What is "compensation strategy" in HR?

Compensation strategy in HR refers to the structured approach a company employs to determine how it will compensate its workforce. This strategy is crucial as it directly influences various factors such as employee motivation, retention, and recruitment. By outlining how a company will pay its employees in relation to external market rates and internal equity, the compensation strategy ensures that salary decisions are competitive and fair among employees.

This strategy takes into consideration the prevailing wages in the industry, which helps employers attract talent, as well as how jobs within the organization relate to one another in terms of responsibility and skills required. A well-defined compensation strategy promotes fairness and transparency, reducing the likelihood of disputes over pay and fostering a positive organizational culture.

In contrast, other approaches listed focus on different HR aspects. Training and employee development primarily target skill enhancement and career growth, while employee turnover strategies specifically aim to retain talent. Evaluating job satisfaction, while important, does not directly relate to how employees are compensated. Thus, the focus of the compensation strategy is unique and distinctly centered on the financial remuneration aspect of human resources.