# What is a Compensation Strategy?

A compensation strategy defines how pay is set, reviewed, and communicated. For SMEs, it aligns salaries with budgets, market data, and performance. Clarity reduces bias, speeds hiring decisions, and improves retention by setting expectations for bands, reviews, and rewards.

Source: https://faqtic.co/glossary/compensation-strategy

## Why it Matters for SMEs

- Aligns pay to strategy
- Reduces bias
- Speeds decisions

## Example in Practice

Leadership sets principles and review cycles, tracked in Factorial via custom fields.

## Frequently Asked Questions

### What should it include?

Pay philosophy, bands, review cadence, criteria.

### How often to review pay?

Annually, plus ad hoc for promotions.

### Can HR tools track it?

Yes, with roles, bands, and notes.

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Canonical HTML: https://faqtic.co/glossary/compensation-strategy