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Compensation Philosophy Worksheet

This worksheet is a walk-through exercise from start to finish to create a compensation philosophy that clarifies how you compensate employees and helps you articulate it in writing. 
You can fill in answers as you go through the questions on this page. Your input is not recorded. You can also find samples of fictional compensation philosophies at the end. 

Remember to consult with legal counsel to ensure that your compensation philosophy aligns with relevant laws. 

Step 1: Identify Mission,
Core Values, and Culture

What is your organization's mission?

What are 3 to 5 words that best reflect your organization’s core values and culture? Any adjectives! (E.g., mission-driven, fast-paced, dynamic, ambitious, innovative, collaborative, inclusive, safety-oriented, customer-centric, socially responsible)

Step 2: Identify Key Strategic Goals

Has your organization fully articulated your key strategic goals? They could be:


  • Financial goals (e.g., increase revenue, reduce costs, secure donors)

  • Customer/market goals (e.g., serve more individuals, increase market share, brand awareness, or customer satisfaction)

  • Operational goals (e.g., increase employee retention, improve product quality, recruit more volunteers)

  • Social impact goals (e.g., implement sustainability practices, increase diversity, equity, and inclusion in workforce and/or supply chain).

Step 3: Identify Factors that Drive Compensation

Taking into consideration your organization’s mission, core values and culture, and key strategic goals, define the main objectives of your compensation program.

Step 4: Identify Qualities To Reward

What are the top qualities you want to reward in your employees to further your organization’s mission and align with strategic goals (e.g., performance, tenure, collaboration, safety)?

Step 5: Does Your Compensation Package
Lag, Match, or Lead the Market?

You may choose to lag, match or lead the market as you consider various factors in the design of your compensation package. While lagging the market in salary means it can be harder to recruit and retain high-quality talent, you might reinforce the overall attractiveness through benefits or having an option for flexible work. Consider the balance of pay with additional components in your compensation package, such as:

Additional Questions to Ask Yourself

1. Should you offer signing bonuses?

2. Do you offer other opportunities or prestige that allows you to pay less? 

3. Would your compensation philosophy vary by role or geographic locations?

4. Will you want to offer the same percentage of market rate for all aspects of the compensation package or will they each fall into different categories (e.g., base salary at market rate with healthcare benefits at the higher end of the market range)?

5. How will you think about different categories of employees, for example non-exempt versus unionized, part-time versus full time or year-round versus seasonal employees?​

A Few Compensation Philosophy Examples


At [Organization Name], our compensation philosophy goes beyond competitive pay to foster a culture of collaboration, achievement, and shared prosperity.

We strive to attract and retain top talent by setting target pay rates at the 80-90th percentile of the market for all roles. As a growth-stage start-up, providing performance-based incentives that can elevate total compensation for exceeding ambitious, yet achievable, goals motivates employees to contribute to our shared success.

Our multi-faceted approach to compensation fosters a culture of ownership and continuous improvement. We believe in investing in our people to motivate them to invest in us.


At [Organization Name], we believe in challenging the status quo and empowering our people to do the same. Our focus is on fostering a thriving ecosystem where innovation flourishes. We empower our people to take smart risks, experiment, and disrupt the norm, ultimately propelling both individual and company growth. Our compensation philosophy reflects our disruptive spirit.


We enact dynamic pay adjustments, meaning  we continuously analyze the market and adjust base salaries to maintain a top-tier position, ensuring we attract and retain the best talent. We champion flexible work, empowering employees to balance work, family, and personal pursuits with autonomy and a sense of ownership. We reject norms by spearheading skills-based pay and strong advancement opportunities for individual contributors, embodying the innovative spirit of our organization.


At [Company Name], our progressive compensation philosophy champions equity and fairness. We care about the well-being of our employees because it makes us better at delivering the best products to our customers. We offer competitive salaries, promote work-life balance, and subsidize caregiving resources for all our employees. Valuing continuous learning, we reward skill development, career growth opportunities, and sabbaticals. Profit-sharing fosters employee ownership, aligning everyone with the company's success. This model attracts top talent, builds a diverse and engaged workforce, and propels a sustainable future for all.

Final Step: Check Your Work!

Now that you’ve drafted your compensation philosophy, check that your final product:

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