The Annual Compensation Review: How Necessary is it?

Competitive Pay

With an improving economy, it is critical that organizations maintain awareness of the job market. Over- and under-compensation of employees are major concerns from the human resources and budgetary perspectives. Competitive pay is essential for staffing hard to fill positions, and helps keep employees content within their place of work.

Keep in mind that compensation reviews are usually conducted annually. The market is ever changing, requiring a vigilant eye to external changes. As a result, your organization will technically line up with the market once a year. This finding should generate even more enthusiasm for not only conducting an annual compensation review, but also for timing the reviews in time for your organization’s recruiting season.

Talent Management

Having competitive pay within your organization can assist in ensuring that your talent are valued. Competitive pay will help motivate employees to not only stay loyal to the organization, but also to contribute their best. Clearly, money is not the only factor in ensuring satisfied and motivated employees. However, it is no secret that compensation and additional incentive pay can attract new talent and keep employees engaged at some level within the organization.

Legal Compliance / Pay Disparity Issues

United States Federal and State Laws such as the Fair Labor Standards Act (FLSA)and the Equal Pay Act of 1963 were passed to ensure organizations pay employees fair wages for their work performed. Organizations cannot afford to be unaware of these laws. Annual compensation reviews help your organization to avoid running afoul of discrimination laws, by identifying any potential problems early and allowing time for instituting equitable remedies. A article gives this example: “…suppose a company established a flat rate of $9.90 per hour for nonexempt employees in a customer service role. The department had 200 percent turnover. Despite the published flat rate, some employees with college degrees successfully negotiated for $10 per hour or more, while employees with 20 years of experience faithfully assumed the flat rate was non-negotiable. Soon, three women over 40 (a protected class under age discrimination laws) were earning less than three men who had just graduated from college. The manager's defense when confronted with the disparity was that the women never asked for more.” This situation is a prime example of possible lawsuits that can occur from being unaware of compensation laws, and not keeping up with competitive rates for all incoming employees.

Motivated to start your compensation review? Having trouble conducting it? Earlier this year Astronology® explored the many different aspects of compensation, including compensation philosophy,job evaluation,salary structure,and variable pay.We also provided an article on5 steps to simplify your compensation program if you see areas that can be improved. Still need more help? No worries, Astron Solutions offers compensation consultation! Schedule your complimentary 30 minute consultation today, and see a more equitable and competitive compensation future!


Astron Solutions gets our articles from our bi-weekly e-zine, Astronology. Astronology utilizes a number of authors, each with their own fields of interest and expertise. All authors are employees of Astron Solutions unless otherwise noted. If you'd like to sign up for your FREE bi-weekly edition of Astronology, please visit and fill out the required information. A bit about Astron Solutions: Astron Solutions is a New York-based ...

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