Budgeting Part 1: Managing Internal Pay Inequities
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It’s budget season again, and that makes it time to update your data for next years comp plan. The first critical step is to get a sense of where the issues are.
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Budgeting Part 1: Managing Internal Pay Inequities
- 1. Compensation Budgeting Part I: Managing Pay Inequities Mykkah Herner, MA, CCP Head of Professional Services Ian Englund, CCP Compensation Professional www.payscale.com
- 2. 14,000 Positions 3000 Customers 11 Countries 40 Million Salary Profiles 250 Compensable Factors www.payscale.com
- 3. Compensation Budgeting Part I: Managing Pay Inequities Part II: Determining Increases Part III: Putting it all together with PayScale Insight
- 4. www.payscale.com Agenda Start with a Plan Identify Compensation Inequities • Organizational Level • Department Level • Position Level • Individual Level Develop solutions Next month: determining increases
- 5. Start with a (comp) plan
- 6. Comp Design Elements Philosophy High-level view on the aims of the organization with regard to compensation Strategy o Define your talent market(s) o Determine level of competitiveness o What do you want to reward? Structure Mathematically sound way of aligning your positions to market and internally Policy Ensures that the comp plan is carried out
- 7. Get Reliable Market Data Compensable factors for benchmarking jobs Defining your competitive set Accurate and current market data
- 8. Build Compensation Structure Define Grades & Ranges Assign Jobs to Grades
- 9. Test for Pay Inequities
- 10. Types of Pay Inequities Plan Level Department level Position level Employee level
- 11. Plan-wide Pay Inequities Pay Fairly to Market Determine your target market percentile Budget Competitiveness and impact on retention/attraction Stay competitive relative to market Annually, keep ranges current
- 12. Analyze Ranges to Market Create a report: range midpoints, market values, and delta
- 13. Cross-Department Pay Inequities Target / Strategy Determine appropriate target(s) by department Build ranges around targets
- 14. Position-specific Pay Inequities Market movement & critical positions Listen to your employees
- 15. Employee-specific Pay Inequities Pay according to your comp plan Compression issues Examine compa-ratio (.8-1.2) Look at range outliers
- 16. Disparate Pay & EEO Concerns Create a Disparate Pay Report o High disparity is a flag for litigation o Low disparity may indicate not following your comp plan
- 18. Identify Solutions o Identify options o Determine cost to remedy o Examine budget allowance o Consider multi-year strategy o How critical to resolve? o Develop multiple scenarios o Create communication plan
- 19. Identify solutions: Plan Level Plan Level Options Do nothing Make small incremental change Update comp strategy Adjust all ranges at once Plan Level Costing Increase plan $ impact of green outliers Former red outlier eligibility for increase
- 20. Identify solutions: Position Level Position Level Options Keep position static Move position to new grade Offer market premium Position Level Costing Cost to move to new grade Cost to market premium
- 21. Identify solutions: Employee Level Employee Level Options Identify critical issues Compression Disparate pay Green outliers Employee Level Costing $ for critical issues $ for compression $ for market adjustments
- 22. Communicate Pay Inequities Develop Budget Request Ask for what the organization needs Help the organization manage the budget once approved
- 23. Next Month Calculating Increases to Base Pay
- 24. PayScale Delivers Where Other Compensation Providers Fall Short PayScale leads the world in compensation knowledge with the freshest and most detailed data from over 40 million salary profiles. More than 3000 organizations use PayScale’s software and intelligence to get the greatest return on their talent. Smart businesses use PayScale Insight to recruit, retain and motivate their people. Visit our blog: www.payscale.com/compensation-today Join our Group on LinkedIn: Compensation Today: HR Best Practices Mykkah Herner, MA, CCP Head of Professional Services Ian Englund, CCP Compensation Professional www.payscale.com
Editor's Notes
- Mykkah
- Compensable factors for benchmarking jobs Know your positions, go beyond titles What are the top 3 functions of the role What’s the level of responsibility What kind of decision-making authority What typical tenures do you seek for your roles (newer, more tenured, etc) Are there required degrees or certifications Defining your competitive set Accurate and current market data Decide to use market pricing (vs Point Factor) Determine your overall compensation strategy Gather documentation of key compensable factors for your jobs Select jobs to benchmark. A benchmark job: A position that is common in the market. Identify your data source(s) Methodology Need to age data Covers your competitive set? Trusted/reliable/accurate? Fits your budget? (time is money – participation for “free” surveys)
- Ian The first step to take in building a pay structure is to identify if you need pay schedules and how many may be necessary