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Consulting Inc. Compensation 101. Creating & Administering your base pay strategy. Our Agenda. Identifying your total rewards goals Establishing your competitive philosophy Defining your compensation policies Identifying career paths and job worth Matching to the market
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Consulting Inc. Compensation 101 Creating & Administering your base pay strategy
Our Agenda • Identifying your total rewards goals • Establishing your competitive philosophy • Defining your compensation policies • Identifying career paths and job worth • Matching to the market • Assigning jobs to grades • Creating your salary structure • Transitioning to the new structure • Managing salary administration • Evaluating your salary program
total rewards goals • To support the organization’s mission, vision, values and culture • To be fair, equitable, well understood and in support of lasting trusting relationships • To build depth, strength and sustainability • To be competitive and supportive of career progression • To promote smart business practices • To be economically responsible to employees and the organization • To inspire excellence and motivate results • Reward and motivate measurable performance
3 Minutes Total rewards components
Competitive philosophy Competitive Position - How competitive do you want your “total compensation” program to be? • 50th percentile? • 75th percentile? • For all occupations? • For all levels? • Compared to what organizations in what marketplace? (industry, size, geography)
Compensation Policy How will base pay be managed? • Who decides the pay of a new employee? • Under what conditions does pay change? • Is progression based on seniority or performance? • What is the timing of progression adjustments? • What is the timing of scale adjustments? • Are scale adjustments guaranteed for everyone? • What is the timing of promotion adjustments? • Who is eligible for overtime?
Compensation philosophy How will base pay be managed? (cont’d) • Who is accountable for determining the distribution of compensation rewards? • How will consistency be managed? • What information will be communicated to managers? • What information will be communicated to employees? • What information will be kept confidential?
Career paths & job worth M5 • Skill • Education • Experience • Mental Effort • Problem Solving • Thinking Horizon • Responsibility • Autonomy • Authority • Impact • Working Conditions • Physical Effort • Sensory Attention • Mental Stress M4 P6 M3 P5 M2 P4 M1 P3 A5 P2 A4 P1 A3 A = Administrative P = Professional / Technical M = Managerial A2 A1
Matching to the market • Select sources of data • Identify benchmark positions • Match positions using market descriptors • Close matches • Blended matches • Partial matches • Collect data based on competitive criteria • Size of organization • Location of organization • Industry • Percentile match
Creating the salary structure Developing Skilled Expert
Managers recommend placement • HR conducts a gap and costing analysis while ensuring consistency • Red-circling and green-circling is considered for outliers • Pro-rating is necessary if transitioning from anniversary date to annual date
Managing salary admin • Will progression be fluid or based on steps? • Who is eligible to progress beyond the midpoint? • How will promotions be handled? • Where are new employees placed?
Managing salary admin • Annual budgeting • Based on organization affordability • Based on trends for region, occupation, industry • Considering CPI • Establish a structure adjustment budget • Establish a progression merit budget • Establish a promotion budget • Implement together based on performance
Evaluating your salary program Compa-ratio Analysis
Structure design is also impacted by variable pay • How does your variable pay design intersect with your base pay design for individuals and teams based on: • Market practices • Job level • Company performance • Individual and team performance • Compa-ratio ….…the saga continues