In an era where securing skilled talent, transparency, and strategic alignment are central challenges for medium-sized companies, the topic of compensation is gaining increasing importance. A fair, comprehensible, and future-oriented compensation structure is no longer just a "nice-to-have"—it is a decisive competitive factor, further underscored by increasing legal requirements for pay transparency.
Why modernizing compensation models in medium-sized companies is necessary
Many medium-sized companies face the task of modernizing legacy compensation models. Often, there is a lack of clear criteria to make salaries comparable and understandable. In many companies, these structures have simply grown over time. This can lead to dissatisfaction, a lack of transparency, and ultimately, unwanted turnover. The goal is therefore to develop a clear and transparent compensation strategy that integrates job profiles, career levels, and competency models into a grading system.
Introducing a grading system with salary bands
A central element of compensation principles is the introduction of a grading system linked to salary bands. This system creates comparability across departments and enables a fair classification of jobs, roles, and responsibilities. Employees can better understand how their position fits into the company—and what development opportunities exist.
Binding principles for greater clarity
Beyond the technical structure, it is also about cultural clarity: binding principles that define how compensation is handled within the company should be established from the outset. These include criteria such as performance, market benchmarks, experience, and responsibility. These principles should serve as a guide not only for management but also provide orientation for employees.
Putting target and bonus models to the test
Another building block is the review of existing target and bonus models. We analyze whether these still align with the company's strategic goals and whether they provide the desired motivation and steering effect. Where necessary, adjustments are made—always with the aim of creating a fair and performance-enhancing system.
A structured approach to implementation
To successfully achieve these ambitious goals, we follow a clear, structured process:
- Analysis of the current situation
- Assessment of existing compensation models and practices
- Benchmarking against comparable companies and industries
- Identification of ambiguities, imbalances, and optimization potential
- Definition of guiding principles
- Development of principles for fair and transparent compensation
- Defining criteria for salary progression and differentiation
- Developing the grading system
- Developing or adapting job descriptions
- Structuring job descriptions into job families
- Establishing a grading system for evaluating roles within the company
- Mapping salary bands to grades based on market and company data
- Coordination with the works council (if applicable)
- Early involvement in concept development
- Joint development and negotiation of new compensation principles
- Revising the target and bonus model
- Evaluating existing target systems
- Aligning with strategic company goals and new framework conditions
- Communication and training
- Transparent communication to all employees
- Training for managers on how to apply the new systems
- Implementation and evaluation
- Rollout of the new compensation structure
- Regular review and further development based on feedback and key performance indicators
A modern compensation strategy is more than just a salary model—it is an expression of a company's culture and its commitment to acting fairly, transparently, and with a focus on the future. The path to achieving this requires the courage to change. It is a worthwhile endeavor—for the company and for everyone who works there.
THE MAK'ED TEAM develops compensation concepts for your company based on existing structures and a defined target structure. In conjunction with this, we develop job profiles, job families, and the grading system, integrating employees into a transparent and fair compensation and development model. You can find a project example here.
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