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5 Steps to a Smart
Compensation Plan
www.payscale.com
PayScale's compensation
and data platform gives
you insights into how to
invest in your people, so
you can build and retain
the right team
Camie Bailey
Software Implementation Manager
PayScale
Speaker
www.payscale.com
What are the benefits of having a comp
plan?
Fairness Communication Alignment
Pay Equity Can Make or Break Your
Brand
www.payscale.com
37% have a compensation strategy. 39% are developing one.
56% have done a market study within the past year. 25% have done
one less than 6 months ago.
80% have a pay structure in place. 30% use pay ranges for each
position.
2019 PayScale Compensation Best Practices Report
www.payscale.com
Elements of a Comp Plan
Philosophy
Strategy
Guidelines (e.g. pay ranges)
Policies
Processes
www.payscale.com
Lay the Ground Work
Get Buy-in From Executives
Develop a Clear Compensation Philosophy,
Based on Your Company Values
If you believe employees are your most valuable asset, pay fairly
If you have a fast-paced organization, examine pay frequently
If you value open communication, prove it
If you give your managers autonomy, support them
Start getting your jobs in order
Job descriptions need to clearly list the essential functions of the role (the key
compensable factors).
www.payscale.com
2. Define a Compensation Strategy
www.payscale.com
Where do you compete for
talent?
Step 1.1: Define your target candidate profile
Step 1.2: Define your talent market(s):
• Industry
• Org size/stage
• Org type
• Location
www.payscale.com
How competitive do you want to be?
What do you want to reward?
www.payscale.com
3. Select Market Data Source(s)
www.payscale.com
Types of Salary
Data
•Free data
•Crowd-sourced data (paid
subscriptions)
•Company-sourced data
•Employer-sourced surveys provided
by consulting firms
Crowdsourced
Google Search &
Original Research
Free Salary
Information
Dynamic
Survey
Detailed
Profiles
PayScale crowd-sourced data collection
methodology
Company-sourced data
✓ No Participation Required
✓ No Friction
✓ Quarterly Releases
✓ Smart Geography Differentials
Automatically matched and quarterly refreshed data aggregated from PayScale
customers.
www.payscale.com
Employer-
sourced and
industry
surveys
How do you know which data sources
are right for you?
Breadth
Precision
Age
Ease of Use
4. Set Pay Guidelines
Creating Pay Ranges: Key Steps
1. Determine the range mid-point
2. Determine the width of the salary range
3. Create guidelines for each compensation scenario
Step 1: Determine the range midpoint
Key tip: do not take market data at face value.
Key considerations:
1. How critical is this role to your organization?
2. What’s your organizational profile and company stage?
3. What can you afford?
4. How much would you like to spend on base pay versus other parts of the
rewards mix?
www.payscale.com
25th 50th 75th
$49,907 $63,927
11.2% 12.1%
$48,900 $56,205 $63,500
MidMin Max
15% 15%
Spectrum of Market
Data Based on Your
Market Strategy
$56,205
Pay Range Built
Around Your Target
Percentile
Building a pay range
Key tip: When benchmarking, look at essential function and key
skills for the role, not job title. Use selected market target as
midpoint of pay range
Step 2: Determine the Width of a Range
Range Spread (or Range Width) = (Range Max – Range Min)/ Range Min
Step 3: Create Guidelines for Each Scenario
Account for different situations, including
• Where new employees enter ranges
• How & how quickly current employees move within range
• What happens when an employee is promoted
• How much discretion managers have to move someone
through the range.
Use Metrics to Stay Consistent
www.payscale.com
5. Implement the Plan
Define the Implementation Plan
3 key components
• Compare incumbent pay to new ranges
• How will you handle green-circled and red-circled employees?
• Make plan for gaining executive support & approval
• Decide how transparent to be with employees about new ranges
www.payscale.com
Decide how transparent you want
to be with employees
Develop Policies and Processes
Review your pay ranges on an annual basis
Keep an eye on your key jobs:
• Newer jobs
• Technology jobs
• Mission-critical jobs for your organization
Consider adjusting the range if it deviates >5% from the market
Checklist
Processes
• Add or evaluating a job
• Market study
• Budget
• Increase cycle
• New hire process (pay)
• Promotion process
Policies
• Increases
• New hire
• Promotion
• Outliers
• Eligibility
www.payscale.com
Key take-aways
• A comp plan helps ensure fair pay, alignment and facilitates honest
conversations about pay between employees and managers
• Start by creating a compensation philosophy based on values
• Understand competitive you need to be
• Create a range for each position based on market data & internal factors
• Develop policies and processes to ensure adherence to plan
• Communicate your comp plan with employees to build trust
www.payscale.com
Questions

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5 Steps to Smart Comp Plan Design

  • 1. 5 Steps to a Smart Compensation Plan
  • 2. www.payscale.com PayScale's compensation and data platform gives you insights into how to invest in your people, so you can build and retain the right team
  • 3. Camie Bailey Software Implementation Manager PayScale Speaker
  • 4. www.payscale.com What are the benefits of having a comp plan? Fairness Communication Alignment
  • 5. Pay Equity Can Make or Break Your Brand
  • 6. www.payscale.com 37% have a compensation strategy. 39% are developing one. 56% have done a market study within the past year. 25% have done one less than 6 months ago. 80% have a pay structure in place. 30% use pay ranges for each position. 2019 PayScale Compensation Best Practices Report
  • 7. www.payscale.com Elements of a Comp Plan Philosophy Strategy Guidelines (e.g. pay ranges) Policies Processes
  • 9. Get Buy-in From Executives
  • 10. Develop a Clear Compensation Philosophy, Based on Your Company Values If you believe employees are your most valuable asset, pay fairly If you have a fast-paced organization, examine pay frequently If you value open communication, prove it If you give your managers autonomy, support them
  • 11. Start getting your jobs in order Job descriptions need to clearly list the essential functions of the role (the key compensable factors).
  • 12. www.payscale.com 2. Define a Compensation Strategy
  • 13. www.payscale.com Where do you compete for talent? Step 1.1: Define your target candidate profile Step 1.2: Define your talent market(s): • Industry • Org size/stage • Org type • Location
  • 14. www.payscale.com How competitive do you want to be? What do you want to reward?
  • 16. www.payscale.com Types of Salary Data •Free data •Crowd-sourced data (paid subscriptions) •Company-sourced data •Employer-sourced surveys provided by consulting firms
  • 17. Crowdsourced Google Search & Original Research Free Salary Information Dynamic Survey Detailed Profiles PayScale crowd-sourced data collection methodology
  • 18. Company-sourced data ✓ No Participation Required ✓ No Friction ✓ Quarterly Releases ✓ Smart Geography Differentials Automatically matched and quarterly refreshed data aggregated from PayScale customers.
  • 20. How do you know which data sources are right for you? Breadth Precision Age Ease of Use
  • 21. 4. Set Pay Guidelines
  • 22. Creating Pay Ranges: Key Steps 1. Determine the range mid-point 2. Determine the width of the salary range 3. Create guidelines for each compensation scenario
  • 23. Step 1: Determine the range midpoint Key tip: do not take market data at face value. Key considerations: 1. How critical is this role to your organization? 2. What’s your organizational profile and company stage? 3. What can you afford? 4. How much would you like to spend on base pay versus other parts of the rewards mix?
  • 24. www.payscale.com 25th 50th 75th $49,907 $63,927 11.2% 12.1% $48,900 $56,205 $63,500 MidMin Max 15% 15% Spectrum of Market Data Based on Your Market Strategy $56,205 Pay Range Built Around Your Target Percentile Building a pay range Key tip: When benchmarking, look at essential function and key skills for the role, not job title. Use selected market target as midpoint of pay range
  • 25. Step 2: Determine the Width of a Range Range Spread (or Range Width) = (Range Max – Range Min)/ Range Min
  • 26. Step 3: Create Guidelines for Each Scenario Account for different situations, including • Where new employees enter ranges • How & how quickly current employees move within range • What happens when an employee is promoted • How much discretion managers have to move someone through the range.
  • 27. Use Metrics to Stay Consistent
  • 29. Define the Implementation Plan 3 key components • Compare incumbent pay to new ranges • How will you handle green-circled and red-circled employees? • Make plan for gaining executive support & approval • Decide how transparent to be with employees about new ranges
  • 30. www.payscale.com Decide how transparent you want to be with employees
  • 31. Develop Policies and Processes Review your pay ranges on an annual basis Keep an eye on your key jobs: • Newer jobs • Technology jobs • Mission-critical jobs for your organization Consider adjusting the range if it deviates >5% from the market
  • 32. Checklist Processes • Add or evaluating a job • Market study • Budget • Increase cycle • New hire process (pay) • Promotion process Policies • Increases • New hire • Promotion • Outliers • Eligibility
  • 33. www.payscale.com Key take-aways • A comp plan helps ensure fair pay, alignment and facilitates honest conversations about pay between employees and managers • Start by creating a compensation philosophy based on values • Understand competitive you need to be • Create a range for each position based on market data & internal factors • Develop policies and processes to ensure adherence to plan • Communicate your comp plan with employees to build trust