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How to set up your compensation philosophy

This guide explains how to define your organisation’s target market position and pay strategy within Ravio to ensure your salary bands align with your business goals.

Overview

Your compensation philosophy is the foundation of how you reward your employees. In Ravio, setting this philosophy allows the platform to automatically calculate salary midpoints and ranges that reflect whether you want to lead, meet, or follow the market. By defining these parameters, you ensure consistency across all hiring and retention decisions.

Prerequisites

  • Permission Level: Admin only

  • Data needed: Your organisation's target market percentiles (e.g., 50th or 75th percentile)

Step-by-step instructions

Step 1: Navigate to settings

To define your strategy, you first need to access your account configuration.

  • Click on Settings at the bottom of the left-hand menu bar.

  • Select Compensation philosophy from the sub-menu.

Step 2: Define your target market position

This determines which Ravio benchmark data point will serve as your band midpoint.

  • Use the toggle or dropdown menu to select your desired Percentile (e.g., the 50th percentile is the market median).

  • You can set different target percentiles for Base salary and Variable pay if your philosophy differs between the two.

Step 3: Set your band width

The band width (or "spread") defines the minimum and maximum earning potential for a specific level.

  • Enter your preferred percentage for the Lower echelon and Upper echelon (e.g., 15%–20% on either side of the midpoint).

  • This ensures that employees have room for salary growth within their current role while staying within a controlled budget.

Step 4: Configure variable pay logic

Decide how performance-based pay is calculated within your bands.

  • Variable band: A range-based approach for variable pay.

  • Fixed OTE percentage: A set percentage of the On-Target Earnings (OTE).

Step 5: Save and apply

Review your settings to ensure they reflect your current HR strategy.

  • Click Save changes.

  • These settings will now be used as the default "skeleton" whenever you use the Auto-create bands tool.

Tip: Your compensation philosophy isn't set in stone. Many companies review and adjust these percentiles annually – or after a fresh funding round – to remain competitive in the talent market.

Still need a hand?

If you are unsure which percentile is right for your industry or stage of growth, our team can provide further insights into market trends.