compensation: creating an equitable and market-driven pay system
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YWCA –USA National Capacity Building Institute February 2014 Alice Conner, M.S., SPHR HR Consultant [email protected]. Compensation: Creating an Equitable and Market-driven Pay System. Today’s Objectives. Compensation Philosophy Legal Considerations Sources of market data - PowerPoint PPT PresentationTRANSCRIPT
Compensation:Creating an Equitable and Market-driven Pay System
YWCA –USA National Capacity
Building Institute
February 2014
Alice Conner, M.S., SPHRHR Consultant
Today’s Objectives
Compensation Philosophy Legal Considerations Sources of market data Setting a fair and equitable pay
structure Job evaluation methods Strategies for market adjustments
and other pay increases Benefits as part of total
Compensation Strategy and Philosophy
Value of pay
Market competitiveness
Benefits’ Package
Pay as a motivator
Compensation Philosophy and Strategy
Skill Differentials
Academic Degrees
Internal Promotions
Market Adjustments
Capping Pay at the
MaxSupervisory Authority
Acting/Interim Roles
Geographic Differentials
Demotions
Legal Considerations
Exempt classifications
Overtime pay for non-exempt
Independent Contractor vs. Employee
IRS sanctions for excessive executive pay
Compliance with collective bargaining [email protected]
Job Descriptions: The Basis for Determining Fair and
Market-driven Pay
Job descriptions should include:Essential functionsCore competenciesEducation Experience levelSupervisory responsibilityLevel of independent judgment
Job Descriptions’ Link to Pay
Compensable factors include:
Scope of responsibility Knowledge (education and
experience) Problem-solving Financial management responsibility Internal and external relationships
For “hybrid” jobs, estimate % of time spent in each functional area (i.e.—Facilities and Executive Assistant)
Market Analysis Techniques
Use third party survey data, not individual employers
Mean vs. median
Use job summaries, not just job titles Match 80% of essential functions “Age” the data to a common date
Determine local, regional or national data for each job
Reasons for Job Evaluation
Objective analysis of the job’s worth to the organization
Ensures internal equity Assists in determining pay grades Rational basis for negotiating pay rates in
collective bargaining Identifies a ladder of progression for
employees Complies with Equal Pay Act and Fair Pay
Act (2009) Develops a base for merit or pay for
performance increases
Comparing Unlike Jobs
Compensable Factor
Child CareProvider
Director of Advocacy
Scope of responsibility
Clearly defined procedures
Faces critical, complex challenges
Problem Solving Solves routine, recurring problems
Faces critical, complex challenges
Knowledge H.S. diploma B.A./B.S. plus 4 years management experience
Fiscal Responsibility
Conserves costs, attentive to revenue
Develops and administers dept. budget
Relationships External clients Board, donors, elected officials
Method A: Establishing a range
Use the market median as the mid-point of the pay range for each position
Build a 30% spread on either side of the median for non-exempt; 40% for exempt, 50-60% for senior management
Example of an exempt pay range:34,000-----42,500----51,000
Minimum-----Mid-point---Maximum
Method B: Establishing a Range
Establish a range for the most entry level non-exempt position and then build each subsequent ranges using a 10-12% differential between ranges.Example: Min. Mid Max
N-1 Receptionist 10.20 12.00 13.80 N-2 Child Care Asst. 11.42 13.44 15.46 N-3 Admin. Asst. 12.79 15.05 17.31 N-4 Payroll Clerk 14.32 16.86 19.38
Placement in the range
Calculate “compa-ratio” (each position compared to the mid-point)
Use clear criteria to determine appropriate placement in new range Length of service Performance documentation Performance rating by supervisor Current placement in range Combination
Recommend capping salaries at maximum of range
Salary Increase Methods
General Cost of Living Market adjustment within range Merit or performance based Skill-based differentials Productivity based Lump sum bonus
2014 Compensation Forecast:Partially Cloudy with an 90% Chance of
Raises
Retention is a primary concern of most employers
3.1% budgeted for pay increases
2.1% projected for salary structure increases
Sources: 2013-14 World at Work Salary Budget Survey2013 PayScale Compensation Best Practices
Benefits as a recruitment/retention tool
Benefits typically cost 30% of payroll Recommend annual benefits statements 401k or 403b plan designs Paid time off plans Cost analysis of benefits
Salary and wage data sources ERI (www.economicresearchinstitute.com) Bureau of Labor Statistics (www.bls.gov) Business and Legal Reports (www.blr.com) Medical Group Management Association (www.mgma.org) Kenexa CompAnalyst
www.salary.com
Local surveys produced by universities, United Way, non-profit associations, human resource associations, professional associations
Towers Watson data available at World at Work (WAW) library, Scottsdale, AZ
Mercer… Data available at WAW library
Resources and References
External compensation consultants World at Work coursework Society of Human Resource Management
(SHRM) www.dol.gov (FLSA exempt classifications) Solving the Compensation Puzzle by Sharon
Koss
