A Practical Guide to Compensation Self Auditing

There are a variety of reasons why an employer may conduct a compensation self-audit. Regardless of the reason, the steps necessary to construct the analysis framework are similar. The first step in developing a successful self-auditing program is to gain a thorough understanding of how employees are compensated and why they are compensated at different rates. In most organizations, the answers to these questions will differ across employee groups; sales workers may be paid a commission, administrative employees may be paid a salary, and production workers may be paid an hourly rate, perhaps, governed by a collective bargaining agreement. These differences in the how and why of compensation will guide nearly every step of the self-audit process, from the decisions about which factors should be included in the model to the appropriate manner for follow-up.