In a BLR webinar titled "Compensation 101: Essential Secrets and Strategies for HR Professionals," Paul R. Dorf discussed the fact that that most employees do not understand the nuances of their company's compensation program. This confusion is a major de-motivator to employees. Having a clear philosophy and communicating it well is of utmost importance.

The key is that the employees need to understand what they have to do to make the program work for them. If you put in any kind of incentive plan, you need to communicate how it works and what they can do to make it happen.

Program communication should include:

• Purpose of the new or modified program
• Type of plan
• Participation and eligibility
• Performance measures and triggers
• Awards levels
• Funding and range of awards
• Payout timing and frequency
• Timing of performance cycles

It is also important to have rules and to ensure they are known. Remember that changes can always be made, but they cannot be made retroactively. Changes must be communicated in sufficient time for the employees to react.

The communication of the plan and the rules is also important from a legal perspective. Companies often say "this is not a contract" on their communications, but it actually can be binding. As such, you should have a legal review to ensure it's all properly stated.

Once the compensation and incentive plans are established, it is important to communicate them well. Success is dependent on timely and thorough communication. This builds enthusiasm for the pay programs, and establishes the company's commitment to them.

Paul Dorf is the Managing Director of Compensation Resources, Inc. (CRI). CRI (www.compensationresources.com) specializes in providing comprehensive Compensation and Human Resource consulting services. Dorf is responsible for directing consulting services in all areas of executive compensation, short and long term incentives, sales compensation, performance management programs, and salary admin programs.