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Fundamentals of
Compensation
We start 3 minutes past the hour
Sam Noble
Compensation Consultant
2
NAVIGATING THE WEBINAR
Type in Questions
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This session will be recorded
Develop Pay Philosophy
Define Your Strategy
Created Ranges
Policies
Processes
ELEMENTS
OF A
COMP
PLAN
COMPENSATION PHILOSOPHY
❑What are the driving factors behind your compensation plan?
✓ Attraction
✓ Retention
✓ Motivation
❑What do you currently reward?
✓ e.g., Performance, Proficiency, Skills, Tenure
WE BELIEVE…
Our compensation program is a management tool that,
when aligned with effective communication plans, is
designed to support, reinforce, and align our values,
business strategy, operation & financial needs with a goal
of growth and profitability.
MARKET STRATEGY BASICS
KEY CONCEPTS
• Talent Market
• A Benchmark Job
WHAT IS A TALENT MARKET?
Where do you compete for talent?
Talent
Market
INDUSTRY
ORG SIZE
LOCATION
ORG TYPE
WORKFORCE SEGMENTATION
Targeting some areas of the organization differently
WOULD YOUR ORGANIZATION
BENEFIT FROM A SEGMENTED
APPROACH TO COMPENSATION?
10TH
PERCENTILE
50TH
PERCENTILE
90TH
PERCENTILE
LAG THE MARKET
MEET
THE
MARKET
LEAD THE MARKET
And at what level do you compete?
YOUR COMPETITVE POSITONING
MARKET DATA SOURCES
Traditional
(Standard) Surveys
• Well-understood
• Participant list
• Data is broad
• Lacks freshness
• Usually published
annually
Pre-Mixed Data
• Cover gaps in
traditional data
• Low transparency in
terms of source
• Freshness is
unknown
Employee Reported
Data (ERD)
• Granular data
• Covers more jobs
and locations
• Some groups are
underrepresented
• Updated daily
“Scraped” Data
• Insight into the
demand for labor
• Does not reflect
actual pay
Government Data
• Broad comp trends
• Available for select
industries and
locations
• Fairly dated
• Free!
HRIS/Internal Data
• Great for internal
analysis
• Pay Fairness
• More of a manual
process
• No external market
• Freshness varies
Two considerations to make when selecting your market data sources are:
- Are they current, accurate, and validated?
- Do they cover the data needs of your jobs and organizations?
PAY RANGES
KEY CONCEPTS
• Pay Grades & Ranges
• Green & Red Outliers
• Range Penetration
REQUIREMENTS FOR BUILDING A PAY STRUCTURE
Accurate Job
Descriptions Market Analysis
Compensation
Philosophy &
Strategy
$
13
MARKET DATA vs PAY RANGES
MARKET DATA vs PAY RANGES
Spectrum of Market Data based
on your Market Strategy
Pay Range built around your
Target Percentile
Job Market Data
Administrative Assistant 41,481
Payroll Assistant 47,592
Accountant 57,874
JOB-BASED RANGES GRADE-BASED RANGES
Job Min Mid Max
Administrative Assistant 35,303 41,841 47,659
Payroll Assistant 40,504 47,592 54,681
Accountant 49,255 57,874 66,494
Grade Min Mid Max
1 35,700 41,000 46,300
2 40,600 47,200 53,700
3 46,300 54,200 62,100
KEY POINT
Ranges are built around the market
value for the job at the target percentile.
KEY POINT
Jobs with similar market and organizational
value, plus level of responsibility are
grouped together in a grade range
ESTABLISHING PAY RANGES
15
DETERMINE RANGE WIDTHS
Pro Tip: Line up the market values so you can see your jobs of similar
value near each other, ensuring the market points make sense for your
internal organization. This will also help you set consistent range widths
for the various levels and functions.
20-30%
30-40%
40-50%
50-70%
Directors, VPs,
Executives
Specialized ICs,
Supervisors, &
Managers
Individual
Contributors
Entry Level Clerical &
Laborers
Expanding Range Widths
• Mitigate risk of over/under payment
• Provides visibility to promotions and career pathing
• Allows for higher level employees to continue to grow
in role
• Assists with budgeting
Which structure is best for your organization?
Items to consider:
• # of jobs in workforce
• Internal leveling
• Positions in multiple locations
• Growth Rate
RESOURCES:
• How Your Structure Can Make or Break Your Culture
• What Type of Pay Structure Should You Create? From an HR Leader
• Which Compensation Structure is Right For Your Company?
POLICIES AND PROCESSES
WHAT IS BEST FOR YOUR ORGANIZATION?
Pay Transparency Spectrum
WHERE DOES YOUR ORGANIZATION
CURRENTLY FALL ON THE
TRANSPARENCY SPECTRUM?
• How and when are merit and/or market increases allocated?
• How will we handle green-circles and red-circled outliers?
• What will happen to pay in the case of promotion, demotion or transfer?
• How is the hiring range determined for a position?
• What are the different types of compensation and which employees are eligible for
which types?
POLICY CHECKLIST
Your policies should answer the following questions:
PROCESSES
Make sure you document the steps for the following processes:
• Making a new hire offer
• Adding a new job
• Employee promotions
• Pay increases determination
• Calculation for incentive payouts
• Completing the market study
COMMUNICATION
24
COMMUNICATION ROLES
HR
Prepare communication, consult and inform Executives, train Managers
Executives
• Communicate program to organization at a high level
Managers
• Communicate compensation details to employees
Employees
• Bring questions to manager or HR
COMMUNICATION BEST PRACTICES
• Know your audience
• Watch the jargon
• Provide a way forward
• Have a plan & timeline
• Prepare, prepare, prepare
• Be direct and also empathetic
• Communicate early & often
$
26
YOU CAN TACKLE THE COMPENSATION COMMUNICATION
PROBLEM FROM THREE DIFFERENT ANGLES:
Increase Your
Level of
Transparency
Increase Your
Frequency of
Communication
Train Managers to
Talk Pay
QUESTIONS?
THANK YOU!

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Webinar - Fundamentals of Compensation

  • 1. Fundamentals of Compensation We start 3 minutes past the hour Sam Noble Compensation Consultant
  • 2. 2 NAVIGATING THE WEBINAR Type in Questions Here Access Handout Links This session will be recorded
  • 3. Develop Pay Philosophy Define Your Strategy Created Ranges Policies Processes ELEMENTS OF A COMP PLAN
  • 4. COMPENSATION PHILOSOPHY ❑What are the driving factors behind your compensation plan? ✓ Attraction ✓ Retention ✓ Motivation ❑What do you currently reward? ✓ e.g., Performance, Proficiency, Skills, Tenure WE BELIEVE… Our compensation program is a management tool that, when aligned with effective communication plans, is designed to support, reinforce, and align our values, business strategy, operation & financial needs with a goal of growth and profitability.
  • 5. MARKET STRATEGY BASICS KEY CONCEPTS • Talent Market • A Benchmark Job
  • 6. WHAT IS A TALENT MARKET? Where do you compete for talent? Talent Market INDUSTRY ORG SIZE LOCATION ORG TYPE
  • 7. WORKFORCE SEGMENTATION Targeting some areas of the organization differently
  • 8. WOULD YOUR ORGANIZATION BENEFIT FROM A SEGMENTED APPROACH TO COMPENSATION?
  • 9. 10TH PERCENTILE 50TH PERCENTILE 90TH PERCENTILE LAG THE MARKET MEET THE MARKET LEAD THE MARKET And at what level do you compete? YOUR COMPETITVE POSITONING
  • 10. MARKET DATA SOURCES Traditional (Standard) Surveys • Well-understood • Participant list • Data is broad • Lacks freshness • Usually published annually Pre-Mixed Data • Cover gaps in traditional data • Low transparency in terms of source • Freshness is unknown Employee Reported Data (ERD) • Granular data • Covers more jobs and locations • Some groups are underrepresented • Updated daily “Scraped” Data • Insight into the demand for labor • Does not reflect actual pay Government Data • Broad comp trends • Available for select industries and locations • Fairly dated • Free! HRIS/Internal Data • Great for internal analysis • Pay Fairness • More of a manual process • No external market • Freshness varies Two considerations to make when selecting your market data sources are: - Are they current, accurate, and validated? - Do they cover the data needs of your jobs and organizations?
  • 11. PAY RANGES KEY CONCEPTS • Pay Grades & Ranges • Green & Red Outliers • Range Penetration
  • 12. REQUIREMENTS FOR BUILDING A PAY STRUCTURE Accurate Job Descriptions Market Analysis Compensation Philosophy & Strategy $
  • 13. 13 MARKET DATA vs PAY RANGES MARKET DATA vs PAY RANGES Spectrum of Market Data based on your Market Strategy Pay Range built around your Target Percentile
  • 14. Job Market Data Administrative Assistant 41,481 Payroll Assistant 47,592 Accountant 57,874 JOB-BASED RANGES GRADE-BASED RANGES Job Min Mid Max Administrative Assistant 35,303 41,841 47,659 Payroll Assistant 40,504 47,592 54,681 Accountant 49,255 57,874 66,494 Grade Min Mid Max 1 35,700 41,000 46,300 2 40,600 47,200 53,700 3 46,300 54,200 62,100 KEY POINT Ranges are built around the market value for the job at the target percentile. KEY POINT Jobs with similar market and organizational value, plus level of responsibility are grouped together in a grade range ESTABLISHING PAY RANGES
  • 15. 15 DETERMINE RANGE WIDTHS Pro Tip: Line up the market values so you can see your jobs of similar value near each other, ensuring the market points make sense for your internal organization. This will also help you set consistent range widths for the various levels and functions. 20-30% 30-40% 40-50% 50-70% Directors, VPs, Executives Specialized ICs, Supervisors, & Managers Individual Contributors Entry Level Clerical & Laborers Expanding Range Widths • Mitigate risk of over/under payment • Provides visibility to promotions and career pathing • Allows for higher level employees to continue to grow in role • Assists with budgeting
  • 16. Which structure is best for your organization? Items to consider: • # of jobs in workforce • Internal leveling • Positions in multiple locations • Growth Rate RESOURCES: • How Your Structure Can Make or Break Your Culture • What Type of Pay Structure Should You Create? From an HR Leader • Which Compensation Structure is Right For Your Company?
  • 18. WHAT IS BEST FOR YOUR ORGANIZATION? Pay Transparency Spectrum
  • 19. WHERE DOES YOUR ORGANIZATION CURRENTLY FALL ON THE TRANSPARENCY SPECTRUM?
  • 20. • How and when are merit and/or market increases allocated? • How will we handle green-circles and red-circled outliers? • What will happen to pay in the case of promotion, demotion or transfer? • How is the hiring range determined for a position? • What are the different types of compensation and which employees are eligible for which types? POLICY CHECKLIST Your policies should answer the following questions:
  • 21. PROCESSES Make sure you document the steps for the following processes: • Making a new hire offer • Adding a new job • Employee promotions • Pay increases determination • Calculation for incentive payouts • Completing the market study
  • 23. 24 COMMUNICATION ROLES HR Prepare communication, consult and inform Executives, train Managers Executives • Communicate program to organization at a high level Managers • Communicate compensation details to employees Employees • Bring questions to manager or HR
  • 24. COMMUNICATION BEST PRACTICES • Know your audience • Watch the jargon • Provide a way forward • Have a plan & timeline • Prepare, prepare, prepare • Be direct and also empathetic • Communicate early & often $
  • 25. 26 YOU CAN TACKLE THE COMPENSATION COMMUNICATION PROBLEM FROM THREE DIFFERENT ANGLES: Increase Your Level of Transparency Increase Your Frequency of Communication Train Managers to Talk Pay