What is Compensation Consulting?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 11 August 2019
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Compensation consulting is a profession geared toward assisting companies of all sizes in designing and implementing a workable and balanced compensation package for employees. The goal of the consultant is to develop a benefits package that is within the ability of the company to maintain while still providing the highest quality of benefits possible, based on the current financial status of the corporation.

Compensation packages involve more than just salary and wages. Such items as health insurance, profit sharing opportunities, retirement and pension programs, the accumulation vacation and sick leave time, and other benefits are all included in the analysis. In most cases, a compensation consulting firm will work closely with both executives and HR personnel to evaluate any current benefits offered to employees, mid-level managers, and executives and identify any changes to those existing forms of compensation that would result in maintaining those benefits while still making more efficient use of company resources.

It is not unusual for compensation consulting to involve designing packages that operate on several different tiers within one company. Hourly employees may be entitled to one compensation package, while a salaried employee not functioning as a manager may be eligible for a different package. Management and the executive branch of the corporation may also enjoy compensation packages that are more comprehensive and varied than the packages offered to hourly and salaried employees.


Regardless of the complexity associated with the compensation offered by the company, a competent compensation consulting firm will always attempt to create packages that are in keeping with the financial abilities of the company and are still competitive with compensation plans offered by similar companies within the industry. This means finding the ideal balance between keeping a handle on costs and offering benefits that motivate employees to perform well. In addition, responsible compensation consulting requires that the overall design of the compensation packages support the mission and goals of the company. Doing so makes it possible for the company to grow over time without being crippled by extending benefits that it cannot reasonably support.

There are compensation consulting firms that focus on specific industries. This can be helpful, in that those firms are well aware of current economic and other conditions that influence the ability of a company within that industry to operate. Other compensation consultants do not specialize in a limited number of industries and are prepared to assist any size company involved with any industry type. The potential advantage of going with a consultant with a broader knowledge base is that he or she may be aware of package structures that are not common within that industry, but would allow the company to attract quality employees.


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