A well-crafted compensation plan does more than one thing for a company and the employees it effects. With some careful thought and consideration of the multitude of subtle factors hidden in the simple concept of ‘compensation for work’, you can craft a plan that encourages personal investment and improves employee morale. If both parties involved aren’t benefitting on more than one level, you should reconsider your compensation plan. Fortunately, we have a few tips to get you to that point.

1. Think Ahead-Way Ahead

When developing a compensation plan, keep in mind the big picture; compensation must be reliable and consistent even in time of famine. Developing an ambitious plan before you have a first grasp of budgetary metrics as a start-up or basing a long-term compensation strategy on the numbers during what may be a temporary upswing can be devastating down the line to the company and the employee.

A solid compensation plan must consider all possibilities and account for as many as it can-the best plan will not just move with the possibilities, it will include measures which will directly reinforce or counter the rise or fall of the company as needed.

2. Research the Employee/Role

A good compensation plan considers both sides of the employer. An employee relationship-a take-it-or-leave-it plan that ignores the employee being compensated needs and wants won’t catch or keep the best talent and it certainly won’t improve the all-important Company Morale.

Information is power in crafting a mutually beneficial compensation plan-that means information about what the employee’s role in the company, that role in the industry at large, personal information about individual candidates, anything that might give you an edge in crafting a perfect fit.

3. Make Your Plan Do More

A truly magnificent compensation plan will do more than just get your company work and the employee money-it might help shape a positive corporate culture, make for good PR, or help the company survive in the roughest times. Don’t settle for a plan that is ‘good enough’ if you can help it-maximize your ROI, keeping in mind that the obvious returns are not the only returns.

4. Consider the Visuals of Your Plan

If a compensation plan becomes known within the company, or to business partners, or to the public at large, it can have an impact on how your company is perceived. A major investment into a single individual or team can create a buzz, questionably low compensation can harm company morale or draw negative publicity-it’s difficult to balance this against other concerns, but you should at least be aware of how your plan will look when put under an outsider’s microscope.

5. Avoid the Biggest Compensation Plan Pitfall

Consistently, there are a few places companies trip up in their compensation plan, but the biggest one is performance-based incentives. Performance based incentives should be designed to incentivize sales people to have their sales activities be in line with the direction/goals of the company as a whole. Moreover, you want to ensure you are paying enough to attract and retain the right talent, but you also don’t want to over pay either.