All organizations need to have their compensation and benefits systems support their
organization’s mission and strategy. Although the degree of sophistication may vary, a
good total rewards strategy should hold to some basic principles. That is, in the face of
competitive market pressures, all pay decisions should have the following attributes:
• Be legal They must be consistent with numerous federal, state, and local laws.
• Be adequate They must be large enough to attract qualified employees to join
the organization and stay.
• Be motivating They should provide sufficient incentives to motivate employees
to perform effectively.
• Be equitable Employees should feel that their compensation is internally
equitable relative to other employees in the organization and externally equitable
relative to employees doing similar work in other organizations.
• Provide security Employees want to feel that their monthly income is secure and
predictable. They need to feel that their pay is somewhat insulated from changes in
employment, profitability, individual performance, and personal health.
• Be cost-benefit effective The organization must administer its compensation
system efficiently and have the financial resources to support it on a continuing basis.
