Compensation is one of the best ways to attract, retain and motivate your employees so they can achieve your business goals and yet many companies are outsourcing compensation and benefits. Why would an organization outsource an important component of their business? Here are the primary reasons businesses are outsourcing compensation:

1. Compensation design and management are not core competencies of the human resource department, though it is deemed a necessary part of business.

2. Compensation design outsourcing saves the business money.

3. Outsourcing compensation design and planning means that someone will be actively working on compensation rather than taxing the limited resources of the in-house human resources staff.

Outsourcing compensation design and planning is one way that organizations are trying to stay competitive in the marketplace. Better compensation is the most cited reason for an employee leaving an employer. A well-designed compensation plan will allow you to retain key executives and salespeople to meet your business goals.

Action Steps
The best contacts and resources to help you get it done

Interview and compare fees of compensation planning outsourcing partners

This might sound like a no-brainer, but you must evaluate the service provider you are thinking of using to do your compensation outsourcing. A formal written proposal is nice, but does the vendor understand your industry and your company? Is the vendor a good fit with your work practices and corporate culture and do they keep up with industry trends?

I recommend: Although you would never choose compensation designers based solely on fees, you can compare outsourcing costs and services from multiple vendors without cost or obligation by using HR AllOptions to receive multiple quotes. Check out Compensation Resources, Inc. to view their different plans for executives and for sales staff.

Work alongside your compensation outsourcing partner

The decision to outsource compensation is not the end of your participation in the process. You must be ready to roll up your sleeves and be a key player in the design of your compensation plan because you know your organization better than the vendor. The vendor might know how to put together a compensation program, but you have the final say on what actually goes into the plan.

I recommend: Stanton Group and Hewitt Associates are industry leaders in outsourcing employee compensation and in human resource consulting services.

Purchase software solutions as your compensation designers

If your budget doesn't include compensation services outsourcing, don't rule out software products. The software solutions on the market for employee compensation are highly customizable. Packages available are usually sold in modules for executive compensation, employee compensation and a sales force compensation so you can just select the ones that you will need.

I recommend: NPKtools has an array of software solutions to aid in your executive compensation design. Varicent will enable you to manage and design flexible compensation models.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Be wary of complex executive compensation design. If the design is too complicated, it cannot be administrated in a timely manner. Most compensation plans end on fiscal quarters so you want design a simple plan with clear goals and objectives.