How to Conduct a Compensation Analysis for Your Business

If you’ve ever had that nagging feeling: “Are we paying people fairly?” You’re not alone. It’s one of the most common questions growing companies wrestle with, especially as hiring accelerates, roles evolve, or inflation reshapes expectations.

But here’s the truth: compensation isn’t just a cost to manage, it’s one of the clearest ways your business communicates value and priorities.

A well-executed compensation analysis helps you make smart, confident decisions about how you pay your people.

What Is a Compensation Strategy and Why Does It Matter?

Your compensation strategy is the blueprint that guides how you pay your employees and why.

It reflects your business philosophy, growth goals, values, and budget. A good strategy doesn’t just answer “how much?” It aligns how and why you pay with who you’re trying to attract, retain, and reward.

A strong compensation strategy matters because it helps you:

Stay competitive in the talent market
Create internal consistency and fairness
Boost retention and morale
Plan confidently for future growth

When you get compensation right, you don’t just avoid turnover or lawsuits, you build a culture where people know they’re seen, valued, and invested in.

How to Conduct a Compensation Analysis

Now let’s break down how to actually do the work.

1. Start With Your “Why”

Before pulling salary data or building spreadsheets, clarify the purpose of your compensation analysis. Are you:

Experiencing high turnover?
Competing for hard-to-fill roles?
Planning for annual reviews or a raise cycle?
Growing quickly and unsure if pay is keeping pace?

Your “why” shapes everything—from the roles you benchmark to the data sources you use.

2. Gather Internal Data

Begin with your current team. Collect data on:

Job titles and descriptions
Salaries, bonuses, and equity
Tenure and performance
Location (for remote or hybrid teams)

This gives you a clear view of your current compensation structure and helps identify internal inconsistencies or potential pay equity concerns.

3. Benchmark Against the Market

Next, compare your data to the market. Reliable sources include:

Salary surveys (e.g., Radford, Mercer, Culpepper)
Publicly available compensation databases (e.g., BLS, Glassdoor, Levels.fyi)
Industry-specific reports or local economic development data

Look for compensation ranges that match your company size, geography, and industry. A common pitfall is using data from companies that are much larger (or more resourced) than yours. Keep it apples to apples.

4. Analyze Gaps and Trends

Once you have both internal and external data, start spotting patterns:

Are you underpaying in critical roles?
Do some departments lag behind market benchmarks?
Is there internal compression (e.g., new hires making more than longer-tenured employees)?
Are pay gaps appearing across gender or ethnicity?

This is where analysis turns into insight.

5. Align With Your Compensation Philosophy

Data is essential—but context matters too. Your compensation strategy should reflect your values, stage of growth, and business goals. For example:

Early-stage companies might lean on equity when cash is tight.
High-growth teams may prioritize aggressive pay to secure scarce talent.
Mission-driven orgs may pair modest base pay with meaningful perks.

The best strategies balance fairness, competitiveness, and sustainability.

6. Communicate Transparently

Once you’ve made decisions, loop in your leadership team—and plan how to roll out updates to employees. Transparent communication helps build trust and reinforces your commitment to equity and growth.

Even if you’re not making immediate changes, sharing that a compensation review is underway demonstrates intentional leadership.

When to Bring in Backup

Conducting a compensation analysis can feel overwhelming especially when you’re short on time, tools, or experience. At Ampleo HR, we help teams with compensation strategies that reflect your business model, goals, and growth pace.

Whether you’re building your first salary bands, preparing for open enrollment, or navigating post-acquisition complexity, we plug in right where you need us—with just-right HR support that’s both strategic and hands-on.

Want help making sense of your comp strategy?

Let’s connect. We’ll roll up our sleeves with you to ensure your people programs grow in step with your business.

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