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How to Create a Salary Proposal

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• Salary and Compensation
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How Should Salary Requirements Be Emailed?

How should i answer about flexibility for salary requirements, how to respond to an e-mail for desired salary.

• How to List Salary in a Job Posting
• How to Negotiate a Salary Based on the Salary Range

Once you're in the final stages of the hiring process for your dream job, one of the most challenging steps in this process could be justifying your worth, or convincing the hiring committee that you deserve the salary that you want. Research is fundamental to creating a salary proposal, but confidence in your skills, abilities, experience and capabilities is the factor that will benefit you throughout the process.

Define the Purpose of a Salary Proposal

When you receive a job offer, your future employer will likely have a salary range they have already decided is appropriate for your new position. The salary range may be based on previous employees' earnings or it might be a generic range that the company and its HR leadership feel is sufficient compensation for the position they offer to you. In this case, creating your own salary proposal could be instrumental in helping the company restructure its compensation practices, or at the very least, revisiting the compensation level for your position.

Alternatively, creating a salary proposal might be your counterproposal to a salary offer that's on the table. If it's a job you've set your sights on for quite some time, or an organization you have wanted to join but never had the opportunity, and you're willing to put in the extra work, creating a salary proposal letter to the employer might further illustrate why you're the right person for the job.

Set Up a Salary Proposal Template

Unless you're creating a salary proposal letter or email for several different jobs and companies, you probably don't need to create a compensation proposal template. Although if you embark on a job search that entails numerous interviews and you intend to compare the salary expectations or offers for all the positions you're considering, a salary proposal template is a useful tool for organizing the last stages of your job search. Ideally, a pay proposal template would include the employer's name, location, and contact information for HR as well as the hiring manager.

The position or job title, a brief job description, including the number of direct reports or team members, also is helpful information for a well-thought-out salary proposal template. Insert columns for the employer's proposed salary level, your salary expectation and researched salary information and sources.

Compare Similar Job Titles

Conducting a broad search for positions with the same or similar job titles is the first step in creating a salary proposal. Job titles can vary, particularly if you're comparing private sector to public sector roles. For example, a junior accountant for a mid-size accounting firm might be considered Accountant I within state government, and a Management Analyst for the federal government might be the equivalent of an executive assistant with a law firm. Your research will need to include a cursory view of the job titles, duties and responsibilities to find equivalent salaries.

Research Salary Tables

The U.S. Office of Personnel Management (OPM) publishes its General Schedule (GS) Local Pay Tables , which contains salaries for every level – except senior executive level and political appointees – in the federal system. The OPM salary tables also include differentials for various localities in the U.S. Another federal resource is the U.S. Bureau of Labor Statistics Occupational Outlook Handbook; it contains average wages and median wages for thousands of occupations.

Industry-specific professional associations often publish salary information, although you might need to be a member to access complete salary data and information on comparable benefits and total compensation plans for people in your field. For example, the Society for Human Resource Management offers to members the SHRM Compensation Data Center, which contains information about salaries and compensation packages for numerous occupations – not just HR-related jobs. In addition, there are online calculators that enable comparisons of jobs in different locales. If you are moving from, say, Kansas City to Atlanta, and are staying in the same field, you can obtain salary and cost-of-living information that you can present to a prospective employer.

Present Your Proposal

The foundation of a salary proposal letter to an employer is the combination of your research, qualifications and experience, and if applicable, your education and professional certifications. A salary proposal letter – or, even a salary proposal email – is, ideally, a formal proposal that sets out your position and the reasons for your salary expectations.

Avoid presenting your salary expectation as a precise number, such as $101,450 per year. Instead, create a proposal that indicates the salary range that you deem acceptable. For example, if you earn $90,000 a year and you are seeking an increase, determine the lowest percentage increase that you will accept, along with the increase you would like to have. If you can live with a five percent increase, but would love to make 15 percent more, indicate the salary you would accept is between $94,500 and $103,500 . Or, simply between $95,000 and $104,000 .

• U.S. Office of Personnel Management: Pay & Leave, Salaries & Wages
• U.S. Bureau of Labor Statistics: Occupational Outlook Handbook
• Society for Human Resource Management: SHRM Membership

Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. She holds a Master of Arts in sociology from the University of Missouri-Kansas City. Ruth resides in the nation's capital, Washington, D.C.

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Proposal Template AI

Free proposal templates in word, powerpoint, pdf and more

Salary Proposal Template: A Comprehensive Guide + Free Template Download + How to Write it

Crafting the perfect salary proposal: a comprehensive guide.

As a professional in the workforce, one of the most crucial elements of your career is discussing and negotiating your salary. It’s important to have a solid understanding of your worth and be able to effectively communicate it to your employer. This is where a salary proposal template comes in handy. Unlike a standard proposal, a salary proposal template is specifically designed to address and outline your financial requirements and expectations. In this article, we’ll explore the importance of a salary proposal template and how it differs from a standard proposal.

Salary Proposal Template

Introduction

My advice on the introduction section is to start with a brief overview of the purpose of the proposal. Mention the position you are applying for and a summary of your qualifications and experience. This will help the reader understand the context of your salary proposal.

Current Salary and Benefits

In this section, you can include details about your current salary, benefits, and any additional perks that you receive from your current employer. It’s important to provide a clear breakdown of your current compensation package to give the reader a comprehensive understanding of your financial situation.

Example: Current Base Salary: $60,000 per year Health Insurance: Fully covered by employer Retirement Benefits: 401(k) matching up to 5%

Salary Research and Market Data

Researching the market data for the position you are applying for is crucial to support your salary proposal. Provide information about the average salary range for similar positions in your industry and location. This will give the reader a benchmark to compare your proposal against.

Example: According to research from reputable sources such as Glassdoor and Payscale, the average salary for a [Job Title] in [Location] ranges from $50,000 to $75,000 annually.

Proposed Salary and Benefits Package

This section is where you outline your proposed salary and benefits package. Be sure to justify your proposal based on your qualifications, experience, and the market data you have researched. You can also include any additional perks or benefits that you are seeking.

Example: Proposed Base Salary: $70,000 per year Additional Benefits: Flexible work schedule, annual performance bonus, professional development stipend

In the conclusion, you can summarize your proposal and express your enthusiasm for the opportunity. You can also reiterate your qualifications and why you believe your proposed salary is fair and competitive.

By following these detailed examples, you can create a comprehensive salary proposal template that effectively communicates your value to potential employers. Remember to customize the template to fit your specific situation and always be transparent and honest in your proposals. Good luck!

Download free Salary Proposal Template in Word DocX, Powerpoint PPTX, and PDF. We included Salary Proposal Template examples as well.

Download Free Salary Proposal Template PDF and Examples Download Free Salary Proposal Template Word Document

Download Free Salary Proposal Template Powerpoint

Q: What is a salary proposal template? A: A salary proposal template is a document used to outline a proposed salary for a job position or promotion within a company.

Q: How do I use a salary proposal template? A: To use a salary proposal template, simply fill in the necessary information such as the job title, proposed salary amount, and rationale for the proposed salary.

Q: What should be included in a salary proposal template? A: A salary proposal template should include the employee’s name, job title, current salary, proposed salary, reasoning for the proposed increase, and any additional benefits or incentives being requested.

Q: Is it necessary to use a salary proposal template? A: While it is not necessary to use a template, it can help streamline the process and ensure all necessary information is included in the proposal.

Q: Can I negotiate using a salary proposal template? A: Yes, a salary proposal template can be used as a starting point for negotiations with an employer.

Q: How should I present my salary proposal to my employer? A: It is generally best to present the salary proposal in person, either during a scheduled meeting with your manager or through a formal written request.

Q: What if my employer rejects my salary proposal? A: If your employer rejects your salary proposal, ask for feedback on why it was rejected and consider revising and resubmitting the proposal.

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Crafting a Competitive Employee Compensation Plan Guide (with Templates)

Table of Contents

If you want to hire and retain top talent, improve employee productivity , and build trusting relationships with your employees, then crafting a competitive compensation plan is what you need.

Still, a compensation package involves far more than just an employee salary or pay rate, and it is equally important to both employees and business owners.

This text will cover everything you need to know about crafting a compensation package and benefits, including:

• The definition of compensation plan,
• Benefits of crafting a compensation package,
• Types of compensation,
• Steps on how to create compensation plans, and
• Compensation plan templates and examples.

Let’s begin! 

• A compensation plan is a formal document that outlines the components of an employee’s pay structure.
• Effective compensation plans help attract top talent, boost employee morale and productivity, promote a healthy company culture, and more.
• Direct compensation is financial or monetary compensation given to an employee for the time worked, such as hourly wages, salary, commissions, and bonuses.
• Indirect compensation, on the other hand, is non-monetary compensation that includes a retirement plan, time off, health insurance, and other employee benefits.
• Crafting a competitive compensation package includes several steps, such as deciding on your company’s compensation philosophy, researching the job market, defining the compensation structure, and including employee benefits.
• Time tracking is crucial for your business as it covers keeping track of your employees’ work hours, PTO, and more.

What is a compensation plan?

A compensation plan is a formal document that includes all the components of the employee compensation packages . This involves: 

• Hourly wages, 
• Salaries, 
• Commissions and bonuses, as well as 
• Employee benefits and other incentives.

Compensation plans are somewhat flexible, as it’s up to the employers to decide what they want to offer to their employees in order to stay competitive in the labor market.

Nowadays, as more employees work remotely, companies must make sure they offer competitive compensation packages that cater to their remote workers . For some, that may be offering location-based or location-agnostic compensation. While location-based pay will require you to pay your employees based on the cost of living in their place of residence, location-agnostic pay calls for equal pay no matter the location.

The 2 types of compensation

There are 2 major types of employee compensation for an employer to consider when setting up a compensation plan:

• Direct compensation, and
• Indirect compensation.

Apart from these 2 major types of compensation, there is an additional type that doesn’t fall into any of these categories and which we’ll discuss in more detail below.

Let’s break down each in more detail. 

Type #1: Direct compensation

Direct compensation is financial compensation given to an employee for time worked. It can be in the form of a salary, overtime pay , bonuses, or commissions (we’ll go over each more thoroughly in The 4 types of direct compensation section below).

Type #2: Indirect compensation

As opposed to direct or financial compensation, indirect compensation is the non-monetary payment provided to an employee. This type of compensation usually involves the benefits an employee receives in addition to the direct compensation, commonly known as employee benefits .

Such benefits may include health insurance, life insurance, vacation or paid time off , retirement funds, fringe benefits, etc. Some companies may also offer company stocks and profit-sharing in their benefits packages.

💡 Clockify Pro Tip

Want to know how to request time off and track it properly? Stick around and read the following blog post on the matter:

• How to request time off and track it successfully

Bonus compensation type: Incentives

Speaking of the additional type of compensation, incentive pay is also a form of employee compensation — one that doesn’t strictly fall under the above-listed categories.

Incentive pay is a form of compensation that is usually either indirect or non-financial and based on performance rather than on time worked. Incentives serve as a form of encouragement and motivation for employees to strive for excellence in their work. They usually imply a specific goal — if an employee reaches the said goal, they get the incentive, which may be in the form of travel, merchandise, or even cash. 

If you want to learn more about goals, their types, and most importantly, how to achieve them, pay attention to the following text:

• Different Types of Goals and How to Achieve Them

The 4 types of direct compensation

As we mentioned earlier, direct compensation is monetary or financial employee compensation, and these are main types of direct compensation:

• Hourly compensation,
• Salary compensation,
• Commissions, and
• Bonuses.  

Direct compensation type #1: Hourly compensation

Hourly compensation is a type of direct compensation associated with base pay, meaning companies pay their employees a predetermined rate for each hour worked.

Unless additional rules apply (some hourly workers are exempt from minimum wage and overtime ), hourly employees are treated as non-exempt as they are entitled to the federal minimum wage under the Fair Labor Standards Act . In addition to the hourly wage, the same act entitles hourly workers to receive overtime compensation — 1.5 times their standard hourly rates. This rule applies for each hour they spend working beyond 40 hours per week .

The required federal minimum wage in the US is $7.25 per hour worked . Still, if a state law requires a higher minimum wage per hour worked, then the more favorable law for the employee prevails. 

To find out if you are eligible for either federal or state minimum wage, read the following text that will give you more insight into the topic:

• Minimum wages by state in USA for 2023

Direct compensation type #2: Salary compensation

Salary compensation is another type of direct compensation associated with base pay, meaning employees receive a fixed amount of money each pay period (weekly, monthly, bi-weekly, etc.).

This fixed salary is always based on a salary range defined for a particular job position.

A salary range is the pay range defined by the employer that describes the minimum and maximum pay rate for a job position. It also includes a series of mid-range pay increases employees may expect to get during their time at a company.

In case salaried employees are exempt from the FLSA , they do not get paid either minimum wage or overtime for the hours they spend working past 40 hours per week. This is the case if they earn more than $684 per week or $27.63 per hour . If they earn less than this amount, they are treated as non-exempt and are entitled to minimum wage and overtime pay.

To learn more about the differences between hourly and salaried employee compensation, as well as their pros and cons, check out our blog post on the subject:

• Salary vs hourly employment: pros and cons

Direct compensation type #3: Commission 

Compensation based on commission is a type of direct compensation associated with variable pay . It is common among people in the sales industry who get paid in this manner based on the sales quotas, sales percentages, and goals they reach.

Commission rates may be based on:

• Revenue — for example, if a sales professional gets 5% worth of commission for each sale, and they make a $50,000 sale, they get $1,000 worth of commission for that sale,
• Gross margins or profit — the higher a sales professional sells a product or service, the higher the commission rate, and
• Commission fee — the sales professional makes a fixed commission amount regardless of the monetary value of the sales they made.

Direct compensation type #4: Bonuses

Compensation based on bonuses is another direct type of compensation associated with variable pay. Professionals who have precise goals to reach — such as managers and salespeople — usually receive bonuses.

Bonuses are frequently paired up with other types of compensation, such as commissions or salary.

In some companies, bonuses may be implemented as an incentive meant to help employees reach higher performance standards at their jobs. In such companies, employees usually receive bonuses when they live up to certain metrics (such as company OKRs or KPIs ).

How do I create an employee compensation plan?

In this section, we’ll talk about the steps you need to undertake in order to design a competitive compensation package properly.

The following steps will help your organization stay competitive in the market and attract the top-talent professionals you need. 

Let’s go over each step in more detail.

Step #1: Define the company’s compensation philosophy

Competitive compensation is based on market pay rates. Therefore, when defining the compensation in your company, you can choose to: 

• Lead, 
• Lag, or 
• Match the market .

While leading the market would entail offering higher compensation than the competitors, lagging would include offering lower compensation as compared to competitors. Finally, matching the market would mean giving the same compensation as the competitors. 

Establishing the company’s compensation philosophy is completely up to you, but bear in mind that if you want to attract and retain top talent, you should at least match the numbers on the market.

You can always offer additional, non-monetary compensation such as more days off or other employee benefits that may sound more appealing to a job candidate than the actual monetary compensation.  

Step #2: Define the type of employees you will hire

When outlining your compensation strategy, it’s also important to decide which employees you tend to hire. Remember that, as an employer, you must be aware of the different legal regulations and obligations concerning each type of worker. 

Therefore, when choosing which employees to hire, you ask yourself the following questions: 

• Are your employees full-time or part-time employees?
• Will you tap into the gig economy and employ contractors and freelancers?
• What are the average hourly rates you’ll need to offer to your freelancers and contractors?
• Does your business need to hire seasonal workers during peak times such as summer or winter holidays?

In case you’re wondering how to pay contractors and freelancers, here’s a text that will help you: 

• How to pay contractors and freelancers in 5 simple steps

Step #3: Research and analyze the job market

As said above, you need to scrutinize the market before defining your compensation package and benefits since it’s crucial for attracting top talent. 

If you are operating in the US, you can obtain useful general compensation statistics from the US Bureau of Labor Statistics .

Still, the best way to do so is to analyze and research salary data and market surveys — this is also known as compensation benchmarking.

When looking for market surveys and salary data to buy and analyze, make sure you pay close attention to the following elements:

• Industries — look for surveys that cater to your company’s industry,
• Location — look for surveys that cater to the country, state, or city your company is operating in, 
• Employee size — look for surveys that cater to the size of your company,
• Revenue size — look for surveys that show data from companies that have a similar business volume as you, or
• Job summaries — look for the job summaries closest to the positions you need.

Furthermore, if you want to find compensation statistics on salary-focused websites, bear in mind that this data is not the true representation of the market, as anyone can edit it. 

Step #4: Define your compensation structure 

Compensation structure refers to the compensation strategy you will use to define how employees will be paid. No matter how you choose to compensate for your employees’ work, you’ll need to think carefully about how best to define the hourly rates, salaries, and salary ranges you want to offer.

Also, make sure you take the following elements into consideration before you make your decision:

• The industry you are operating in,
• The size of your company,
• The revenue your company makes,
• The specific job positions you are looking for, and
• The importance and worth of these positions for the successful operation of your company.

Here’s how you can best define the salaries and hourly rates in your company .

Defining employee salaries

If you’ve decided to compensate your employees through salaries, you’ll need to think about the salary ranges you want to offer.

To best define employee salaries , make sure you: 

• Carry out job analysis — determining more information about the job position you are opening, 
• Group the jobs into job families — grouping the jobs by department and type (such as executive, administrative, technical) or location,
• Gauge employee experience and expertise for a certain job position — focusing on the skillfulness and the collection of experiences that an employee possesses for the successful operations of the company,
• Group jobs by job grades — the US federal government recognizes 15 job pay grades, each characterized by the General Schedule (GS) payscale . For instance, for an entry-level position with a bachelor’s degree, the average pay rate in 2023 was from $40,082 to $52,106 per year,
• Calculate the actual salary ranges — most companies will use +/- 15% or 20%, starting from the midpoint, and
• Decide how you want employees to progress within their salary range — for example, you can base this progression on the number and difficulty of skills, duties, and responsibilities, on a preplanned schedule, etc.

Defining employee hourly wages

If you decide to hire hourly workers, you must make sure you determine hourly wages carefully. To be able to do that (and make sure you are offering competitive hourly rates), you must also take in factors such as your industry, skills, and the experience you are looking for in a candidate.

Here are some hourly rates effective for 2024 based on federal pay grades that you can use as a reference when defining your own compensation packages:

• Entry-level positions (an associate’s or bachelor’s degree) — hourly rates range from $18.10 to $23.52,
• Mid-level positions (a bachelor’s or master’s degree) — hourly rates range from $24.60 to $31.97, and
• Top-level positions (a master’s degree or Ph.D.) — hourly rates range from $42.41 to $55.14.

Step #5: Add in employee benefits

Apart from direct compensation, in order to attract top talent, you’ll also need to offer competitive benefits packages when crafting your compensation strategy.

Therefore, make sure you include the most common employee benefits in your employee compensation package. Such benefits include (but are not limited to): 

• COBRA health insurance — additional 18 months of health coverage to eligible employees after job termination, either voluntary or involuntary (applicable to companies with 20 employees or more),
• Workers’ compensation insurance — medical insurance and compensation to employees who suffered an injury or illness in the workplace,
• Disability insurance — compensation benefits provided to employees due to ‘temporary disability’ that occurred in the workplace, 
• Paid holidays — in order to stay competitive, employers may provide employees with paid holidays as a way to boost employee morale,
• Family and medical leave — includes maternal, paternal, and adoption leave (not required to be paid leave, by law),
• Flexible schedules — employers may choose to offer flexible work arrangements such as a 4-day workweek or a 9/80 work schedule that contribute to a better work/life balance,
• Hazard pay — provided to employees whose job duties require them to work in unsafe conditions (such as security and military professions),
• Regular work breaks — times off during work time provided for lunch breaks, short breaks, and others.

If you are not sure about the holidays (paid or unpaid) you are entitled to while living and working in the US, head on to the following blog post to learn more about it:

• What are paid holidays and how do they work?

Bonus tip #1: Calculating commissions

If you’ve decided to include commissions in your compensation planning (either as the only form of compensation or a supplementary form of compensation), there are several factors you should consider when defining commissions for your employees:

• The commission rate — this is the percentage (e.g., 5%) of fixed compensation (e.g.,$25) employees will get for each sale they make.
• The total number of sales,
• The gross margin of the product being sold,
• The total net profit of the product being sold (when you want to inspire your sales team to focus on selling more profitable products in your offer),
• The cash received from sales (when you want to inspire the sales team to collect all overdue receivables), and
• The inventory (when you’re looking to eliminate a product from stock).
• The overrides — one percentage (e.g., 5%) of fixed compensation (e.g., $25) may apply before the employees reach a certain goal, after which they can count on a higher percentage (e.g., 8%) or fixed compensation (e.g., $30).
• The splits — in the case when two or more employees are responsible for the sale they split the commission.
• The payment delay — commissions are usually calculated subsequently at the end of the month.

Bonus tip #2: Calculating bonuses

Sometimes, you’ll want to include bonuses in your employee compensation packages as additional incentives for high-quality performance.

Here are some of the bonuses you can consider offering:

• Signing bonuses — bonuses offered to job candidate executives as incentives to inspire them to accept positions,
• Salary-based bonuses — based on the amount of hourly wages or annual salaries the employees are making (the higher the wages or salaries, the higher the bonuses),
• Bonuses based on department goals — once a team or department meets the predefined goal, all members of the team receive bonuses,
• Referral bonuses — the higher the number of customers referred, the higher the bonuses for the employees who referred them,
• Performance bonuses — bonuses based on the employee’s overall performance or achieved specific goals at work,  
• Holiday bonuses — non-performance-based bonuses typically paid around a beloved national holiday, such as Christmas,
• Quarterly or annual bonuses — if the company reaches a certain net profit goal, the employees receive a flat rate bonus or percentage,
• Retention bonuses — bonuses paid to top performers in order to keep them, and others. 

Benefits of a fair compensation system

A fair compensation strategy must be developed and implemented without any prejudice or favor to anyone or anything, showing equity in the workplace.

As such, a compensation system has a handful of benefits for both the organization and the employees:

• It helps you attract top talent through competitive compensation packages,
• It helps employees understand exactly how valued they are within the organization,
• It motivates employees to perform better at work ,
• It raises the morale and cooperation level among the people,
• It elevates employee satisfaction for a job well done, and
• It promotes workplace equity.

If you want to learn more about calculating work hours and streamlining your payroll processes, head to the following link:

• How to calculate work hours: A step-by-step guide to calculating payroll and hours worked

Compensation plan template 

Now that you know what you need to include in your compensation plan, here is an example of a compensation plan template that you can follow when defining your compensation packages.

You can download the template and choose the form that suits you best, whether that’s Google Sheets, Google Docs, PDF, Excel, or Word.

⏬ Download an Employee Compensation Plan in Google Sheets

⏬ Download an Employee Compensation Plan in Google Docs

⏬ Download an Employee Compensation Plan in PDF

⏬ Download an Employee Compensation Plan in Excel

⏬ Download an Employee Compensation Plan in Word

What is an example of a compensation plan?

The following is an example of a filled out compensation package template. The example plan below contains some of the most important information when preparing a compensation package for your employees, including: 

• Basic information, 
• Direct compensation information, 
• Benefits, 
• Retirement planning, and 
• Other relevant information.

Most of the information in the compensation plan example we already discussed in the above text, and we hope this example helps you craft your compensation package successfully and make sure you offer equity to your employees at the same time.

As for the direct compensation section in the template, you can see that the employee is an hourly worker hence there’s no salary information. Since she is a sales specialist, you can see all the details about her commission-based compensation, too.

The next section in the template is about the employee’s benefits — whether the employee in question is given dental care, information about medical insurance, time off, and others.

As for the retirement planning section, the template provides information about the employer-paid retirement savings plan, eligibility to buy shares of the companies and under which conditions, or whether the employee may obtain a percentage of the company’s total earnings or not.

Finally, the template allows you to write any additional information about certain benefits, break and meal periods, reimbursement of transportation, and others. 

Tracking work hours vigilantly is the cornerstone of fair employee compensation

Whether you need to fill in employee timesheets, track overtime, PTO, or billable hours, having a reliable tool is critical. Clockify is an efficient business solution that can help you with that, as it allows employees to track their work time in real-time (with a timer), add it manually afterward, or enter it in a timesheet template .

With Clockify, you’ll also be able to define hourly rates for all people within your company and have their pay calculated automatically based on the number of hours they worked in a given time period.

What’s more, no matter if you hire salaried or hourly workers, exempt or non-exempt, Clockify’s free employee hours tracker will also help you stay on top of compensatory time (provided that your employees are eligible for comp time, of course).

Clockify can be your ally in making sure your employees are compensated accurately and timely, no matter which employees you hire.

Marija Kojic is a productivity writer who's always researching about various productivity techniques and time management tips in order to find the best ones to write about. She can often be found testing and writing about apps meant to enhance the workflow of freelancers, remote workers, and regular employees. Appeared in G2 Crowd Learning Hub, The Good Men Project, and Pick the Brain, among other places.

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• Compensation plan

What is a compensation plan?

Foundation of a compensation plan, why your company needs a compensation plan, compensation vs. total compensation, total rewards plan advantages, types of compensation, types of benefits (indirect compensation), how to create a compensation plan, compensation plan example.

A compensation plan (also known as a comp plan) is a set of guidelines for employees’ salaries, bonuses, and equity. It gives current and prospective employees a clear view of their compensation package—which gives your company an advantage as you’re hiring.

A great compensation plan not only sets the value of what you’re paying (compensation bands), but also defines roles and levels and outlines how performance will be evaluated. Ideally, it’s part of a total rewards plan, which documents your comp plan plus the benefits you offer.

A compensation plan is built on four pillars: compensation philosophy, job architecture, performance management, and incentives.

Compensation philosophy: your company’s overall position about employee compensation. Your compensation philosophy should align with your business strategy to hire, retain, and reward top talent. 

Job architecture: how you define roles and leveling. Also called job leveling or job structure, this refers to the hierarchy of jobs within your company.

Performance management: guidelines for performance evaluations. This helps managers track employees’ work so they can receive ongoing feedback and advance their careers.

Incentives: how you pay employees for their performance. Incentives like bonuses, and equity compensation , encourage employee performance and stimulate productivity.

Creating or updating any compensation program starts with a clear philosophy. Knowing what your company values makes it easier to make decisions that match those values. Knowing why you’re making those decisions will make sure the entire planning process goes smoothly. Once you have that down, we’ll explore items two through four below. 

An official compensation plan cultivates pay equity and transparency , maintains strong company culture, and helps retain top talent.

Pay equity is simply compensating employees equally for performing the same or similar role according to factors like experience and job performance. Without a compensation plan, pay equity can be difficult to track and manage, especially for early-stage companies.

A fair work environment increases employee performance and reduces turnover, according to a Gartner survey . By implementing a compensation program early, founders and CEOs can attract the best employees and reduce turnover. 

Compensation , also referred to as “direct compensation,” is strictly salary, bonus, and equity. “Total rewards” encompasses compensation plus benefits. (You may hear total rewards described as “total compensation,” but since benefits are not strictly compensation, that’s less accurate.)

A total rewards plan (compensation plus other employee benefits) ensures your company remains competitive. Take a look at some of the top advantages to total rewards plans and examples below.

The possibilities are endless when structuring your company’s compensation plan. Here are some considerations to keep in mind for direct compensation (salary, bonus, and equity). 

Salary is the main pillar of compensation and is often the foundation of a company’s total rewards. When determining salaries for your company, consider geography and structure.

Localized vs. national salaries

Salaries can be standard regardless of location or can be based on an employee’s specific region. For example, you may choose to pay employees in San Francisco, California, more than employees in Raleigh, North Carolina, based on the cost of labor to stay competitive in local markets.

Salary structures: Traditional vs. broadband

A traditional salary structure is common at larger companies. This structure has smaller differences between the minimum and maximum pay bands, placing more emphasis on promotions.

Here’s an example of a traditional salary structure:

Broadband salary structure bands are much wider and are more common at smaller companies with fewer employees because it allows for more flexibility.

Here’s an example of a broadband salary structure:

A bonus is additional compensation given to employees. When you’re determining your plan for bonuses, consider eligibility, targets, and payouts:

Who is eligible? Often, companies distinguish between the bonus structure for employees in sales vs. other departments.

What are the targets employees need to hit to get bonuses? Targets can be flat dollar amounts or percentages and can vary by job level. You can also create ranges for bonus payouts. 

What should the payout structure be? A compensation plan can include minimum and maximum payouts, outline the frequency of bonus payments, and include a methodology for payout metrics. 

Equity is the final piece of direct compensation. Equity compensation incentivizes employees to stick around by giving them an ownership stake in the company. As the company grows, an employee’s equity grows, too. A compensation plan should outline the types of stock, grant timing, and vesting schedules.

Types of stock

Common types of equity for earlier-stage companies include incentive stock options (ISOs) or non-qualified stock options (NSOs) .

ISOs have more favorable tax treatment for the employee than NSOs. Restricted stock units (RSUs) are a popular equity vehicle offering for more mature companies because employees don’t need to pay to exercise in order to own shares outright (which might be prohibitive considering usually steep 409A valuations for late-stage companies). Seed-stage companies that have not yet raised outside capital commonly issue restricted stock awards (RSAs) , which an employee owns outright the day they are issued. 

Your company might move from issuing employee stock options to RSUs as it grows to better align between the company and equity strategy (e.g. to limit share dilution or if there’s a plan to IPO soon). That’s why it’s so important to revisit your compensation plan every year or anytime your company’s goals shift. 

Vesting schedule

A vesting schedule is another consideration for equity. Vesting is the process of earning either options or stock over time and can encourage your employees to stay longer at the company to earn their rewards. There are three common types of vesting schedules: time-based, milestone-based, and a hybrid of time-based and milestone-based.

A typical vesting schedule for a new hire grant is four years with a one-year cliff. Here’s an example:

Less common than time-based vesting, milestone vesting is when options or shares are distributed after the company reaches a business goal (e.g. the company hits a certain valuation). Hybrid vesting is a combination of the two. 

Refresh grants

Most companies that offer equity as part of compensation also need to consider whether they’ll have a grant refresh program —an additional grant given to employees who have previously received grants. Here are some questions to answer when adding grants to a compensation plan:

How will you structure refresh grants? The structure of your refresh grants can help account for the reduction in employee’s unvested value over time. Most private companies use a traditional vesting schedule, which often leads to employee turnover after their initial grants vest.

Will refresh grants be timed based on an employee’s start date or will there be a “focal” date? The latter choice means several employees receive new grants at the same time, which helps maintain equity among employees’ compensation.

Will you have a grant refresh program? This can help with employee retention, along with salary increases. 

Retaining employees generally comes down to more than just compensation. It often takes benefits, development opportunities, and company culture, all of which fit nicely into a holistic total rewards approach. Those benefits can include a wide range of perks, depending on your company’s philosophy and overall mission. For example, a rideshare company might offer fully paid commuter benefits for its employees, while a medical imaging company might offer more wellness and well-being benefits than other employers. 

Some examples of benefits are: 

Medical insurance

Dental and vision coverage

Retirement benefits

Wellness benefits (such as gym reimbursement)

Educational incentives or continuous learning stipends

Well-being benefits (coaching, meditation, therapy)

Volunteer opportunities

Flexible spending accounts (FSA)

Flexible work opportunities (hybrid work)

Paid time off (PTO)

Disability insurance (DI)

Company equipment (such as a laptop)

Paid holidays

Reimbursement for childcare expenses

Relocation stipends or housing options

Reimbursement for work-from-home costs

Commuter benefits

Each company is different and some leaders choose to prioritize direct compensation over benefits. It can be difficult for employees to see the dollar value of additional benefits like paid meals or continuing education opportunities. Compensation management software , such as Carta Total Comp, aggregates the value of compensation plus benefits to determine the total rewards.

The steps to creating a compensation plan vary from company to company. These are some of the steps you can start with when creating yours:

Determine your compensation philosophy

Outline job architecture by defining roles and levels

Create guidelines for performance evaluations

Define direct compensation (salary, bonus, and equity)

Add in benefits

Implement a pay equity process

Conduct post-hoc reviews

Now that you know the structure of a compensation plan, let’s put it into action. Using Carta Total Comp, you can create your company’s total rewards system. Our software accounts for all of the aspects mentioned above, including salary targets based on geography and cost of living, salary bands, bonuses structures, and equity grant schedules, as well as benefits.

Here’s an example of a compensation plan for a (hypothetical) $150 million Series D company that used Carta Total Comp to create its compensation plan:

Meetly’s HR manager set the peer group used to benchmark compensation for all pay bands (the total amount allocated for compensation) to between $100 million and $250 million and set the geographical location to the local San Francisco-Oakland-Berkeley, CA, area. They were also able to set compensation band widths for individual contributors (ICs), managers, and executives. 

Above you can see a customized compensation plan for Meetly. It also shows how the company targets compensation versus the overall market for the roles, using Carta’s benchmarks.

By inputting some basic information, you can create a total rewards compensation plan that accounts for salary, bonus, equity, and benefits. Carta Total Comp uses data from over 120,000 employees across the entire Carta’s customer base to make compensation recommendations that can help your company attract and retain talent. Schedule a demo to see how Carta Total Comp can work for your company. 

Related Content

How Do You Draft the Personnel Section of the Business Plan? The Personnel Section of a Business Plan Explained.

Sample Letter Hub

Salary Proposal Letter To Employer (5 Samples)

By Mubashir

March 5, 2024

Salary Proposal Letter To Employer is a letter that you send to your employer to propose a salary increase.

It is important to write a well-crafted salary proposal letter in order to make a good impression on your employer and increase your chances of getting approved for a raise.

In this article, we will share some templates, examples, and samples of Salary Proposal Letter To Employer.

These resources will help you write a professional and effective salary proposal letter that will get you the results you are looking for.

Salary Proposal Letter to Employer

[Your Name] [Your Address] [City, Postal Code] [Email Address] [Phone Number] [Date]

[Employer’s Name] [Employer’s Title] [Company Name] [Company Address] [City, Postal Code]

Dear Mr./Ms. [Employer’s Last Name],

I am writing to express my interest in the [Position Name] position at [Company Name]. I have been following your company’s progress with great interest and believe that my skills and experience would be a valuable asset to your team.

I have [Number] years of experience in [Industry Name], where I have consistently exceeded expectations in roles such as [Previous Position Name] and [Previous Position Name]. In my previous role at [Previous Company Name], I was responsible for [List of Responsibilities]. I successfully [List of Accomplishments].

I am confident that I can bring my expertise in [Skill Name], [Skill Name], and [Skill Name] to your company. I am a highly motivated and results-oriented individual with a strong work ethic. I am also an excellent communicator and have a proven ability to build strong relationships with clients and colleagues.

I understand that the salary range for this position is [Salary Range]. I am seeking a salary of [Your Desired Salary], which is commensurate with my experience and qualifications. I am open to negotiation and believe that my contributions to your company will far exceed the cost of my salary.

I am eager to learn more about this opportunity and how I can contribute to the success of [Company Name]. I am available for an interview at your earliest convenience.

Thank you for your time and consideration.

Sincerely, [Your Signature] [Your Typed Name]

Salary Proposal Letter To Employer Sample

[Your Name]

[Your Address]

[City, Postal Code]

[Email Address]

[Phone Number]

[Employee Name]

[Employee Address]

Subject: Salary Increment Proposal

Dear [Employee Name],

I hope this letter finds you well.

I am writing to propose a salary increment in recognition of your outstanding contributions to our team. Your performance has consistently exceeded expectations, and you have made significant contributions to the success of our department.

Since joining [Company Name] on [Start Date], you have consistently demonstrated:

Exceptional technical skills and expertise in [Relevant Areas]

Strong work ethic and dedication to your role

A positive and collaborative attitude that inspires your colleagues

A proactive approach to problem-solving and innovation

Your efforts have not only benefited our team but have also contributed to the overall growth and success of the company. Specifically, your contributions have:

[List specific accomplishments and quantifiable results]

In light of your exceptional performance, I am proposing a salary increment of [Percentage]% to [New Salary]. This increment is effective from [Start Date of Increment].

I believe that this salary adjustment is both fair and competitive, and it reflects the value that you bring to our organization. I am confident that you will continue to make significant contributions to our team and the company as a whole.

I would like to schedule a meeting with you to discuss this proposal further and answer any questions you may have. Please let me know your availability at your earliest convenience.

Thank you for your continued hard work and dedication. We are fortunate to have you as a valuable member of our team.

Appraisal Letter For Salary Proposal To Employer

[Employer’s Name]

[Employer’s Title]

[Company Name]

[Company Address]

Dear [Employer’s Name],

I am writing to formally propose a salary adjustment for my role as [Your Role] at [Company Name]. I have been with the company for [Number] years and have consistently exceeded expectations in my responsibilities.

During my tenure, I have made significant contributions to the team and the organization as a whole. I have successfully:

[List of key accomplishments and quantifiable results]

I am confident that I can continue to make valuable contributions to the company in the future. I have a strong work ethic, excellent communication and interpersonal skills, and a proven track record of success.

Based on my performance, experience, and the current market value for similar roles, I am requesting a salary increase of [Percentage or Amount] to [Proposed Salary]. This adjustment would bring my salary to a level that is commensurate with my contributions and the value I bring to the organization.

I am eager to discuss my salary proposal with you further and explore how we can mutually benefit from this adjustment. I am available to meet at your earliest convenience.

Thank you for your time and consideration. I appreciate the opportunity to work at [Company Name] and am committed to its continued success.

Salary Proposal Request Letter To Employer

[Employer Name]

Dear [Employer Name],

I am writing to formally request a salary proposal for the position of [Position Name] that I applied for on [Date]. I am very interested in this opportunity and believe that my skills and experience would be a valuable asset to your team.

During our recent interview, we discussed the responsibilities and expectations of the role. Based on my understanding, I have researched industry benchmarks and market rates for similar positions. I believe that a salary range of [Salary Range] would be commensurate with my qualifications and the value I can bring to the company.

I am confident that I can make a significant contribution to your organization. I have [Number] years of experience in [Industry/Field], where I have consistently exceeded expectations in [Relevant Skills]. I am also proficient in [Software/Tools] and have a strong understanding of [Business Processes].

I am eager to learn more about the specific compensation package that you are offering for this position. I am open to discussing salary, benefits, and other forms of compensation that may be available.

I am available for a follow-up meeting or call at your earliest convenience to further discuss my salary expectations and how my qualifications align with the company’s needs.

Thank you for your time and consideration. I look forward to hearing from you soon.

[Your Signature]

[Your Typed Name]

Wishes For Salary Proposal Letter To Employer

I hope this letter finds you well. I am writing to formally request a salary increment in recognition of my contributions and performance over the past [number] years.

Since joining [Company Name], I have consistently exceeded expectations in my role as [Your Role]. I have taken on additional responsibilities, led key projects, and made significant contributions to the team’s success.

Key Accomplishments:

[List of specific accomplishments and quantifiable results]

[List of additional responsibilities and initiatives undertaken]

[Highlight any positive feedback or recognition received]

Based on my performance and the current market value for similar roles, I believe that a salary increment of [percentage or amount] is reasonable and justified. This would bring my salary in line with industry benchmarks and reflect my increased value to the company.

I am confident that I can continue to make valuable contributions to [Company Name] in the future. I am eager to take on new challenges and responsibilities that will allow me to grow and develop within the organization.

I understand that salary decisions are based on a variety of factors, including the company’s budget and overall financial performance. However, I would appreciate the opportunity to discuss my request further with you. I am available to meet at your earliest convenience.

Simple Salary Proposal Letter To Employer

I am writing to formally request a salary increase of [Percentage]% to [New Salary Amount] per annum. I have been employed with [Company Name] for [Number] years as a [Your Position].

During my tenure, I have consistently exceeded expectations in my role. My key accomplishments include:

[Accomplishment 1]

[Accomplishment 2]

[Accomplishment 3]

I have also taken on additional responsibilities, including [Additional Responsibilities]. I am confident that I have made a significant contribution to the company’s success.

Based on my performance and the current market value for similar positions, I believe that my requested salary is fair and reasonable. I am committed to continuing my contributions to [Company Name] and am eager to take on new challenges.

I am available to discuss my request further at your earliest convenience. Thank you for your time and consideration.

Salary Proposal Letter To Employer After 1 Year

I hope this letter finds you well. I am writing to respectfully request a salary increase after one year of employment with [Company Name].

During my time with the company, I have consistently exceeded expectations in my role as [Your Role]. I have taken on additional responsibilities, including:

[List of additional responsibilities]

These contributions have resulted in significant benefits to the team and the organization, including:

[List of accomplishments and quantifiable results]

I have also received positive feedback from my colleagues and supervisors, who have recognized my hard work, dedication, and commitment to excellence.

Based on my performance and contributions, I am requesting a salary increase of [Percentage or Amount]. This request is in line with industry benchmarks for similar roles and experience levels, as well as the value I have brought to the company.

I am confident that I can continue to make valuable contributions to [Company Name] in the future. I am eager to take on new challenges and responsibilities, and I am committed to the company’s success.

I would appreciate the opportunity to discuss my salary request further with you at your earliest convenience. I am available to meet at your earliest convenience.

Salary Proposal Letter To Employer Template

Subject: Salary Proposal

I am writing to offer you a salary proposal for the position of [Position Name] at [Company Name]. We are pleased to extend this offer to you based on your exceptional qualifications and the value you will bring to our team.

Proposed Salary:

We are proposing a starting salary of [Amount] per [Frequency (e.g., month, year)]. This salary is commensurate with your experience, skills, and the market value for this role.

In addition to your salary, you will be eligible for the following benefits:

[List of benefits, such as health insurance, paid time off, retirement plan]

Performance Expectations:

Your performance will be evaluated regularly based on the following criteria:

[List of performance expectations]

Start Date:

Your start date is [Date]. Please confirm your acceptance of this offer by signing and returning a copy of this letter to me by [Date].

Additional Information:

We are excited to have you join our team and believe that you will be a valuable asset to our organization. If you have any questions or require further clarification, please do not hesitate to contact me.

Thank you for your time and consideration. We look forward to welcoming you to [Company Name].

[Your Title]

Formal Letter For Salary Proposal To Employee

I am writing to you today to formally propose a salary increase of [Percentage]% to your current salary, effective [Effective Date]. This increase brings your annual salary to [New Annual Salary].

This salary adjustment is a recognition of your outstanding performance and contributions to our team over the past [Number] years. During this time, you have consistently exceeded expectations in your role as [Employee’s Position].

Your accomplishments have included:

Your hard work, dedication, and positive attitude have made a significant impact on our team and the organization as a whole. We value your contributions and believe that this salary increase is a fair reflection of your worth.

We understand that salary is an important factor in your career and financial planning. We are committed to providing our employees with competitive compensation and benefits that align with their contributions and the market value for their skills and experience.

This salary adjustment has been approved by [Approving Authority]. If you accept this proposal, please sign and return a copy of this letter to me by [Return Date].

We are confident that you will continue to be a valuable asset to our team and we look forward to your continued success.

Thank you for your hard work and dedication.

Salary Compensation Proposal Letter To Employer

Subject: Salary Compensation Proposal

I am writing to formally propose a salary compensation adjustment for my position as [Your Position] at [Company Name]. I have been employed with the company for [Number] years and have consistently exceeded expectations in my role.

During my tenure, I have made significant contributions to the team and the organization, including:

I have also taken on additional responsibilities and projects beyond my job description, demonstrating my commitment and value to the company.

Based on my performance, experience, and market research, I believe that a salary adjustment is warranted. I am requesting a salary increase of [Percentage]% to [New Salary Amount]. This request is in line with industry benchmarks for similar positions with comparable experience and responsibilities.

I am confident that I will continue to be a valuable asset to the company and am eager to contribute to its continued success. I am available to discuss my proposal further at your convenience.

How to Write a Salary Proposal Letter to Employer

Writing a salary proposal letter is an important step in the negotiation process. It is an opportunity to state your case for a higher salary and to provide evidence to support your request.

1. Research Your Worth

Before you write your letter, it is important to do your research and determine what you are worth.

This includes looking at industry benchmarks, your experience and skills, and the cost of living in your area.

2. State Your Case

In the first paragraph of your letter, state your case for a higher salary. Be clear and concise, and provide specific evidence to support your request.

3. Provide Evidence

In the body of your letter, provide evidence to support your request. This could include your performance reviews, your experience and skills, or the cost of living in your area.

4. Be Negotiable

It is important to be negotiable in your salary proposal. Be prepared to compromise and to accept a salary that is lower than your initial request.

5. Be Professional

Your salary proposal letter should be professional and well-written. It should be free of errors and should be written in a clear and concise style.

6. Follow Up

After you have submitted your salary proposal letter, follow up with the employer to see if they have any questions or if they are interested in negotiating.

7. Be Patient

It may take some time for the employer to make a decision on your salary proposal. Be patient and do not be discouraged if you do not receive a response immediately.

FAQs about Salary Proposal Letter To Employer

What is a salary proposal letter.

A salary proposal letter is a formal document that you can send to your employer to request a salary increase.

It should outline your reasons for requesting the increase, and provide evidence to support your request.

What should I include in a salary proposal letter?

Your salary proposal letter should include the following information:

• Your current salary and the salary you are requesting
• Your reasons for requesting the increase
• Evidence to support your request, such as your performance reviews, accomplishments, and market research
• Your availability to discuss your request further

How do I write a salary proposal letter?

To write a salary proposal letter, you should:

• Start with a formal salutation
• State your purpose for writing the letter
• Provide evidence to support your request
• State your desired salary
• Close with a professional closing

What are some tips for writing a successful salary proposal letter?

Here are some tips for writing a successful salary proposal letter:

• Be professional and respectful
• Be specific and clear
• Proofread your letter carefully before sending it

What should I do if my salary proposal is rejected?

If your salary proposal is rejected, don’t be discouraged. You can try to negotiate with your employer, or you can wait and reapply for a higher salary at a later date.

Salary Increment Letter To Employee From The Employer (5 Samples)

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