What Does a Compensation Manager in HR Do?

The Employee with the Compensation Manager's Hat Differs by Company Size

The compensation manager discusses salary ranges with other managers.
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Compensation managers  are responsible for researching, establishing, and maintaining a company's pay system. In performing this important function, the compensation manager has to research and understand the current and upcoming competitive markets for employee pay and benefits. They must find ways to ensure that pay rates are fair and equitable to retain and recruit employees.

The compensation manager may specialize, in larger organizations, in specific areas such as job classification or market pay studies.

At a government or civil service employer, the manager establishes the pay grades that govern employees' level and amount of pay.

A compensation manager, in a larger organization, is often assisted by staff specialists.

They may conduct salary surveys to see how their pay rates compare with those of other companies. They may also work with established online sites that specialize in compensation to do market comparisons of pay by region, number of employees, and job responsibilities.

It is the compensation manager's job to see that the company's pay scale complies with ever-changing state and Federal laws and regulations. In addition, depending on the needs of the organization, compensation managers may oversee their company's performance evaluation system.

They may also handle employee benefits. Employee reward systems such as bonuses, merit raises, and pay-for-performance plans may also fall within their responsibility.

Is the Compensation Manager's Job All Spreadsheets and Surveys?

While a good portion of developing a good compensation strategy involves sitting behind a computer and looking at the data, a good compensation manager also wears a business partner hat.

Compensation managers meet with line managers to help develop promotion and retention strategies for existing employees.

They may be responsible for annual increase programs since companies often tie annual salary increases to performance.

Thus, a compensation manager can find herself working closely with individual managers as well as HR business partners, HRIS experts and the payroll department to ensure that raises are done correctly and fairly.

It's important that a compensation strategy recognizes the differences in humans. For instance, a compensation manager may work directly with a manager to help come up with a new job description that allows for a different pay band in order to help retain a valued employee who has reached a high level within her current pay band.

The last thing you want is to lose an employee who adds significant value to the company because of compensation policies.

Is the Compensation Manager a One Hat Job?

Even in large companies, compensation managers can be involved in so many different projects and processes that it feels as if they wear too many hats. But, in small and even mid-sized companies, it is unusual to find an employee whose sole responsibility is compensation.

Often an HR generalist, HR business partner, or even a recruiter is tasked with compensation functions.

Compensation is complicated and can require good mathematical and statistical skills that not every HR person has. For this reason, in small companies, compensation often falls on the HR person with the best technical skills.

Why Is a Compensation Manager So Important to a Company?

What is the first thing people are interested in when they receive a job offer? The pay. What's the first thing someone's going to say if they find out that their pay is far below their similarly situated coworkers? Discrimination! And that may mean an expensive lawsuit.

What happens when the company next door starts paying more?

People start leaving in droves. Pay is absolutely essential to building and maintaining a great company. If your pay isn't competitive and your people aren't well rewarded, they won't care about the video games in the break room or the free lunches on Friday.

Essentially, a great compensation manager is one of your best retention tools - used effectively. Make sure she's compensated appropriately.  

In small to mid-size organizations where employees must wear many hats, the responsibilities of a compensation manager are handled by the Human Resources Manager or HR Generalist.