In order to develop a corporate compensation philosophy, total compensation must be viewed from two different perspectives. First, it is a major expense. Economic pressures have forced management to reconsider the affordability of their compensation programs. Others have concluded that a strong compensation package, including deferred compensation and incentive plans, can be a competitive advantage with regards to attracting and retaining quality employees who contribute to the company's success. Secondly, the total compensation and performance appraisal package should be a positive tool with which to influence employees' behavior (employee contribution) and attitude towards work and job performance. Well-adjusted and happy employees are more productive and increase the effectiveness of the entire organization.

It is important to recognize that a wage and salary program cannot create a totally equitable internal and external compensation pattern instantaneously. The achievement of an optimal wage and salary system is an evolutionary process, resulting from a series of planned adjustments, periodic updates, and compensation analysis. The wage and salary administration program must constantly be reviewed for the following reasons:

Pay Adjustments: A wage and salary program is established for an existing group of employees, whose pay cannot be immediately adjusted, either upward or downward, to create a balanced environment.

Interpretation: Even the most scientific wage and salary program requires management to make some judgments and subjective interpretations.

The most finely constructed wage and salary administration program produces, at best, momentary competitiveness. More likely, some inequities already exist, and will become magnified quickly in the absence of proper maintenance. Keeping a wage and salary administration program equitable and up-to-date requires simultaneous development of administrative skills, exercise of judgment, resolution of inequities, and adherence to original objectives in a dynamic and usually inflationary wage and salary environment. It also requires a comprehensive approach and an integrated system, which includes job analysis, job description, job valuation, and performance evaluation. Each of these steps must be integrated in order to provide consistency between the specifications for the job as determined by job analysis, and the essential elements of the position as expressed in the job description. These factors in turn must be in total agreement with the factors used to price the job as well as the standards and criteria for job evaluation. In this manner, disparities in pay, hiring practices, retention and termination can be explained and accounted for with detail and objectivity.