HR Glossary / Pay Policy

A pay policy refers to a document that establishes the principles that govern the remuneration and benefits granted to employees of a company.


Why is it important to establish a pay policy?

Establishing a clear pay policy allows companies to better structure the remuneration of their employees and to achieve their financial objectives more easily.

A well-defined salary policy, or remuneration policy, also stimulates employee productivity and increases their motivation at work. It makes it possible to define objectives to be achieved according to their performance or their seniority.

Done well, it also helps to limit employee turnover, ease talent acquisition and achieve company objectives more quickly.

How to set up a salary policy

Typically, the human resources department is responsible for establishing and implementing the pay policy after management approval.

There are 4 steps to implement a salary policy:

  1. Define the company's strategy: labor needs, new product development, increase in sales, etc.
  2. Determine job descriptions to offer competitive salaries
  3. Determine the benefits offered and their terms
  4. Present the pay policy to employees

What should be in a pay policy?

A pay policy typically contains the following information:

  • Salary grid for each position in the company
  • Vacation policy
  • Paid sick leave
  • Paid statutory holidays
  • Benefits
  • Performance evaluations
  • Salary increases
  • The company's objectives

A salary policy is generally transparent and fair for all employees of a company.

How to build a pay policy that is attractive for employees?

Human resources specialists who want to build an attractive compensation policy for employees can:

  • Ask for employee feedback using an anonymous questionnaire
  • Do in-depth research on the most common compensation policies in the labor market in general or in a particular field
  • Identify the needs and motivations of different generations in order to offer a policy that reflects them

What are issues linked to a pay policy?

Issues related to writing or revising a company's pay policy include:

  • Adapting procedures to company strategies
  • Considering the budget
  • Responding to human resources needs
  • Meeting employee needs
  • Respecting the legislation in place
  • Adapting to the economic context and inflation

What is the difference between a pay policy and pay equity?

A pay policy is a document that contains the terms and conditions regarding the remuneration of employees of a company.

Pay equity, on the other hand, is a component of wage policy that ensures that compensation between women and men is of comparable value within a company.


Discover more terms (4)

Start Scheduling
in Minutes.

14-day free trial. Easy setup. Cancel anytime.