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Compensation

Compensation. Deborah Marsh November 2006. Total Rewards. Total Rewards definition Why Total Rewards? Elements of Total Rewards Compensation Benefits Work Environment Total Rewards Strategy. FLSA. Law impacting compensation more than any other law Enacted in the 30’s

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Compensation

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  1. Compensation Deborah Marsh November 2006

  2. Total Rewards • Total Rewards definition • Why Total Rewards? • Elements of Total Rewards • Compensation • Benefits • Work Environment • Total Rewards Strategy

  3. FLSA • Law impacting compensation more than any other law • Enacted in the 30’s • Major components • Child labor restrictions • Minimum wage • Overtime provisions

  4. Elements of Compensation • Fixed pay • Variable Pay

  5. Determining Base Pay • Build Job Worth Hierarchy • Job analysis • Job documentation • Job evaluation • Job worth hierarchy • Base pay structure

  6. Determining Base Pay • Job analysis • Document work methods and processes • Training • Performance Appraisal • Qualifications • Legal compliance

  7. Determining Base Pay • Job documentation • Job analysis questionnaires • Job families (leveling) • Job descriptions • Nature of work • Level of work • Job specifications (what is required for competent performance)

  8. Determining Base Pay • Job Evaluation • Ranking • Classification • Point factor • Market pricing

  9. Determining Base Pay • Market Pricing • Most common • Collect market data • Going rate • Pay trends • Competitive pay practices • Benchmark jobs • 50-60% of jobs should be benchmarked • 70-80% similar content for match

  10. Determining Base Pay • Job Worth Hierarchy • Based on job evaluation method • Perceived value of jobs in relationship to each other • Determines jobs to be group together • Determines internal equity

  11. Example Job Worth Hierarchy Position Market Director of HR $100,000 Accountant $ 85,000 Marketing Analyst $ 75,000 Payroll Clerk $ 40,000 Receptionist $ 25,000

  12. Base Pay Structure • Includes policies • Tied to philosophy • Hire rates, promotion, demotion • Pay range • Minimum, midpoint, maximum • Often multiple

  13. Example Base Pay Structure Grade Min Mid Max 10 $48 63.6 78.2 9 $41.7 54.3 66.8 8 $37.1 47.3 57.5 . . 4 $27.8 32.7 37.5

  14. Types of Base Pay • Salary • Weekly • Monthly • Biweekly • Hourly • Piece Rate

  15. Base Pay Adjustments • Merit • Skill based • Step rate • Lump Sum • Cost of living • Adjustments

  16. Base Pay Adjustments • Differentials • Shift • Weekend/holiday • Ex-patriate • Geographic

  17. Variable Pay • Pay at risk • Commissions • Bonuses • Annual • Spot • Profit sharing • Equity • Options • Stock grants • Restricted stock

  18. Putting it all Together • Evaluate programs: • Are they achieving the objectives you wanted them to? • Are the elements balanced for maximum impact? • Are they in alignment with HR strategy? • Attract • Retain • Motivate

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