Building a Creative Compensation Plan: 5 Ways to Attract and Retain Top Talent

Mar 26, 2025

Landing top talent is tougher than ever for small and mid-sized businesses, especially when they’re up against the resources and name recognition of larger companies. Offering a fair salary is no longer enough. A significant trend in 2025 involves companies reevaluating their compensation structures to meet changing employee expectations. For instance, according to a report by Howden Group, 77% of SMEs plan to overhaul their benefits offerings to address workforce challenges, indicating a strong focus on innovation in compensation and benefits to stay competitive.

CFOs have a unique opportunity to rethink the compensation plan, not just as a payroll structure, but as a strategic tool for long-term talent retention and performance alignment. By implementing creative approaches that align employee incentives with company goals, CFOs can turn compensation into a lever for growth, loyalty, and performance. Below are five essential strategies CFOs can use to craft a dynamic compensation plan that attracts and retains high-performing talent in a competitive landscape.

1. Elevating Compensation Strategy in a Competitive Market

In a tightening labor market where employee preferences are evolving, innovative compensation has become central to building a resilient workforce. A traditional, one-size-fits-all compensation model often falls short of addressing the unique needs of modern employees. Workers today, particularly in SMEs, are looking for flexibility, value alignment, and growth potential in their compensation packages. According to Deloitte’s 2023 Human Capital Trends report, employees now view compensation as a holistic ecosystem that includes purpose, development, and lifestyle—not just pay.

For CFOs, this shift means designing a compensation plan that is both financially sustainable and strategically aligned with long-term business goals. A well-crafted compensation plan supports employee motivation and retention while ensuring that payroll remains a manageable portion of company overhead. For instance, in small logistics firms with tight margins, a CFO might introduce performance-based incentives tied to delivery KPIs to reward efficiency without inflating fixed payroll costs.

2. Expanding Beyond Traditional Compensation Models

An effective compensation plan today includes far more than salary and benefits. While base pay, health insurance, and retirement plans remain foundational, SMEs must consider a wider array of incentives to compete. These can include performance-based bonuses, profit sharing, equity grants, milestone-driven incentives, paid sabbaticals, extended PTO, wellness stipends, and remote work options. Research by SCORE reports that benefits and perks are crucial for attracting and retaining employees, with flexible hours being the most preferred benefit at 88% and more vacation time at 80%.

For example, a small advertising agency may offer remote work stipends and flexible work weeks to compensate for a smaller salary band compared to larger agencies. A CFO plays a vital role in identifying which non-monetary benefits provide the highest perceived value while minimizing cost impact. By evaluating return on investment across compensation types, CFOs help ensure that the compensation plan maximizes both employee satisfaction and financial efficiency.

3. Enhancing Talent Strategy through Compensation Plan Innovation

Creative compensation strategies directly influence a company’s ability to recruit and retain skilled employees. A recent ZipRecruiter survey found that 39% of companies experienced higher turnover in 2024, with inadequate compensation or benefits being the most commonly cited reason. This statistic underscores the critical role of compensation strategies in addressing retention challenges. For SMEs, which often lack the brand recognition or deep pockets of larger firms, tailoring compensation to employee values can be a differentiator in hiring and retention.

In small consulting firms, for instance, career development stipends and structured mentorship programs can act as powerful incentives for junior talent. A CFO can assist in structuring these programs within a compensation plan in a way that aligns with both budget constraints and long-term workforce planning. Strategic use of incentives can improve offer acceptance rates, extend employee tenure, and reduce the financial and operational cost of turnover.

4. Using Compensation to Drive Performance

Performance-based compensation is one of the most effective tools for aligning employee output with business goals. By directly tying rewards to results, SMEs can foster a culture of accountability and innovation. A recent Harvard Business Review study found that organizations using performance incentives saw a remarkable 30% boost in employee productivity compared to those that didn’t. However, the key is designing these incentives with clarity, fairness, and scalability.

Take a small manufacturing company as an example. A CFO can help implement a compensation plan that includes quarterly bonuses tied to production efficiency, safety compliance, and cost-saving initiatives. This approach not only motivates workers but also directly supports business objectives. CFOs are instrumental in defining performance metrics, modeling financial outcomes, and ensuring incentive structures remain aligned with broader company goals.

5. Defining Clear Roles to Strengthen Compensation Impact

One overlooked aspect of compensation strategy is role clarity. Without clear expectations, performance-based compensation can feel arbitrary, leading to disengagement. Clarity in job descriptions, KPIs, and growth paths enhances transparency, which in turn makes the compensation plan more effective. Research by Effectory indicates that employees who experience role clarity are 53% more efficient and 27% more effective at work compared to those with role ambiguity.

A CFO can work closely with human resources and other leadership to ensure that compensation is structured around well-documented responsibilities and measurable outputs. In a small software development firm, for example, defining roles around deliverables like product launches or code quality makes it easier to reward developers accurately and fairly. This clarity drives accountability and makes compensation a motivational rather than divisive force.

Conclusion

Building an effective compensation plan requires more than benchmarking salaries—it’s about strategically using incentives to drive performance, foster alignment, and build long-term loyalty. For SMEs, this isn’t a luxury; it’s a necessity in a fiercely competitive hiring market. A CFO’s strategic financial oversight ensures that compensation plans are not only innovative and attractive but also fiscally responsible and aligned with growth. ProCFO Partners’ CFO services can help SMEs design and implement compensation plans that attract top talent, align teams, and drive sustainable success. Contact us today to learn how we can support your business.