Sample Compensation Strategy Objectives

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Document Header

Field	Value
Document Type	Compensation Strategy & Objectives
Category	Foundational & Strategic
Company	<Company Name>
Geography	<Country> and global as applicable
Version	v<Number>
Effective Date	<Date>
Last Reviewed	<Date>
Next Review	<Date> (e.g., annual each <Month>)
Document Owner	Head of Total Rewards, <Company Name>
Approver(s)	<Approver Title> (e.g., CHRO), <Approver Title> (e.g., CFO), <Committee Name> (if applicable)
Related Policies	Pay Transparency Policy; Job Architecture & Leveling; Incentive Plan Charters; Sales Compensation Plan; Equity Plan; Global Mobility Policy
Confidentiality	Internal Use Only

Purpose and Objectives

The purpose of this Compensation Strategy & Objectives document is to establish the guiding philosophy, governance, and actionable policies that inform how <Company Name> designs, delivers, and manages compensation in support of our business strategy and people objectives.

Strategic Objectives

• Align compensation with business outcomes, values, and desired culture
• Attract, engage, and retain diverse, high-performing talent across <Country> and global locations
• Ensure internal equity, external competitiveness, and compliance with applicable laws and regulations
• Reward performance, skills, and impact in a consistent, fair, and sustainable manner
• Optimize compensation investments to deliver measurable return on total rewards spend
• Enable pay transparency at levels appropriate for each jurisdiction and workforce segment

Design Principles

• Market informed, not market defined: Use robust market data while retaining internal judgment based on strategy and affordability
• Pay for performance: Differentiate pay outcomes based on results and behaviors aligned to values
• Simplicity and clarity: Keep programs understandable to employees, managers, and administrators
• Equity and inclusion: Monitor and correct unjustified pay gaps by gender, race/ethnicity, and other protected categories as permissible
• Governance and compliance: Maintain documented processes, approvals, and audit trails; adhere to laws in <Country> and other applicable jurisdictions
• Sustainable cost: Design within budget guardrails and long-term financial capacity

Scope and Applicability

In Scope

• Compensation philosophy and market positioning
• Base pay strategy and salary structures
• Variable pay programs (short-term incentives, sales compensation, long-term incentives)
• Geographic pay strategy and differentials
• Job architecture, leveling, and titling standards
• Pay transparency, pay equity, and governance
• Budgeting, planning, and annual compensation cycle processes
• Metrics, reporting, and compliance monitoring

Out of Scope

• Benefits program design (covered under Total Rewards Benefits Strategy)
• Leave and time-off policies
• Non-compensation recognition not tied to monetary awards (covered by Recognition Policy)
• Mobility compensation packages (covered by Global Mobility Policy and assignment guidelines)

Applicability

• Applies to all regular employees of <Company Name> globally unless superseded by law or a country-specific addendum
• Exceptions for unionized employees are governed by collective bargaining agreements
• Contractors, interns, and temporary workers are excluded unless expressly covered by local addenda

Compensation Philosophy

Market Positioning

• Target overall cash compensation at the <Percentile>th percentile of the defined peer market for fully proficient performance
• Use a balanced approach between external competitiveness and internal equity for pay decisions
• Segment strategies by workforce group:
  • Critical/scarce skills: target <Percentile>th to <Percentile>th percentile of market
  • Core roles: target <Percentile>th percentile
  • Early career roles: target midpoints that facilitate progression and development

Pay Mix and Differentiation

• Define a market-aligned pay mix (base vs. variable) by level and function
  • Individual contributors: base-heavy pay mix (e.g., <Percentage>% base / <Percentage>% variable)
  • Managers and leaders: higher leverage through incentives (e.g., <Percentage>% base / <Percentage>% variable)
  • Sales roles: role-specific target incentive ratios aligned to sales motion and quota setting
• Differentiate pay for top performance and critical skills; maintain pay discipline to avoid compression and inequity

Transparency and Communication

• Provide salary range visibility to candidates and employees as legally required in <Country> and other jurisdictions
• Publish the company’s compensation philosophy internally and deliver manager training for consistent application
• Respond to employee pay inquiries within <Number> business days through <Inbox/Portal Name>

Market Benchmarking and Competitive Set

Market Data Sources

• Use reputable third-party compensation surveys (e.g., <Vendor Name>, <Vendor Name>) with data effective <Survey Effective Date>
• Prioritize data sources with:
  • Robust sample sizes and validated matches
  • Industry and size relevance (revenue: <Amount>, headcount: <Number>)
  • Geographic alignment to operating locations and talent markets

Matching Methodology

• Match jobs by scope, responsibilities, and required skills using standardized job architecture and leveling
• Prioritize survey job matches; use leveling assumptions and content-based adjustments when exact matches are unavailable
• Use at least 2-3 survey sources per benchmark job when available; document rationales for overrides

Aging and Currency

• Age data to common effective date using annual aging factor of <Percentage>% unless survey-specific guidance applies
• Convert currency using <FX Source> exchange rates as of <Date>, and apply local purchasing power or cost-of-labor adjustments as appropriate

Competitive Set Definition

• Primary peer set: <Number> companies in similar industry, size, and growth stage
• Secondary peer set: adjacent talent competitors (e.g., technology firms competing for data science talent)
• Update peer sets annually or upon material business changes (e.g., acquisitions)

Job Architecture and Leveling

Framework

• Establish a consistent job architecture with families, subfamilies, and levels (e.g., Levels L1-L10)
• Use role profiles describing scope, complexity, knowledge, and impact criteria for each level
• Title standards follow the job architecture to avoid inflated or inconsistent titles

Leveling Criteria

• Scope of responsibility and decision-making
• Complexity, problem-solving, and autonomy
• Impact on business results and risk
• Knowledge, experience, and leadership requirements
• Collaboration and communication demands

Sample Level Guide (Illustrative)

Level	Career Stage	Typical Range Width	Midpoint Progression
L1	Entry	<Percentage>%	<Percentage>%
L3	Intermediate IC	<Percentage>%	<Percentage>%
L5	Senior IC / Manager	<Percentage>%	<Percentage>%
L7	Director	<Percentage>%	<Percentage>%
L9	VP	<Percentage>%	<Percentage>%

Base Pay Strategy

Salary Structure Design

• Create global or regional structures using market midpoints by job family and level
• Typical range widths:
  • Early career roles: <Percentage>%
  • Mid-career roles: <Percentage>%
  • Senior roles: <Percentage>%
• Midpoint progressions between adjacent levels: <Percentage>% to <Percentage>%

Range Management and Movement Guidelines

• Placement on hire guided by compa-ratio:
  • New-to-role or developing: 0.80-0.95
  • Fully proficient: 0.95-1.05
  • Expert or scarce skills: 1.05-1.15 with approval
• Annual structure review each <Month> using market movement of <Percentage>% and internal pay distribution
• Range adjustments approved by <Committee Name> with cost impact analysis validated by Finance

Merit and Adjustment Programs

• Annual merit budget target of <Percentage>% of base pay; differentiated by performance and range position
• Off-cycle pay adjustments permitted for:
  • Promotions and career growth
  • Market adjustments for critical skills
  • Pay equity corrections
  • Retention for at-risk talent with documented risk assessment
• Requires pre-approval from Total Rewards and <Approver Title> for adjustments above <Percentage>%

Geographic Pay Strategy

Approach

• Apply a cost-of-labor-based geographic differential model for locations within <Country> and global hubs
• Methods considered:
  • National base with location differentials
  • Zone-based pay structures with <Number> zones (e.g., Zone 1: high-cost, Zone 2: mid, Zone 3: low)
  • Pure local market structures where scale supports it

Geographic Differential Bands (Illustrative)

Zone	Example Locations	Differential vs. Base
Zone 1	<Metro Area>	+<Percentage>%
Zone 2	<Region>	+<Percentage>%
Zone 3	<Region>	0%
Zone 4	<Region>	-<Percentage>%

• Remote work policy defines eligible zones for employees’ chosen locations and process for reassessment on relocation
• Annual or semi-annual review of zone differentials; changes communicated with at least <Number> days’ notice

Variable Pay Strategy

Short-Term Incentive (STI)

• Purpose: align employee rewards with annual company and individual outcomes
• Eligibility: employees at level L3 and above or per country plan; employees must be active and in good standing on payout date unless prohibited by law
• Target opportunities by level (illustrative):

Level	Target STI as % of Base
L3	<Percentage>%
L5	<Percentage>%
L7	<Percentage>%
L9	<Percentage>%

• Funding: company performance multiplier range 0.0x to <Multiple>x based on metrics such as revenue, profitability, and strategic KPIs
• Payout formula: Base Salary x Target % x Company Multiplier x Individual Modifier (0.8x to 1.2x)
• Caps: maximum individual payout <Multiple>x target unless plan charter specifies otherwise
• Clawback: subject to clawback under <Policy Name> in cases of misconduct or restatement where legally permissible

Sales Compensation

• Design principles: line-of-sight, competitive target earnings, balanced risk/reward, and fiscal accountability
• Plan elements:
  • Role-specific pay mix (e.g., 60/40 for Account Executives)
  • Quota setting methodology documenting territory potential and seasonality
  • Accelerators and decelerators with attainable on-target earnings (OTE)
  • Draw policy (recoverable or non-recoverable) for new hires where applicable
• Governance: annual plan charters, crediting rules, dispute process, and auditability in <SCP System Name>

Long-Term Incentives (LTI)

• Purpose: drive retention, ownership mindset, and alignment with long-term value creation
• Eligibility: employees at level L7 and above, plus critical talent as approved
• Vehicles and guidelines:
  • RSUs for broad-based equity: annual grant value <Amount> or <Percentage>% of base
  • Performance-based equity (PSUs) for executives: 3-year performance period with metrics such as TSR, revenue CAGR, or margin expansion; payout range 0-200%
  • Stock options where aligned to growth-stage strategy
• Vesting and timing: standard vesting over <Number> years with annual or quarterly vest cadence; country-specific tax and securities compliance applies

Pay for Performance Linkages

Performance Management Integration

• Annual performance cycle in <Month Range>; ratings calibrated at the department and enterprise level
• Mandatory check-ins throughout the year to reduce bias and improve feedback quality
• High performers receive larger merit increases, higher bonus modifiers, and priority for retention awards

Merit Matrix (Illustrative)

	Below Range	Within Range	Above Range
Exceeds	<Percentage>% - <Percentage>%	<Percentage>% - <Percentage>%	<Percentage>% - <Percentage>%
Meets	<Percentage>% - <Percentage>%	<Percentage>% - <Percentage>%	<Percentage>% - <Percentage>%
Partially Meets	<Percentage>% - <Percentage>%	<Percentage>% - <Percentage>%	<Percentage>% - <Percentage>%

• Managers must provide written justification for increases above guidelines; Total Rewards audits for consistency and equity

Pay Equity, Compliance, and Governance

Pay Equity

• Conduct pay equity analyses at least annually and upon major organization changes
• Methodology includes regression analysis by job family and level, controlling for legitimate factors (e.g., tenure, performance, location, skills) as permitted
• Correct unexplained differentials within <Percentage>% tolerance with documented adjustments

Legal Compliance

• Comply with wage and hour laws, minimum salary thresholds, overtime eligibility, and exemption criteria in <Country> and other relevant jurisdictions
• Adhere to pay transparency and salary range posting requirements in locations such as <State/Province>
• Observe statutory bonus rules, 13th month pay, and pay frequency requirements in countries where applicable
• Maintain data privacy and security standards per <Law/Framework> (e.g., <Country> privacy law)

Governance

• All compensation programs governed by this document and supporting plan charters
• Exceptions require approval by <Committee Name> or <Approver Title> with documented business rationale
• Maintain audit trails for all compensation decisions in <HRIS Vendor Name>

Budgeting and Financial Planning

Annual Cycle Overview

1. Forecast merit, promotion, and market adjustment budgets by business unit and location
2. Model STI funding scenarios at 0.8x, 1.0x, 1.2x company performance outcomes
3. Align LTI burn rate and overhang with equity pool and shareholder guidelines
4. Validate affordability with Finance and stress test against revenue and margin sensitivity
5. Finalize budgets and distribute manager planning worksheets in <System Name>

Budget Guardrails

• Merit pool target: <Percentage>% of base payroll; range <Percentage>% - <Percentage>%
• Promotion budget: <Percentage>% of base payroll; individual promotion increase guidelines <Percentage>% - <Percentage>%
• Market and equity adjustments: cap at <Percentage>% of payroll unless approved by <Approver Title>
• STI pool funding based on plan formula with minimum and maximum funding constraints
• LTI annual run rate target: <Percentage>% of fully diluted shares outstanding

Processes, Roles, and Responsibilities

Key Roles

• Total Rewards: Owns strategy, market data, structures, guidelines, analytics, and governance
• HR Business Partners: Consults with managers, ensures policy adherence, and supports equitable decisions
• People Managers: Make pay decisions within guidelines; provide rationale and communicate outcomes
• Finance: Validates budgets, forecasts costs, and ensures financial controls
• Payroll: Ensures accurate and timely pay execution per approved transactions
• Legal/Compliance: Reviews policies and plan documents for legal compliance
• Executive Leadership / <Committee Name>: Approves major changes, budgets, and executive compensation

Decision Rights Matrix (Summary)

Decision Type	Manager	HRBP	Total Rewards	Finance	Approver
Offer within range	Recommend	Consult	Consult	Inform	Hiring Manager’s VP
Range exceptions	Request	Consult	Recommend	Consult	CHRO
Off-cycle market adjustment	Request	Consult	Recommend	Validate	CHRO or Delegate
STI plan design changes	Consult	Consult	Recommend	Validate	CFO/CHRO
LTI guidelines	Consult	Consult	Recommend	Validate	Board or <Committee Name>

Implementation Guidelines

Timeline (Illustrative)

1. <Month>: Market data refresh and structure modeling
2. <Month>: Budget setting and leadership alignment
3. <Month>: Manager enablement and system configuration
4. <Month>: Compensation planning open window
5. <Month>: Calibration and approvals
6. <Month>: Payroll execution and employee communications

Systems and Data

• Maintain source-of-truth in <HRIS Vendor Name> with integration to <Comp Planning Tool> and <Payroll Vendor Name>
• Data quality checkpoints for job, level, location, FLSA/classification, and pay data prior to cycle
• Access controls and audit logs required for all compensation modules

Manager Enablement and Change Management

• Provide toolkits, FAQs, and training sessions for managers covering pay philosophy, ranges, and conversation tips
• Publish country-specific addenda summarizing legal requirements
• Establish a help channel via <Inbox/Portal Name> with defined SLAs

Controls and Audits

• Pre- and post-cycle audits for:
  • Range exceptions and cap violations
  • Pay equity anomalies
  • Incomplete approvals
  • Payroll variance vs. approved files
• Quarterly compliance checks in locations with pay transparency requirements

Review and Approval Process

Effective Date and Review Cycle

• Effective date of this document: <Date>
• Next review: <Date> or upon material business, market, or legal changes
• Annual attestation by document owners confirming currency and completeness

Approval Workflow

1. Draft by Total Rewards
2. Review by HR Leadership and HRBPs
3. Financial impact validation by Finance
4. Legal review for compliance
5. Final approval by CHRO and CFO; Board or <Committee Name> for executive/LTI items

Document Changes and Version Control

• Maintain version history including summary of changes, rationale, and approvers
• Communicate substantive changes to managers and employees ahead of effective date

Metrics and Reporting

Key Performance Indicators

• Offer acceptance rate vs. market benchmarks
• Voluntary turnover in critical roles
• Compa-ratio distribution by job family and level
• Internal pay equity metrics and remediation progress
• Budget adherence and forecast accuracy
• STI and LTI payout alignment with company performance outcomes
• Pay transparency and inquiry response SLAs

Reporting Cadence

• Monthly dashboard to HR and business leaders
• Quarterly updates to <Committee Name>
• Annual public disclosures as required by law and governance

Risk Management

Principal Risks and Mitigations

• Market volatility leading to lagging pay structures
  • Mitigation: mid-year check and targeted market adjustments
• Pay inequities arising from uncontrolled exceptions
  • Mitigation: strict approval gates and quarterly equity audits
• Compliance changes across jurisdictions
  • Mitigation: maintain legal watchlist via <Vendor Name> and update country addenda
• Budget overruns due to unplanned adjustments
  • Mitigation: exception caps and Finance validation at each step

Appendices

Appendix A: Sample Offer Within Range Guidelines

1. Offers up to 1.00 compa-ratio require hiring manager and HRBP approval
2. Offers between 1.00-1.10 compa-ratio require Total Rewards approval
3. Offers above 1.10 compa-ratio require CHRO approval and written business case

Appendix B: Documentation Standards

• All compensation decisions must be supported by:
  • Rationale tied to performance, skills, or market data
  • Approvals captured in <System Name>
  • Effective dates and amounts clearly stated
  • Links to relevant survey matches and leveling profiles

Glossary of Terms and Definitions

• Base Pay: Fixed compensation paid regularly to an employee, excluding variable pay
• Compa-Ratio: Employee’s base pay divided by the range midpoint
• Geographic Differential: Adjustment to base pay reflecting local labor market costs
• Incentive Pay: Variable compensation contingent on performance
• Job Architecture: Structured framework for job families, levels, and titles
• LTI: Long-term incentives such as RSUs, PSUs, or stock options
• Merit Increase: Base pay increase linked to performance and range position
• Midpoint Progression: Percentage difference between midpoints of adjacent ranges
• Peer Market: Group of external organizations used for benchmarking
• Range Width: Percentage spread between range minimum and maximum
• RSU/PSU: Restricted Stock Units and Performance Stock Units
• STI: Short-term incentive, typically annual bonus

Communication Section: Employee and Manager Narrative

Welcome to <Company Name>’s overview of how pay works. Our goal is to provide clear, consistent, and fair compensation that recognizes your contributions and supports our mission.

At a high level, your pay has two main parts. The first is base pay, which is the fixed amount you receive in your regular paycheck. The second is variable pay, which may include an annual bonus, sales incentives, or long-term incentives like equity, depending on your role and level. Together, these elements form your total compensation.

Every role at <Company Name> is assigned to a pay range. These ranges are built from reliable market data for similar jobs in our industry and locations. New hires and employees developing in role are typically placed lower in the range, while those demonstrating proficiency and strong impact may be positioned around or above the midpoint. We review our ranges regularly to keep them aligned with external markets and internal equity.

If you are eligible for an annual bonus, your target bonus is expressed as a percentage of your base pay. Actual payouts depend on company results and your individual performance for the year. When the company meets or exceeds its goals, the overall bonus pool increases; when we fall short, it decreases. Your individual performance rating can move your payout up or down within the overall company result. We design these programs to reward both what you achieve and how you achieve it, in line with our values.

For employees in sales roles, your plan is tailored to your specific responsibilities and may include commissions, accelerators, or other components. These plans are documented in a plan letter you receive each year. Your manager and Sales Compensation Team can help answer questions at any time.

Some employees, generally at more senior levels or in critical roles, may be eligible for long-term incentives such as restricted stock units or performance-based awards. These are designed to build an ownership mindset and connect your rewards to long-term company value. If you are eligible, you will receive a grant notification explaining the award value, vesting schedule, and any performance conditions.

Location matters in pay because labor markets differ by geography. We use a fair and consistent approach to account for these differences. If you move locations, your pay may be adjusted up or down to reflect the new market, subject to local law. We will always communicate any changes in advance and explain how they were determined.

Performance plays a key role in pay decisions at <Company Name>. Your manager will meet with you regularly to discuss goals, progress, and development. At year end, managers calibrate ratings to ensure fairness across teams. Strong performance is recognized through larger merit increases, higher bonus outcomes, and growth opportunities. If performance is not meeting expectations, your manager will provide coaching and a plan to help you improve.

We are committed to pay equity. Each year we review pay patterns and correct unexplained gaps. If we identify issues, we take action to address them and improve our processes. We also support appropriate transparency: where required by law, we post salary ranges in job openings, and we will share information about your pay range and how pay decisions are made. If you have questions about your compensation, please reach out to your manager or contact <Inbox/Portal Name>. We strive to respond within <Number> business days.

What you can expect each year:

1. During <Month Range>, we review the market and adjust salary ranges as needed.
2. We set budgets for merit, promotions, and bonuses and open the planning process for managers.
3. Managers make recommendations based on performance, skills, and internal equity.
4. Recommendations go through review and approval to ensure fairness and consistency.
5. You receive a compensation statement, and your manager will explain any updates to your pay and the reasons behind them.

Your role in this process:

1. Talk with your manager about your goals, progress, and development; ask for feedback throughout the year.
2. Make sure your job information in our HR system is current, especially your location and reporting line.
3. Ask questions if anything about your compensation is unclear. We want you to understand how your pay is determined.

We value the impact you make at <Company Name>. Our compensation programs are designed to be competitive, fair, and aligned with our strategy. Thank you for your contributions, and please let us know how we can make our programs clearer and more helpful for you.

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Document Information:

• Document Type: Compensation Strategy & Objectives
• Category: Foundational & Strategic
• Generated: August 22, 2025
• Status: Sample Template
• Next Review: <Insert Review Date>

Usage Instructions:

1. Replace all text in angle brackets < > with your company-specific information
2. Review all sections for applicability to your organization
3. Customize content to reflect your company's policies and local regulations
4. Have legal and HR leadership review before implementation
5. Update document header with your company's version control information
6. At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.