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Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
Compensation 101
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Compensation 101

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  • 1. Market BasedPay-for-PerformanceCompensation Systems& Structures Jim Baker, SPHR Sr. Consultant Human resource Services Manufacturer’s Association of South Central Pa Mobile 717-781-4070 Office Phone 717-843-3891 Office Fax 717-854-9445 www.mascpa.org
  • 2. Achieving YourCompensation Goals 2
  • 3. What We Will Cover• Regulatory Concerns• External Competitiveness & Pay Structures• Objectives of Compensation• Pay-for-Performance Systems, & Structures• Market-Based Compensation Practices 3
  • 4. Lilly Ledbetter Fair Pay ActPresident Obama signed bill into lawJanuary 29, 2009.This law overturns a U.S. Supreme Court decisionthat said a woman (Lilly Ledbetter) could not suefor pay discrimination she had endured for 20years for one simple reason.  She hadnt sued within 180 days of the original discrimination.Ledbetter had argued that the discrimination occurred—andthe clock restarted—every time she received a paycheckless than her male peers, but the justices disagreed. 4
  • 5. Lilly Ledbetter Fair Pay Act Retroactive to May 28, 2007 (the day before the U.S. Supreme Court ruled against Ledbetter in her lawsuit) Applies to all pay discrimination charges that were pending on or after that date. Says that discrimination would be deemed to occur every time a new paycheck is delivered 5
  • 6. Other Laws & Regulations Equal Pay Act of 1963 Administered and enforced by the EEOC, prohibits sex- based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort and responsibility under similar working conditions. • Pay differentials are permitted when they are based on seniority, merit, quantity or quality of production, or a factor other than sex. These are known as "affirmative defenses" and it is the employers burden to prove that they apply. • In correcting a pay differential, no employees pay may be reduced. Instead, the pay of the lower paid employee(s) must be increased. OFCCP & Executive Order 11246 6
  • 7. COMPENSATION POLICIES1. Are Company compensation policies documented and made available to managers and employees?2. Is each individual’s compensation package determined using a documented procedure that is consistent with the organization’s compensation policy and plan?3. Are individuals responsible for administering compensation policies (HR and managers) aware of these policies and administering them consistently? 7
  • 8. Compensation Equity Relative to Skill,Qualifications, and Performance1. Is action taken to correct inequities in compensation or other deviations from the organization’s policy and plan2. Are compensation adjustments made based, in part, on each individual’s documented accomplishments against their performance objectives? 8
  • 9. Objectives of Compensation1. Attract & retain talent2. Emphasize and reward high-quality performance3. Allow personal growth4. Challenging and rewarding work assignments5. Formal (and informal) recognition of contributions. 9
  • 10. What is Compensation?Refers to all forms of financial returns andtangible services and benefits employeesreceive as part of an employmentrelationship. 10
  • 11. Total Compensation• Base / Merit Pay• Gain Sharing / Performance Sharing• Special Bonuses• Benefits 11
  • 12. BenefitsMedical/Dental  Retirement Plan  Matching Gift 401K Thrift Plan  Educational AssistanceReimbursement Account Plan   College Scholarships  Military LOALong Term Disability (LTD)  Vacation (Dependents)Life Insurance  Jury Duty  Special EventsLong Term Care  Witness Pay – Hershey Park  Holidays (14) – Diversity DayLegal Services  Special Activities – Open House – Holiday Gift 12
  • 13. Individual Job Salary HR Input Performance Descriptions Surveys Reviews Market Compensation Related Management CompetitivenessOrganizational & Performance Decisions Employee Retention / Turnover Salary Salary Planning & Structure Merit Pool 13
  • 14. Business Strategy Should Drive Compensation Philosophy Relevant Labor Markets Internal Competitive Equity Positioning Vs Of Market Overall Pay CompetitivenessBusiness Typical Strategy Compensation & Philosophy ElementsObjectives Role of Responsibility Different Pay & Authority Elements for Pay Decisions Program Objectives 14
  • 15. Example of a Compensation PhilosophyWe will: 1. Pay competitive base salaries 2. Attract and retain competent employees. 3. Provide each employee opportunity to achieve financial rewards directly related to level of performance & achievement. 15
  • 16. Not Paying for Performance?If half of the employees were doing more than youshould expect of them, your customer ratings andfinancial performance would be off the charts …You’d have no worries about the organization’sfuture, no challenges unmet. 16
  • 17. Using a Pie Chart Distribution?A typical non-pay-for-performance Organization tells 99%of employees that they were doing everything expected.In fact many organizations tell almost half of employeesare that they were doing even more than expected.Can this really occur? 1% 45% Exceeds Meets 54% Does Not Meet 17
  • 18. Typical Bell-Shaped Pattern & the Law of Large NumbersIf you look at performance ratings in companies across the country, you wouldsee the typical distribution resembles a bell-shaped curve, as shown below.Overall, you would find that the number of people with outstandingperformance is just about balanced by the number of people requiringimprovement in their performance. You should fully expect that yourorganization’s overall ratings will follow this same pattern. 99.72% of Performance 18
  • 19. P4P Leads to: Consistency - creating a sense of fairness Compensation viewed as a reward for performance (Vs. COLA adjustments and length of service “entitlements”) Employees who understand what is expected Supervisors with tools and resources to effectively evaluate and motivate performance Employees who perceive professional development as unlimited 19
  • 20. Salary StructureThe Salary Structure consists of a series ofsalary ranges applicable to positions.An annual structure review is completed bythe company to ensure salary ranges remaincompetitive in the marketplace for eachupcoming year.Midpoints are adjusted to be reflective ofmarket by beginning of each year (Lead/Lag) 20
  • 21. Salary RangesDepth Midpoint is representative of market value for jobs in each grade Increments between midpoints (9%) recognize difference in relative value of positionsWidth Typical Grade Range spread above & below the midpoint +/- 25% for Exempt +/- 20% for Non-Exempt These are the intervals that identify the maximum dollar levels to be paid according to performance designation 21
  • 22. Pay-for-Performance MatrixP4P philosophy links individual performance to salary.Linkage achieved by designating specific salary rangesegments for each performance rating designationPerformance Designation: Target Salary RangeImprovement needed: < 95% of midpointCompetent in all aspects of the position: 95% to 104.9%of midpointOutstanding: 105% to 114.9% of midpointExceptional: 115% to 125.0% of midpointNew to Position or Developing Good Performer: < 95% of midpoint 22
  • 23. Salary PlanningPay-for-Performance “Guidelines” Below Target Range Employees with % of midpoint below the target performance range may receive an increase to bring them to the minimum of that range Within Target Range Employees with % of midpoint within the target performance range may receive a competitive increase Above Target Range Employees with % of midpoint above targeted performance range will not receive an increase 23
  • 24. Salary Grade Structuring External salary surveys are used to determine market average salaries for benchmark positions Positions are assigned to salary grade with midpoint closest to market average, e.g., + or – 5% Remaining positions are “slotted” into salary grades based on: - Previous grade relationships - Management judgment 24
  • 25. Salary StructureA Salary structure is the foundation of acompensation system. – The salary structure includes salary grades with a minimum and maximum, which define the dollar value for each position. – Increments between salary grades recognize difference in the relative value of positions. – Intervals within each salary range recognize differences in performance. – The midpoints of the salary grades relate to the competitive market. 25
  • 26. Lag/Lag Lead/Lag Lead/Lead In the course of the one-year period during whichdata will be relied upon for compensation decisions,the market itself continues to move. 1. Therefore, data effective at a point in time at the beginning of the year will “lag” the market the entire year. 2. Projecting the market’s position at mid-end, and adjusting compensation ranges accordingly allows one to “lead” the market for the first half of the year then lag the market for the balance of the year 3. Projecting the market’s position at year-end, and adjusting compensation ranges accordingly allows one to “lead” the market. A “lead/lag strategy” is broadly accepted as efficient in balancing salary costs with competitiveness. This strategy is favored by many organizations because of its “middle ground” position. It is not so conservative as to detract from the organization’s ability to compete. 26 Yet, it is not so aggressive as leading the market for the entire year, with a resultant higher cost.
  • 27. Pay Positioning vs. The Market “Competitive” = market median (most typical) More aggressive organizations target pay at above-average levels, e.g, 3 Quartile Vs Mid or even 1 Quartile rd st “Mix” of compensation (base vs. variable) is a strategic lever, e.g., Pay-at-Risk. 27
  • 28. Salary Range Example Exempt Employees Max for "Meets Max for Max for Expectation" Outstanding Exceptional Differential Minimum performer performer performerEXEMPT between steps 95% MIDPOINT 105% 115% 125% 13 base $31,467 $37,020 $38,871 $42,573 $46,275 14 109.0% $34,299 $40,352 $42,369 $46,405 $50,440 15 109.0% $37,386 $43,983 $46,183 $50,581 $54,979 16 109.0% $40,751 $47,942 $50,339 $55,133 $59,927 17 109.0% $44,418 $52,257 $54,870 $60,095 $65,321 18 109.0% $48,416 $56,960 $59,808 $65,504 $71,200 19 109.0% $52,773 $62,086 $65,191 $71,399 $77,608 20 109.0% $57,523 $67,674 $71,058 $77,825 $84,593 28
  • 29. Salary Range Example Non-Exempt Employees Max for "Meets Max for Max for Expectation" Outstanding Exceptional Differential Minimum performer performer performerNON EXEMPT between steps 96% MIDPOINT 104% 112% 120% 1 BASE $15,974 $16,640 $17,306 $18,637 $19,968 2 109.0% $17,412 $18,138 $18,863 $20,314 $21,765 3 109.0% $18,979 $19,770 $20,561 $22,142 $23,724 4 109.0% $20,687 $21,549 $22,411 $24,135 $25,859 5 109.0% $22,549 $23,489 $24,428 $26,307 $28,186 6 109.0% $24,579 $25,603 $26,627 $28,675 $30,723 7 109.0% $26,791 $27,907 $29,023 $31,256 $33,488 8 109.0% $29,202 $30,419 $31,635 $34,069 $36,502 9 109.0% $31,830 $33,156 $34,482 $37,135 $39,787 10 109.0% $34,695 $36,140 $37,586 $40,477 $43,368 11 109.0% $37,817 $39,393 $40,969 $44,120 $47,272 12 109.0% $41,221 $42,938 $44,656 $48,091 $51,526 29
  • 30. Salary Ranges Non-Exempt & Exempt Employees Pay Grade Differential Minimum EXEMPT between steps 95% MIDPOINT 13 base $31,467 $37,020 Minimum 14 109.0% $34,299 $40,352 DifferentialNON EXEMPT between steps 95% MIDPOINT 15 109.0% $37,386 $43,983 1 BASE $15,808 $16,640 16 109.0% $40,751 $47,942 2 109.0% $15,417 $18,138 17 109.0% $44,418 $52,257 3 109.0% $16,804 $19,770 18 109.0% $48,416 $56,960 4 109.0% $18,317 $21,549 19 109.0% $52,773 $62,086 5 109.0% $19,965 $23,489 20 109.0% $57,523 $67,674 6 109.0% $21,762 $25,603 7 109.0% $23,721 $27,907 109.0% Management 8 $25,856 $30,419 Levels 9 109.0% $28,183 $33,156 (21 and above) Differential Minimum 10 109.0% $30,719 $36,140 between steps 95% MIDPOINT 11 109.0% $33,484 $39,393 21 118.0% $67,877 $79,855 12 109.0% $36,498 $42,938 22 109.0% $73,986 $87,042 23 109.0% $80,645 $94,876 24 109.0% $87,903 $103,415 25 109.0% $95,814 $112,722 26 109.0% $104,437 $122,867 27 109.0% $113,837 $133,925 28 109.0% $124,082 $145,979 29 109.0% 30 $135,249 $159,117 30 109.0% $147,422 $173,437
  • 31. What is Market Pricing?The benchmarking of pay  using salary survey data  against “comparable” positions  in relevant labor markets 31
  • 32. Advantages of Market Pricing Easy to explain and understand Point-factors approaches confuse and frustrate line managers Competitive necessity In increasingly global economy, much more pressure to manage and control costs Labor often viewed like any other resource whereby organizations want to pay the “right” price for level of quality desired Reduces administrative burdens Puts Comp/HR person on more solid ground in pay discussions 32
  • 33. Market Pricing Disadvantages You can’t market price every job Plenty of room for abuse of statistics Surveys cost $$$ The approach requires expertise Requires a cultural shift in organizations traditionally focused on pay equity 33
  • 34. Market Pricing Historical Perspective Global & local business competitiveness Focus on “human capital” Focus on external pay competitivenessGROWTH OF USE OF MARKET PRICING Number and types of compensation elements Number and quality of compensation surveys1950’s 2000’s DECLINE Of USA economic domination Focus on internal equity Job evaluation 34
  • 35. Where & WhenMarket Pricing Typically UsedCOMPENSATION PROGRAM’S FOCUS ON MARKET COMPETITIVENESSMarket Aware Market Integrated Market BasedINDUSTRIESGovernment Manufacturing TechnologyEducation Health care Finance/insurance Brick and mortar Deregulated Health careUSE OF MARKET PRICINGBy exception, when In parallel with job Basis of position“system” doesn’t give evaluation, to set evaluation and pay rangethe right answer grade/band pay ranges development for all positions using specific set of benchmarksPACE OF INDUSTRY CHANGELow Moderate High 35
  • 36. Benchmarking• Intent is to match base pay to market to remain competitive• Competitive salaries are measured through use of published salary surveys.• Preference is to compare local companies that are similar in terms of skills required, technological sophistication, size, and products. 36
  • 37. BENCHMARKING MARKET & JOB LEVELS (Example) MECHANICAL ENGINEER 1 (ENTRY LEVEL position) Bachelors Degree in Mechanical Engineering or equivalent experience. MECHANICAL ENGINEER 2 Bachelors Degree in Mechanical Engineering or equivalent experience, and 2 years of applicable mechanical engineering experience. MECHANICAL ENGINEER 3 Experience and Training: Bachelors (Masters preferred) in Mechanical Engineering or equivalent experience, and 5 years of applicable mechanical engineering experience. MECHANICAL ENGINEER 4 Experience and Training: Masters Degree in Mechanical Engineering or equivalent experience, and 8 or more years of applicable progressively complex Mechanical Engineering experience MANUFACTURING ENGINEER 5. Excludes those with full supervisory responsibilities. Experience and Training: Masters Degree in Manufacturing Engineering or equivalent experience, and 10 or more years applicable progressively complex Manufacturing Engineering experience. 37
  • 38. What is a Career Level? A Career Level is a distinct level of responsibility and proficiency within a job family. In each of the job families positions are typically assigned to one of the following career levels:Management Professional Technician Admin. HourlyM3 - 3rd Level Manager P5 - Expert T3 - Lead A3 - Lead H3 - LeadM2 - 2nd Level Manager P4 - Advanced T2 - Skilled A2 - Skilled H2 - SkilledM1 - 1st Level Manager P3 - Career T1 - Entry A1 - Entry H1 - EntryMS - Supervisor P2 - Intermediate P1 - EntryWhile the definitions and requirements of the survey’s careerlevels are generally consistent across our job families, somedifferences exist between different types of job families (e.g.technical vs. non-technical families). The career levels applicableto each job family are described in terms of the generalexperience/ education, knowledge/skills/abilities, and typicalresponsibilities expected at each level in each family.NOTE: Executive positions are not assigned career levels,as all are assumed to be top managers. 38
  • 39. Non-Benchmark Jobs Jobs for which you can’t get good data Job evaluation is the traditional answer “Slotting” of jobs to estimate market value can be an alternative Link a given job to one or more other benchmark positions that have been market priced, and thereby assigning it to the same reference data. Example: slotting an OD Manager against an HR Manager and a Compensation Manager 39
  • 40. What is a Job Family?A job family is a group of jobs in a majorwork function sharing similar background,education, and experience requirements.  Matching positions to job families is done based upon the duties, responsibilities, background and experience requirements of your positions, not the department or business unit that the position is in.  For instance, while Engineering positions (such as Field Service) may exist in the Operations or Customer Service departments, those jobs are matched to an Engineering job family, not Operations or Customer Service. 40
  • 41. Position Matching Blended JobsFinancial Systems AnalystMatch to Financial Analyst, Systems Analyst or both?1. “Highest Common Denominator” approach (recommended)Survey Position Market Median Base SalaryFinancial Analyst $60,000Systems Analyst $70,000Reference value for your Financial Systems Analyst should be at least $70,0002. Weighted average blending of dataSurvey Position Market Median Base Salary Percentage of jobFinancial Analyst $60,000 60%Systems Analyst $70,000 40% Reference value for your Financial Systems Analyst should be $64,000 41
  • 42. Salary Surveys Survey Sources & Quality ConsiderationsGood  Clear job or role definitions to ensure “apples to apples” comparisons  Efforts to support job matching  Sufficient sample size for statistical inference, i.e., lots of participants!  Full range of compensation elements and appropriate statistical measures  Rigorous data auditing and cleaning  Flexible (electronic) output formatsBad (Let’s just say, “not so good”)  Very brief and/or generalized job definition  Collect average pay per job instead of incumbent-specific data  Base salary only  Averages only  Self-reported data (e.g., professional association surveys of their members)Ugly  Statistically biased (e.g., recruiting firm “surveys”)  Unnamed sources and participants  e.g., Monster.com, Salary.com, Payscale .com 42
  • 43. Surveys & Appropriate Labor MarketsAppropriate labor market should bedetermined by level of position: Non-Exempt (and Hourly) Local only Exempt Local primary Regional secondary Key Employees & Management National primary Local secondary 43
  • 44. Surveys & Similar CompaniesCompanies in the salary surveysmeet one or more of the followingcriteria • Similar size business, i.e. complexity of the job is comparable • Companies with similar positions • Geographic location is in the area from which location would recruit to fill the position 44
  • 45. Weighting Survey MatchesMost situations “simple averaging” (equal weighting) is appropriateUnder certain (limited) circumstances, sources may be more heavilyweighted to put more emphasis on Industry specific sources orSignificantly better match of survey description to your positionSome organizations weight by the number of companies orincumbents for each data pointSample criteria for weighting Weight 1x: “Meets evaluation standards” • acceptable source and match Weight 2x: “Very trustworthy source” • high quality survey methodology • large participant base Weight 3x: “Most relevant source/match” • highly comparable participants 45
  • 46. Aging Survey DataSurvey pay statistics are typically “aged” to a common point in timeTo “standardize” data fromsources conducted at different dates 3% annual Aged Aged to Common DateSurvey A: 1/1/09 data x 1.0450 7/1/2010Survey B: 4/1/09 data x 1.0375 7/1/2010Survey C: 7/1/09 data x 1.0300 7/1/2010 To position pay recommendations to be competitive at a certain point in time Pay policy or ranges effectiveJan 1 July 1 Dec 31Lag/Lag Data Aged to Lead/Lag Data Aged to Lead/Lead 46
  • 47. Salary PlanningEach year, the company should setgoals for the salary planning process.These goals include: 1. Meeting Salary Budget Targets 2. Meeting Cash Flow Targets 3. Achieving Pay-For-Performance Targets 47
  • 48. Salary Planning & Range MovementCompare current Company midpointswith market data (weighted average). – The difference between midpoints and market tells us how the midpoints should move – Example: Company midpoint and market salaries are 3% apart. Midpoints should move 3% to bring us back in line. 48
  • 49. Salary Planning• Annual Event• Based upon projected performance levels• Should take into account expected promotions, progressions, terminations, retirements, and leaves.• May be carried out on-line 49
  • 50. Salary Planning Flow Compensations July Compensation reviews submits the salary survey data recommendations to against pay rates and Division Manager determines salary range for review and movement if necessary. approval. Mid-September Executive Compensation Managers Overall designation Management creates and begins salary of performance communicates the planning process ratings are reviewed approves the range through OSP movements and salary planning by projecting by Divisionestablishes the Salary instructions for performance Manager and Increase Fund. Managers. ratings. approved. Compensation Salary Plan is Managers apply communicates to reviewed by merit increases Managers that Approvals are Compensation and staying within salarythe Salary Plan has completed on-line the Division budget and cash been approved. Manager. flow targets. Yes Plan is No approved Line Managers approve the salaryactions per plan on a monthly basis. 50
  • 51. Salary Planning Process• Each department is allocated a merit increase fund based pro-rata share of merit pool.• Every manager has discretion for planning increases – Project next year’s performance – Increase based on where employee is paid in the range – Internal Equity – Within Company Guidelines – Budget Constraints 51
  • 52. Salary Planning ProcessDepartments must manage their salary plan – Budget Constraints – Cash Flow: – Timing of increase changes cash flow – An increase in January has a large cash flow than an increase in October – Goals: • Meet Company Guidelines • Recognize and reward strong performance • Maintain equity with internal and external market • Motivate and retain 52
  • 53. Salary Planning Projected Performance Ratings• Projected ratings based on expectation of performance against increasingly demanding standards• Distribution should reflect overall performance of the unit “Plan” ratings should be changed at the time of review if performance has improved or deteriorated 53
  • 54. Salary Planning Position in Range• Pay for Performance objective is to achieve at least 75% of employees in each performance rating within target performance range by year-end• Long range goal is to achieve at least 90% of employees in target range 54
  • 55. Difference Between Promotion & Progression• Promotion only occurs through a job posting. Most promotions are not planned ahead of time, and therefore are not included in the salary plan• Progression only occurs in a defined job family where there is a review of employee’s readiness for next level. Progressions are included in salary planning 55
  • 56. Merit Increase FundThe Salary Increase Fund determines the amount ofmoney to be made available for merit increases in orderto maintain equitable and competitive salariesthroughout the Company.A number of business and personnel factors areconsidered in determining the Salary Increase Fundsuch as: – normal and continued changes in the work force; – the need for acquisition of new personnel during growth periods; and – the fiscal resource of the company. 56
  • 57. Managing the Merit Increase Fund “PAY FOR PERFORMANCE PRIORITIES”First Priority • Good Performers Below 95% of Midpoint • Should be Paid Within the Performance Target by Year-endSecond Priority • Outstanding Performers Below Performance Target • Employees who CONSISTENTLY have been rated at “O” Performance Level Should be Paid Within the Performance Target by Year-endThird Priority • Exceptional Performers Below Performance Target • Employees who CONSISTENTLY have been rated at “E” each Performance Level Should be Paid Within the Performance Target by Year-endCash Flow Based on Anniversary Date increases and 12Month Timing : Possible Use Of Two Increases To Reward While Managing Cash Flow 57
  • 58. Adverse Impact Analysis Mean & Standard DeviationVARIABLES INCLUDE:  CURRENT SALARY (AS DEFINED BY EMPLOYER AND INCLUDES COMMISSIONS AND BONUSES)  TIME IN GRADE OR, BAND/LEVEL/GROUP OR TITLE TO IDENTIFY WHETHER THERE IS A “POTENTIAL PATTERN”. Relative to Number of Standard Gender/Race Title Average Annualized Pay Deviations from Mean Female 12 PLANNER 81.3% 39,500 (1.63) Female 4 PLANNER 89.0% 43,200 (0.96) Female 3 PLANNER 94.1% 45,695 (0.52) Female 2 PLANNER 94.4% 45,855 (0.49) Female 6 PLANNER 95.9% 46,545 (0.36) Female 10 PLANNER 96.1% 46,690 0.18 Female 9 PLANNER 98.3% 47,750 (0.15) % Females Below Female Mean Female 11 PLANNER 99.9% 48,530 (0.01) 8 66.67% Female 1 PLANNER 104.0% 50,501 0.35 Female 5 PLANNER 112.7% 54,750 1.11 Female 8 PLANNER 117.4% 57,000 1.52 Female 7 PLANNER 119.4% 58,000 1.70 Total in Group Average or Mean 48,668 12 One Standard Deviation 5,534 UCL $ 59,736 2 sigma 11,067 LCL $ 37,601 58
  • 59. IDENTIFY RELEVANT VARIABLESCORRELATION ANALYSISBASED ON: Male Correlation Table  JOB RESPONSIBILITIES SKILLS 70000  60000  PERFORMANCE 50000 40000 Performance Rating 30000 Annualized Pay 20000 Female Correlation Table 10000 070000 1 3 5 7 9 11 13 15 17 19 21 23 25600005000040000 Performance Rating30000 Annualized Pay2000010000 0 1 2 3 4 5 6 7 8 9 10 11 12 59
  • 60. PATTERNS AND PROBLEMSPATTERN  LOOKING WITHIN EACH Relative to COMPONENT OF EXEMPT Gender/Race Title Average AND NON-EXEMPT Minority PLANNER 75.6% Male 13  IF A PATTERN EXISTS THEN Minority PLANNER 81.3% SYSTEMIC REBUTTAL IS Female 12 NEEDED Minority PLANNER 89.0% Male 5PROBLEM Minority PLANNER 89.0% Female 4  LOOKING AT GROUPS AND Minority INDIVIDUALS Male 24 PLANNER 94.1%  IF A PROBLEM EXISTS THEN Minority PLANNER 94.4% INDIVIDUAL OR GROUP Female 2 EXPLANATIONS ARE NEEDED 60
  • 61. LOOK FOR PATTERNS I1.REVIEW SALARY GRADES IN EACH COMPONENT WITH COMPARATORS, I.E.,  FEMALES Vs MALES;  MINORITY Vs MAJORITY2.FOR ALL GRADES WITH COMPARATORS  DETERMINE ADVERSE IMPACT TO: • MALE Vs FEMALE AND • MINORITY Vs MAJORITY 61
  • 62. LOOK FOR PATTERNS II3. DETERMINE HOW MANY GRADES WITHIN EACH COMPONENT WITH COMPARATORS ARE ADVERSE TO:  FEMALES  MINORITY  DETERMINE THE NUMBER OF SALARY GRADES ADVERSE TO • FEMALE AND • MINORITY4. CALCULATE THE ADVERSE PROTECTED GROUP PERCENTAGE:  DETERMINE THE ADVERSE % OF FEMALES TO TOTAL EMPLOYED AND THE ADVERSE % OF MINORITIES TO TOTAL EMPLOYED 62
  • 63. Salary Planning Close-out• Salary plan reviewed by CEO & Management Team – Distribution of Performance Ratings – Compliance with the “Pay for Performance” guidelines – Spending within budget – Reviewed for adverse impact• Plan finalized and distributed to managers in January 63
  • 64. CommunicationsMake every effort to clearly communicate yourcompensation plan to all employees. However,understand that the compensation plan is a two-wayresponsibility.  Managers and supervisors are expected to explain and answer questions pertaining to the plan.  And to communicate salary information to employees – Salary range for current position – Salary range for next likely position  Employees are expected to understand plan details and put forth behaviors that will result in expected performance. When uncertain about plan practices, employees are expected to ask for further explanation or information. 64
  • 65. Communicating The Process1. Management is committed to fair and equitable administration of the compensation plan.2. Communication about the plan will be published and distributed to all employees.3. Decision making about pay and recognition will be taught to all managers & supervisors to ensure uniformity of practice. 65
  • 66. QUESTIONS YOU NEED TO ADDRESS: What is 2010 Strategy?Business strategies are rapidly changing witheconomic conditions  Survival mode  More cost controls in place  Doing more with less How important are Attraction and Retention? Where does competitive compensation fit in? Is there an opportunity to introduce pay for performance (P4P)? 66
  • 67. MANUFACTURERS’ ASSOCIATIONOF SOUTH CENTRAL PENNSYLVANIA 160 Roosevelt Ave York Pa 17401 www.mascpa.org JIM BAKER SR CONSULTANT TALENT MANAGEMENT 717-781-4070 67

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