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Compensation Survey Compensation Survey Document Transcript

  • INSTITUTE OF MANAGEMENT TECHNOLOGY PROJECT REPORT COMPENSATION SURVEYS SUBMITTED BY: Vidur Pandit (10DCP-094) Human Resource Planning | IMT G DCP
  • Table of ContentsIntroduction ............................................................................................................................................................................... 3 Compensation and Benefits ............................................................................................................................................ 3 Important of Compensation and Benefits ................................................................................................................ 3Compensation Surveys .......................................................................................................................................................... 5 What are Compensation Surveys? ............................................................................................................................... 5 Objectives of a Compensation Survey ........................................................................................................................ 5 Types of Compensation Surveys .................................................................................................................................. 6 Standard Surveys ........................................................................................................................................................... 6 Custom Surveys .............................................................................................................................................................. 6 Types of data gathered ..................................................................................................................................................... 7 How You Can Make Good Use of Compensation Strategy ............................................................................. 8 Equitable Compensation ............................................................................................................................................. 8 Determining Rates of Pay ........................................................................................................................................... 9 Salary Increases .............................................................................................................................................................. 9 Pay Increase on Promotion ...................................................................................................................................... 10 General Salary Adjustment ...................................................................................................................................... 10 Automatic Salary Progression ................................................................................................................................ 10 Anomalous Salary ........................................................................................................................................................ 11How to Conduct a Salary Survey ..................................................................................................................................... 11 Whom to Include in Your Survey ............................................................................................................................... 12 Making Contact with Prospective Applicants ....................................................................................................... 12 Compare apples to apples ............................................................................................................................................. 13 Review job descriptions or position profiles in the survey report ......................................................... 13 Note Province and Region ........................................................................................................................................ 13 Note operating budgets of respondent organizations .................................................................................. 14 Note the types and descriptions of respondent organizations ................................................................. 14 Note the education level and status of respondents ..................................................................................... 14 Note the year of data collection and the date of the report........................................................................ 14 Note if the survey is a one-time event or if its repeated............................................................................. 14 Multiple survey sources ............................................................................................................................................ 15 Number of participants ............................................................................................................................................. 15 Compensation Survey Checklist ................................................................................................................................. 16 Evaluating Its Validity ..................................................................................................................................................... 16 Human Resource Planning | IMT G DCP
  • INTRODUCTIONCompensation and BenefitsCompensation & Benefits (abbreviated “C&B”) is a sub-discipline of Human-Resources, focused onemployee compensation and benefits policy making. It is also known in the UK as “Total Reward”and as “Remuneration” in Australia and New Zealand.The area of Compensation and Benefits belongs to the most specialized areas in Human ResourcesManagement. Compensation and Benefits usually plays the role of the HR Controlling, setting therules and procedures around the salaries, variable pay and benefits.Compensation and Benefits is usually the function of HRM most connected with the competitors onthe market and it sets the compensation policies, which are fully competitive on the job market, butthe policies still meet the targets defined by the organization.Important of Compensation and BenefitsCompensation is an important motivator when you reward achievement of the desired organizationalresults. It is said "that money is a powerful source of motivation." But it is also said that salary increasecan only motivate until the next pay increase is due. Imagine what the impact is if an employee is at themaximum point of his or her salary range. Achievement of the desired behaviors is important in order toenhance your organizations effectiveness. In turn, this increases the possibility of success.Compensation strategy can reinforce the organizational culture that you desire. This is an enablingorganizational culture under which pay is linked to performance. Human Resource Planning | IMT G DCP
  • Your compensation policy must reflect your strategic business objectives. This becomes all the moreimportant when determining CEO compensation. You must clearly define the objectives of yourorganization so that you can achieve them by using compensation strategy. These are communicated toeveryone soon after a decision is taken. It can happen that good decisions fail to achieve results due topoor communication. By providing the right combination of benefits which are non-cash compensationyour organization can motivate employees and make them stay to help in its progress. Human Resource Planning | IMT G DCP
  • COMPENSATION SURVEYSWhat are Compensation Surveys?Organizations have to bridge the gap between the industry standards and their salary packages. Theycannot provide compensation packages that are either less than the industry standards or are veryhigher than the market rates. For the purpose they undertake the salary survey. The Salary survey is theresearch done to analyze the industry standards to set up the compensation strategy for theorganization. Organizations can either conduct the survey themselves or they can purchase the surveyreports from a reputed research organization.To determine the prevailing rate for a job, companies can "benchmark" jobs against compensationsurveys that are detailed and specific to the companies industries and regions. A good compensationsurvey uses standard, proven methods of data gathering and statistical analysis to determine how muchcompanies pay for a specific job in a specific industry. A number of types of organizations conduct salarysurveys, including compensation information businesses, compensation consulting firms, industryassociations, educational institutions, and state and federal governments.Objectives of a Compensation Survey  To gather information regarding the industry standards  To know more about the market rate i.e. compensation offered by the competitors  To design a fair compensation system  To design and implement most competitive reward strategies  To benchmark the compensation strategies Human Resource Planning | IMT G DCP
  • Types of Compensation Surveys Standard CustomizedStandard SurveysStandard surveys are undertaken by organizations on a regular basis. These surveys are conductedannually based on the organizational objectives. These surveys attempt to cover the samecompanies every year and provide the same time of analysis. The reports are published annually bythe research organizations. The organizations willing to formulate their compensations strategiesbased on the surveys purchase the reports from the research organization.Custom SurveysAt times, a few organizations need to know some specific information. The surveys which cater thisneed are known as custom surveys. The organizations either higher research organizations toconduct these surveys for them or they themselves conduct the survey by sampling few of the Human Resource Planning | IMT G DCP
  • competitors on their own. These surveys do not have any time interval. They are undertaken as theneed arises. They focus on important issues usually one or two.Types of data gatheredSalary Surveys are analyses of compensation data. This data may include quantifiable aspects ofcompensation such as:  Base salaries  Increase percentages or amounts  Merit Increases  Salary Ranges  Starting Salary  Incentives/Bonuses  Allowances and Benefits  Working HoursSalary Surveys may also include non-quantifiable aspects of compensation such as:  Educational Requirements  Geographic Location  Source of Hire (Internal/External)  Working Conditions Human Resource Planning | IMT G DCP
  • How You Can Make Good Use of Compensation StrategyYou can use compensation to attract and retain competent people. This objective requires you to offer asalary that is not lower than the market rates. When you want better customer service, rewardemployee behaviors that produce superior service.Do not harp on the amount of salary you are paying yet at the same expect good performance. Yourpeople may conclude that there is insincerity on the part of management. Match the written policy withthe right and appropriate actions that demonstrate to your employees that you are a fair and justemployer.Equitable CompensationLike employees working elsewhere in other organizations, your people are concerned withcompensation equity. Take this into consideration in drawing up your compensation strategy. Whenpeople notice inequities, their morale and motivation will suffer.But by adopting a compensation strategy, you dont have to worry about your good people resigning. Ifthey believe in your managements fair-handedness, it is very probable that they will not go away.Decision to leave an organization requires considerations other than or in addition to dissatisfactionwith compensation. Human Resource Planning | IMT G DCP
  • Determining Rates of PayCompensation strategy involves considering to adopt any of several ways in setting rates of pay.  Pay increase based on employees length of time spent on the job. This is seniority-based pay that is a good motivator in employee retention. But here, you are not rewarding performance  Performance-based pay is intended to motivate employees to perform better. Such a plan is becoming more common whereby the manager and employee agree on the job goals and performance criteria at the beginning of a specified period, usually at the beginning of the year. The effect of this as a motivator can vary from time to time and from situation to situation  You can give pay increases based on job-related skills and knowledge. This is intended to motivate your people to gain additional skills, acquire new competencies and knowledge. Under this method, you do not pay employees for the job they are-doing, their job title or seniority. This is competency-based paySalary IncreasesYour compensation strategy needs to align your compensation objectives to your organizationalbusiness objectives. Salary increases are part of this plan. By this, you are recognizing employees’contribution to the accomplishment of your organizations objectives.Consider implementing a policy whereby employees are given salary increases when your organizationcan afford to give them, in arrears. This ensures that good performers will continue to perform. Theyknow that they will get what is due to them. Human Resource Planning | IMT G DCP
  • Giving salary increase to an under-performer is not justified. There are organizations who haveimplemented a policy that employees who are in the last five percent of the performance bracket willhave to go.Pay Increase on PromotionWhen an employee is promoted, you may or may not give a significant pay increase. It is not justified topay an overpaid employee a significant promotional increase. Consider all relevant matters before youmake a decision. One important thing to consider is the pay parity with people in the same category andperforming similar tasks.General Salary AdjustmentIn performance-based pay, do not give across-the-board increases. Differentiate between outstanding,average and non-performers. If not, your employees will lose trust in the system, resulting in little or nomotivational impact. Paying the right salary has impact on employee performance and organizationaleffectiveness.Automatic Salary ProgressionThis has no relationship to performance. Avoid it as it does not encourage your employees to improvetheir performance. This is fairly common in the public sector. But there are now significant changesmade in accordance with sound human resource management principles. The only occasion where youcan consider giving some salary increase that is unrelated to performance is in respect of increase in thecost of living. Human Resource Planning | IMT G DCP
  • Anomalous SalaryIf you have any employee whose salary is below the minimum for the job or too low in relation to theemployees performance and experience, make the necessary adjustment. This is in addition to anincrease based on performance merit.On the other hand, you may have an employee who is paid above the maximum point in the salaryrange for the job. You may freeze further salary increases until the relevant pay level is reached. Thengive merit increase based on performance. Dont give increase if performance is unsatisfactory.HOW TO CONDUCT A SALARY SURVEYPublic and private organizations, including nonprofits, nearly all use market parity as a starting point instructuring their pay systems. Even when these systems are not formalized, decisions about pay areusually based on some kind of market-based rationale.Employees expect objectivity and equity in decisions about their pay, and good managers do their bestto meet that expectation. One very important tool to help them determine market parity is the salarysurvey.Surveys can be as casual as a telephone call regarding a single job or as structured as a ten-pagequestionnaire sent to dozens of agencies. This discussion covers a middle ground between theseextremes; it is aimed at the agency administrator who is not a statistician and whose experience insalary administration may be limited. Human Resource Planning | IMT G DCP
  • Whom to Include in Your SurveyConsider the following in deciding which organizations to include in your salary survey:•Agency location. Are your interests local, regional, or national?Surveys on support staff jobs are usually done locally because recruiting for those jobs is local.Professional or management job surveys are regional or national because that labor market isgeographically dispersed.•Agency size. Big organizations tend to have more higher-paying jobs carrying more responsibility. Smallagencies often find data from bigger organizations useful, but the reverse is seldom true•Comparability of agency function or services. Are activities, clients served, and revenue sources similaror complementary to those of your agency? A nonprofit agency that serves a disadvantaged clienteleand is funded by government grants may have little in common with one that serves the arts and isfinanced by private philanthropy•Public/private/nonprofit boundaries. Do people in your organization have employment alternatives inother kinds of organizations? If so, you should survey all organizations that demand the same skills thatyour agency requires•Quality of salary management. Is the agency experienced in administering pay? Beware of limiting yoursurvey to inexperienced agencies; mistakes can be compounded by following poor examplesMaking Contact with Prospective ApplicantsNever drop a salary survey questionnaire in the mail without first making personal contact withsomeone in the prospective participant agency. This should be a person with the authority to release the Human Resource Planning | IMT G DCP
  • information you want. In small agencies, that will be the chief executive; in larger ones it will be thebusiness manager, controller, or personnel director. In any case, the questionnaire should be addressedto an individual who is expecting it and who can act on it. Prior telephone contact is usually sufficient;explain the purpose of the proposed survey, its scope, and potential advantages to all participants.Make your appeal on the basis of helping all participants solve common questions about salaries, notjust on the basis of helping to answer your own questions.Compare apples to applesIt is important, when reviewing salary surveys, to make sure that you are comparing information that issimilar. Looking at salary and benefits levels in organizations vastly different from your own will notprovide the information you need. Heres what to look for:Review job descriptions or position profiles in the survey reportIt is important to look at job duties and responsibilities not just job title when deciding if salary surveyinformation is comparable. To be comparable the jobs must have a similar level of responsibility andrange of duties.Note Province and RegionAppropriate salary comparisons will come from agencies with a similar geographic focus: local, regional,provincial or national. At the local level, the best salary comparisons will come from other organizationsin the same city or town. Good salary comparison may come from a different city or town with similarlabor market characteristics and a similar cost of living. Human Resource Planning | IMT G DCP
  • Note operating budgets of respondent organizationsAs a general rule larger operating budgets mean higher salaries. Comparable salaries come fromorganizations of a comparable size. Size is usually estimated by using the operating budget or looking atthe number of paid full-time staff.Note the types and descriptions of respondent organizationsAre the functions, services offered, clientele, and sources of funding of the organizations in the salarysurvey comparable to your organization? For example, an organization providing childcare servicesthrough provincial funding may have very different salaries than an organization providing parent/childresources through its own fundraising.Note the education level and status of respondentsThe level of education required for a job and the type of employment arrangement can have an impacton salaries.Note the year of data collection and the date of the reportLabor market forces can result in significant changes in salaries in a short period of time. More recentdata will be more useful in establishing current salaries.Note if the survey is a one-time event or if its repeatedSurveys that have been repeated provide an added advantage of showing trends in salaries over theyears of the survey. Human Resource Planning | IMT G DCP
  • Multiple survey sourcesAs with any form of research, it is important to use multiple data sources to narrow in on the "true"answer. Relying on a single source can be misleading if that source doesnt perfectly reflect the marketin question. WorldatWork suggests that compensation analysts should use multiple data sourceswherever possible; consulting firms and academics agree. The exceptions come when there is only onedata source, or when there is a spot-on data source, such as a custom survey, that truly describes aprecise market.Number of participantsMake sure the participants are a good sample of the recruiting market. Generally, eight to tenparticipating companies is a good sample for positions below the management level. The sample sizeshould increase the more senior the positions being surveyed, both to get a good representation and toallow for more job matches, since each company is organized differently. There could be limited paydata in some industries, or the available data might not be representative of the industry because of alow participation rate in the survey.Some firms reveal a list of participants, or at least those well known within the industry. The surveyingcompany may disclose big-name participants to draw more interest from smaller companies. A list ofmajor employers can also add credibility to the survey.An important exception to note is that if a compensation analyst or compensation consulting firm isusing multiple surveys to produce their own derivative market numbers, they will aggregate the data bycombining the surveys, placing differing weight on different sources and sometimes even making aqualitative adjustment. When the data has been aggregated in this manner, it is not customary to reportnumbers or names of participants. Human Resource Planning | IMT G DCP
  • Compensation Survey ChecklistHere are some considerations to weigh for a company who is deciding whether to purchase acompensation survey.  The background of the survey research firm and cosponsors, if any  The scope of the survey  The survey methodology  The number of participants in the survey  The names of participants  The number of incumbents covered by the survey; and the sample size for each salary  The relevance of the job descriptions to the positions being benchmarked  The effective date of the survey dataEvaluating Its ValidityIt’s important to ensure that the salary survey was conducted in an objective, valid and reliable manner.What are the sampling frame, sample size and response rate? What is the margin of error? Is itreported? For information to be valid it has to come from a large enough sample size. For example, ifyou collected just three salaries for the same position and one salary is high, one is low, and one is in themiddle, you wouldnt be able to conclude much because your sample is too small to provide valid anduseful information. You also want to be sure that the information is reliable. Reliability means that thesurvey gives consistent results. You should therefore carefully consider how the information is gatheredand decide if it makes sense to you. For example, if the survey instrument is included in the report,assess if it would be easy for you to give accurate answers to the questions. Human Resource Planning | IMT G DCP