Compensation Policies and Strategic Mandates

  1. 4 Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

Compensation policies refer to choices that compensation professionals make to promote competitive advantage. Broadly, choices are made about pay level policies and pay mix policies.

Pay Level Policies

Companies can choose from three pay level policies:

  • Market lead

  • Market lag

  • Market match

The market lead policy distinguishes a company from the competition by compensating employees more highly than most competitors. Leading the market denotes pay levels that place in the area above the market pay line (Figure 7-2). The market lag policy also distinguishes a company from the competition, but by compensating ...

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