A formal compensation administration program is the basic management tool for ensuring that employees are satisfied, that both internal and external equity are maintained, and that control is maintained over compensation costs. Such a program will help attract top talent, retain core employees, and encourage longevity while efficiently using financial resources.

Establishing an effective compensation administration program requires job analysis, job evaluation, and job pricing. Once established, it is important to maintain and update the following aspects of the program: salary banding, employee classification, salary increases, performance appraisals, and longevity increases.