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Building a Compensation Plan Part 3: Implementing Your Total Rewards Plan
 

Building a Compensation Plan Part 3: Implementing Your Total Rewards Plan

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Building a compensation plan… easy. Making it work for the organization . . . . . not so easy. ...

Building a compensation plan… easy. Making it work for the organization . . . . . not so easy.

It’s true that the most difficult part of any major HR project is the implementation, and when building a compensation plan it’s no different.

In this webinar, we’ll talk about how to develop an effective implementation plan, including:

Get an implementation plan approved by senior leadership with appropriate budget allocation
Think through one-time vs. multi-year rollout approaches
Develop a communication strategy tailored to employee, managers and leaders.

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    Building a Compensation Plan Part 3: Implementing Your Total Rewards Plan Building a Compensation Plan Part 3: Implementing Your Total Rewards Plan Presentation Transcript

    • Building aCompensation PlanPart 3: Implementingthe Total Rewards PlanStacey Carroll, SPHR, CCPPrincipal ConsultantPayScale, Inc.
    • PayScale is a market leader in global online compensation data.With the worlds largest database of individual employeecompensation profiles, PayScale provides an immediate andprecise snapshot of the job market.Our patent-pending, real-time profiling system indexes customemployee attributes (such as industry-specific certifications) andspecific job titles for every industry.Our secure, on-demand business solutions, PayScale MarketRateand PayScale Insight, provide employers with accurate, reliablecompensation detail never before available. 13,000 Positions. 50 Major Industries. 11 Countries
    • Agenda • Implementation Planning • Strategies for Implementation • What will your reward • Salary Targeting • Increase budgeting • How will you deal with outliers • Equipping Managers
    • Implementation Planning1. Review benchmarking conclusions with senior leadership2. Lead the discussion about reward strategy3. Show the reward strategy in action4. Educate management about decisions5. Educate employee about decisions
    • Strategies: what will you reward? Once again, there is no “right” answer Rewards should be based on business necessity/strategies Options include:  Changes in market conditions  Longevity  Proficiency  Performance  Skill attainment  Some combination
    • Strategies: Salary Targeting The idea behind salary targeting is it helps quantify how far off the organization is from the desired strategy It is NOT a budgeting or decision making exercise It brings to light your “weak spots” It helps your Exec team visual the results/consequences It should be done at the highest levels of the organization.
    • Sample Salary Targeting Exercise Proficiency + Performance Salary Targeting Matrix Performance & Proficiency Employee Placement 3 - Exceeds 0.85 0.95 1.05 1.15 1.25 Performance 2 - Meets 0.80 0.90 1.00 1.10 1.20 1 - Does Not Meet 0.80 0.85 0.95 1.05 1.10 Learning the Experience above Ready for New hire (no exp.) Fully proficient position proficiency level promotion Proficiency
    • Sample Salary Targeting Worksheet Target Delta to Compa- Range desired % behind Reccd FIRST NAME LAST NAME DEPT # JOB TITLE Current Salary Ratio Midpoint Target Salary salary target increase CostHidden Hidden 000140 MDRC $27,539 1.00 $15.25 $15.25 $2.01 15.18% 1.00% $275Hidden Hidden 000015 RN $63,482 1.00 $35.25 $35.25 $4.73 15.50% 1.00% $635Hidden Hidden 000015 RN $69,784 1.10 $35.25 $38.78 $5.23 15.57% 1.00% $698Hidden Hidden 000106 PACC $34,528 1.10 $17.50 $19.25 $2.65 15.96% 1.00% $345Hidden Hidden 000025 LABT $27,352 1.00 $15.25 $15.25 $2.10 15.97% 1.00% $274 Cardio/PulminaHidden Hidden 000005 ry Mgr $65,000 1.00 $76,000.00 $76,000.00 $11,000.00 16.92% 2.00% $1,300 Supervisor,Hidden Hidden 000145 Admissions $39,000 1.10 $20.25 $22.28 $3.53 18.80% 3.00% $1,170Hidden Hidden 000015 RN $67,808 1.10 $35.25 $38.78 $6.18 18.94% 3.00% $2,034Hidden Hidden 000090 COOK $25,376 1.10 $13.25 $14.58 $2.38 19.47% 4.00% $1,015Hidden Hidden 000001 RN $67,475 1.10 $35.25 $38.78 $6.34 19.53% 4.00% $2,699Hidden Hidden 000015 NRST $25,272 1.10 $13.25 $14.58 $2.43 19.96% 4.00% $1,011Hidden Hidden 000145 AREP $26,416 1.00 $15.25 $15.25 $2.55 20.08% 5.00% $1,321Hidden Hidden 000001 RN $60,320 1.00 $35.25 $35.25 $6.25 21.55% 6.00% $3,619Hidden Hidden 000015 RN $69,264 1.15 $35.25 $40.54 $7.24 21.73% 6.00% $4,156Hidden Hidden 000145 SCHE $29,952 1.15 $15.25 $17.54 $3.14 21.79% 6.00% $1,797Hidden Hidden 000145 AREP $25,792 1.00 $15.25 $15.25 $2.85 22.98% 7.00% $1,805Hidden Hidden 000115 Accountant $38,147 1.00 $47,000.00 $47,000.00 $8,853.00 23.21% 7.00% $2,670
    • Strategies: Increase budgeting This is the opportunity to actually plan a budget, bringing into account all the decisions that have been made It’s best to break out the pieces Budget different scenarios For more detail on how to budget, attend Compensation Budgeting webinar
    • Sample Implementation Budget 1. Market 2. Market movers 3. Merit Matrix (Performance + Placement in range) 4. Consistency
    • Sample Merit Matrix
    • Strategies: Green Outliers (below the minimum)Option 1: Minimize Outliers – Bring all employees who are not at minimum to the minimum of the pay range. This method is favored whenyour organization has a strong commitment to correcting outliers in your compensation plan. No discretion is given to managers. In the longterm, employees will get raises when the market shifts, thus creating outliers.Option 2: Market-based Pay – Allocate increases based solely on where employees are in their range (which is alignment with themarket). For example if you are farther behind the market you may get a 6% increase, but if you are above the market rate you get a 2%increase. This method is favored when your organization has a strong commitment to compensating staff based on the going market rate fortheir positions. Little discretion is given to managers. In the long term, employees will get raises when the market shifts. Option 3: Market & Performance-based Pay – Allocate increases based on both employees’ placement within the range and performance. For example, a star performer who is lower in the range may get an 8% increase, while a star performer who is high in the range may get a 6% increase. A matrix is used to show percent increases by both range and performance. Some flexibility may be given to managers by providing a range rather than an exact percentage. This method is favored if your organization both has a commitment to paying relative to the market and to rewarding top performers. In the long term, high performers have higher salaries and moderate performers’ salaries will shift as the market shifts. Note: this option can be used with market & performance, market & tenure, or any number of variables you may wish to reward.
    • Strategies: Red Outliers (over the maximum)Option A: Do nothing– Continue to give increases to employees, even if they fall over the top of the pay range. This method is favored if thesituations that call for individual outliers to fall above the range are acceptable to the organization, and if the need to avoid the possibility thatthey will leave the organization outweighs the cost. In the long term, red outliers will become even more skewed and above the market.Option B: Tier increases by position in range– Continue to allocate increases to outliers falling above the range, but give a smallerpercentage than to those in or below the range. For example, if you are farther behind the market you may get a 6% increase, but if you areabove the market rate you may get a 2% increase. This method is favored when your organization has a commitment to paying relative to themarket, and would like to decrease the amount over range, over a longer period of time. This option has less risk of turnover of red outliersthan the following options. Option C: Freeze base pay and offer performance-based bonuses – Discontinue base-pay increases for red outliers until the market catches up. Offer clear incentives for a lump-sum performance-based bonus annually (or semi-annually or quarterly). Only reward top performers among the red outliers. This method is favored if your organization both has a commitment to paying relative to the market and to rewarding top performers. This option has some risk of turnover among red outliers, especially those who are underperformers. Option D: Freeze base pay – Discontinue base pay increases for red outliers until the market catches up. This option has a moderate to high risk of turnover among red outliers – including those who are top performers. Option E: Decrease base pay – Decrease base pay for red outliers to the maximum of the range. Increases will happen only when the market moves. This option is for organizations with a strong commitment to internal equity and market-based pay. There is a very high risk of turnover among red outliers, especially top performers. This option is not recommended unless there is a strong policy desire for it.
    • Equipping Managers Who: Managers first – then employees What: Educate Managers about compensation When: Before required action Why: Give the big picture Give Managers tools (FAQ’s, scripts, documents to share) Verify understanding
    • Sample Budget WorksheetTotal Payroll $981,000Increase Budget % 3Increase Budget $39,240Proposed $32,685 $6,555 Annualized Annualized Annualized Annualized Annualized ExpectedName Employee Dept Employee Job Title Base Pay Rating Grade Base Min Base Mid Base Max Compa-ratio comp-ratio Increase % Increase $Jackson, Susan Marketing Director of Marketing $150,000 3 7 $72,200 $90,300 $108,400 1.661 1.00 1.00% $1,500Johnson, Leonard Sales Director, Sales $140,000 3 8 $84,600 $105,800 $127,000 1.323 1.00 5.00% $7,000Lawson, Madeline Administration Controller $102,000 2 5 $75,000 $85,000 $100,000 1.2 0.90 0.00% $0Jones, Daniel Development Software Engineer $89,000 2 7 $72,200 $90,300 $108,400 0.986 0.90 1.50% $1,335Edmonds, Tim Sales Account Executive $45,000 5 1 $28,000 $35,000 $42,000 1.286 1.20 2.00% $900Jennings, Sean Development Program Manager $89,000 3 7 $72,200 $90,300 $108,400 0.986 1.00 3.50% $3,115James, Bob Development Software Engineer $84,000 3 7 $72,200 $90,300 $108,400 0.93 1.00 4.00% $3,360Vincent, Keven Sales Account Manager $38,000 2 4 $45,000 $55,000 $65,000 0.691 0.90 5.50% $2,090Dillings, Jeff Development Software Engineer $87,000 4 7 $72,200 $90,300 $108,400 0.963 1.10 5.50% $4,785Cowan, Leanne Marketing Product Manager $82,000 4 7 $72,200 $90,300 $108,400 0.908 1.10 5.00% $4,100Smith, Jane Development Software Engineer $75,000 5 7 $72,200 $90,300 $108,400 0.831 1.20 6.00% $4,500 $981,000 $32,685
    • Questions?
    • Save Time and Money on Your Compensation InitiativesPayScale is your key to saving money, recruiting talent at the right price, and retaining top performers with accurate, real-time compensation data matched to your workplace and workforce. Visit our blog: http://blogs.payscale.com/compensation/ Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey