AFOA HR CONFERENCE 2015

Compensation 101

The Jouta Performance Group

Agenda

• Introduction• Compensation 101 – Art or Science?• What is your compensation philosophy?• Next steps

Compensation 101

Overview of Compensation

• Philosophy• Policy• Base Pay• “Add On” Pay• Incentive Pay• Benefits and Perks• Administration

Philosophy

The “guiding principles” that drive decision making about compensation. Spells out why the company makes decisions it does about how to pay an employee

One size does not fit all

PolicyDerived from the philosophy. Outlines specifics such as:• Lead, lag or meet the market?• Market based or classification based system?• How is compensation comprised (base pay,

incentive pay)• Determining base pay – geographic location,

supply/demand of talent, internal equity (measuring job differences and the value of positions to the organization)

• Determining increases – performance, tenure, COLA, profitability, competition for talent etc.

Base Pay – Market Based

1. Start with good data (internal job descriptions, external surveys – AFOA BC 2015)

2. Determine progression from lowest to highest job

3. Determine current place in the market4. Compare to desired market position5. Develop pay bands and salary ranges

Anatomy of a Salary Band

1st Quartile

2nd Quartile

3rd Quartile

4th Quartile

Mid

Midpoint is typically market “weighted average” or “median” (50th Percentile)

Min Q2 Q3 Max

“Add On” Pay

• Overtime, on call, shift differentials, working stat holidays etc.,

• Understand the legislative environment and how it applies to your organization

• Add-ons can potentially increase costs 30-50% above base pay.

Incentive Pay

• Not new! Oldest form of compensation in the world. Specific pay for specific output.

• Today incentive pay is usually based on reaching performance targets tied to organizational goals.

• Other forms of incentive pay include profit sharing, retention or sign-on bonuses.

Benefits and Perks

• Are benefits cost shared or employer paid?• Group benefits (medical, dental)• Income protection (Life, AD&D, STD, LTD,

C/I)• Employee Assistance Programs• Paid time off (vacation, stats, other)• Retirement (pension plans, RRSP)• Perks – tool reimbursement, education,

discounts

Administration

• Based on your philosophy and policy• Timing of employee compensation reviews• Timing of market reviews• How employees move through their salary

ranges• Clarity, Transparency, Ease of

Administration

Movement through a Salary Band

MidMin Q2 Q3 Max

• Inexperienced• New in job• Unskilled• Low

Performers

• Competent• Solid over time• Fully successful• Experienced• Meets requirements

• Very experienced• Top performers

over time• Exceptional

Merit Pay

Philosophy

How to create one?

Your Total Compensation Today

• What is “compensation”• Why is it important?• What do you think your current

compensation “philosophy” is?• What is working right now? What is

not?• Do staff understand your

compensation philosophy and plan?

HR Strategy + Compensation

Culture+Protection

+ Productivity_____________

= Organizational Performance

Defining your Philosophy

• Link to business strategy• Reward behaviors that drive results• Measure return – define and track

Defining your Philosophy

Start with creating a mission statement

for Total Compensation

The WHY!

Considerations for Policy• Base Pay• “Add On” Pay,• Incentive Pay,• Benefits and Perks

What is in play currently? Does the current state support the new/revised philosophy statement? What needs to change?

Next Steps

Next Steps• Develop the Policy to support your Total Compensation

Philosophy• Create the work plan for developing your compensation

structure. Work plan will include:• Ensuring you have up to date position descriptions • Rank positions from lowest to highest in the organization• Obtain current and relevant market data • Compare and contrast positions to market and identify initial

gaps in internal equity and external equity• Develop salary bands/compensation grid and place positions

within grid• Final “sore thumbing”

Next Steps• Develop action plan to bring incumbents to desired place

within range, when and where possible.

• Document your administration process in order to operationalize the policy

• Develop the communication strategy to staff. What will you communicate? What can they expect in the future?

• Stick to it!

Presented By:The Jouta Performance Group Inc.

www.jouta.com

Invest in your people today, and protect your investment tomorrow.

604.488.8885