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Mykkah Herner, MA, CCPDirector of Professional Services
Jenni Marquez, CCPSr. Compensation Professionalwww.payscale.com
Compensation Budgeting Part I:
Managing Pay Inequities
www.payscale.com
14,000 Positions 3000 Customers 11 Countries
250 Compensable Factors40 Million Salary Profiles
Compensation Budgeting
Part I: Managing Pay Inequities
Part II: Determining Increases
AgendaStart with a Plan
Identify Compensation Inequities
o Organizational Levelo Department Levelo Position Levelo Individual Level
Develop solutions
Next month: determining increases
Start with a (comp) plan
Comp Design ElementsPhilosophyHigh-level view on the aims of the organization with regard to compensation
Strategyo Define your talent market(s)
o Determine level of competitiveness
o What do you want to reward?
StructureMathematically sound way of aligning your positions to market and internally
PolicyEnsures that the comp plan is carried out
Get Reliable Market Data
Compensable factors for benchmarking jobs
Defining your competitive set
Accurate and current market data
Build Compensation StructureDefine Grades & Ranges
Assign Jobs to Grades
Test for Pay Inequities
Types of Pay Inequities
Plan Level
Department level
Position level
Employee level
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
Analyze Ranges to Market
Create a report: range midpoints, market values, and delta
Identify Solutions: Plan LevelPlan 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
Cross-Department Pay Inequities Target / Strategy
Determine appropriate target(s) by department
Build ranges around targets
Position-specific Pay Inequities
Market movement & critical positions
Listen to your employees
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
Employee-specific Pay Inequities Pay according to your comp plan
Compression issues
Examine compa-ratio (.8-1.2)
Look at range outliers
Disparate Pay & EEO ConcernsCreate a Disparate Pay Report
o High disparity is a flag for litigation
o Low disparity may indicate not following your comp plan
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
Identify options
Determine cost to remedy
Examine budget allowance
Consider multi-year strategy
How critical to resolve?
Develop multiple scenarios
Create communication plan
Identify Solutions
Communicate Pay InequitiesDevelop Budget Request
Ask for what the organization needs
Help the organization manage the budget once approved
Next MonthCalculating Increases to Base Pay
PayScale Delivers Where Other Compensation Providers Fall ShortPayScale 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, CCPHead of Professional Services
Jenni Marquez, CCPSr. Compensation Professional
www.payscale.com