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Strategic Compensation
Strategic Analysis & Contextual Factors

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You Would Learn About

Strategic Analysis of Compensation
External Market Environment
Internal Capabilities

Factors Influencing Competitive Strategies and Compensation Practices

National Culture
Organizational Culture
Organizational & Product Life Cycle

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Strategic Analysis
Entails an examination of a company’s external
market context and internal factors.

Examples of external market factors include

industry profile, information about competitors,
and long term growth prospects.

Internal factors encompass financial condition and

functional capabilities.

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External Market Environment

1. Industry Profile
Describe such basic industry characteristics as sales volume,
the impact of relevant government regulations on
competitive strategies, and the impact of recent
technological advancements on business activity.

2. Competition
Companies take stock of competitors’ business activities to
help position themselves in the market

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External Market Environment

3. Foreign Demand
Most companies are interested in foreign demand for their
products or services because such demand is an indicator of
additional sales revenue potential.

4. Industry’s Long Term Prospects

Long term prospects set the backdrop for strategic planning
because these prospects are indicators of companies’ futures.

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External Market Environment

5. Labour Market Assessment
Represent key activities, companies should carefully assess
the labour market to determine the availability of qualified
employees.

6. Occupation Specific Considerations

Qualifications and Trainings
Job Outlook
Typical Earnings Range

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Internal Capabilities
1. Functional Capabilities

2. Human Resource Capabilities

3. Financial Condition
Operating Requirements
Capital Requirement

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Factors Influence Competitive Strategies

& Compensation Practices
1. National Cultures
Refers to the set of shared norms and beliefs among
individuals within national boundaries who are indigenous
to the area.
a. Power Distance
Is the extent to which people accept a hierarchical system or
power structure in companies.
b. Individualism-Collectivism
Is the extent to which individuals value personal
independence or group membership.

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Core Compensation

1. Base Pay
Represents the monetary compensation employees earn on
a regular basis for performing their jobs. Hourly pay and
salary are the main forms of base pay.

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Adjustment to Core Compensation

1. Cost of Living Adjustments (COLA)

Represent periodic base pay increases that are based on
changes in prices, as indexed by the Consumer Price Index
(CPI). COLAs enable workers to maintain their
purchasing power and standard of living by adjusting base
pay for inflation.

Consumer Price Index (CPI)

Indexes monthly price changes of goods and services that people buy
for day to day living

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Adjustment to Core Compensation

2. Seniority Pay
Systems reward employees with permanent additions to base pay
periodically, according to employees’ length of service
performing their jobs.
3. Merit Pay
Programme reward employees with permanent increases to base
pay according to differences in job performance.
4. Incentive Pay
As compensation, other than base wages or salaries, that
fluctuates according to employees’ attainment of some standard,
such as a pre-established formula, individual or group goals, or
company earning

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Adjustment to Core Compensation

5. Person Focused Pay
Generally reward employees for acquiring job-related
competencies, knowledge, or skills rather than for demonstration
successful job performances. (Skill Based Pay or Pay for
Knowledge Plans)

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Employees’ Benefits

1. Legally Required Benefits

Are protection programmes, that attempt to promote worker
safety and health, maintain family income streams, and assist
families in crisis.

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Discretionary Benefits

1. Protection Programme
Provide family benefits, promote health, and guard against
income loss caused by catastrophic factors such as
unemployment, disability, or serious illness.
2. Paid Time Off
Provides employees with pay for time when they are not
working, such as vacation.
3. Services
Provide enhancements such as tuition reimbursement and day
care assistance to employees and their families

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Compensation Professionals’ Goal

Compensation, Recruitment, and Selection
Compensation & Performance Appraisal
Compensation & Trainings
Compensation & Career Development
Compensation & Labour Management Relation
Compensation & Employee Termination
Compensation & Legislation
Internally Consistent Compensation System
Market Competitiveness
Recognizing Individual Contributions

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Stakeholders of the Compensation System

Employees

Line Managers

Executives

Unions

Government

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