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GSFPC Strategic Compensation

This document discusses strategic compensation, including direct compensation like base pay and incentives, indirect compensation like benefits, and how to determine appropriate compensation levels based on internal and external equity comparisons using market data from surveys. It provides details on different types of compensation surveys, how to identify benchmark jobs to compare compensation levels, and approaches to setting pay based on market rates.

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Sahil Sharma
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34 views46 pages

GSFPC Strategic Compensation

This document discusses strategic compensation, including direct compensation like base pay and incentives, indirect compensation like benefits, and how to determine appropriate compensation levels based on internal and external equity comparisons using market data from surveys. It provides details on different types of compensation surveys, how to identify benchmark jobs to compare compensation levels, and approaches to setting pay based on market rates.

Uploaded by

Sahil Sharma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Strategic Compensation

Kathy Starnick, SPHR, CCP, CBP


Director Human Resources
TYBRIN Corporation
What is Total Compensation?
 All forms of financial returns that
employees receive:

 Direct compensation – pay system

 Indirect compensation – benefits and


work environment
Direct Compensation
 Base Pay
 Differential Pay
 Short and long term incentive pay
 Cash Awards
Indirect Compensation
 Legally required benefits
 Disability insurance
 Life Insurance
 Medical, dental, vision insurance
 Deferred pay
 Unpaid Leave
 Pay for time not worked
 Flex benefits
 Perks
 Work environment
 Non-cash awards
Equity Issues
 Internal Equity
 Fairness between what employees
bring to the company and how they are
rewarded
 External Equity
 Comparison of compensation levels and
practices with organizations in the
same market that are competing for
the same employees
Cold, hard cash
 Direct compensation isn’t the total
answer, but employers may be
misinterpreting its importance
Cold, hard cash

2005 Workforce Study by Spherion


shows that 49% of employers rate
financial compensation as a very
important driver of retention.

69% of workers
Rate very important
Market Pay Strategies
 Match – Pay approximately the
same wages and benefits as
competition
 Lag – Salaries and/or benefits below
market
 Lead – Pay higher salaries and/or
benefits as a strategy to attract
most desirable employees.
Market Based Pay
 The ultimate goal is to determine
the market rate – what other
organizations pay for similar work in
the external marketplace.
 Most employees expect to be paid at a
level that is consistent with that paid in
the market for comparable work.
Market Pricing
 Market pricing should complement
internal value determinations that
are most frequently made by job
content evaluation
Job Evaluation
 Non-quantitative (whole job)
evaluation
 Evaluates an entire job and places the
job in order without assigning a
numerical value
 Job ranking – establishes a hierarchy of
jobs from highest to lowest
 Job classification – groups jobs into

predetermined grades or classifications


The “Market Rate”
 Market rate may apply to all jobs in
the:
 Same physical area
 Same industry within the area
 Same industry, regardless of area
Competitive Market Rates
 By discovering competitive market
rates in an area and/or industry, an
organization should be able to:
 Determine appropriate compensation
levels for comparable work and
 Diagnose existing or potential salary
issues
Competitive Market Rates
 Once an organization determines
competitive market rates of pay for
benchmark positions, the
organization can determine if
positions are underpaid or overpaid,
and internal equity situations may
be identified and corrected.
Benchmark Jobs
 Benchmark jobs are positions
selected on the basis of similarity of
duties, responsibilities, skills,
education and experience. These
positions are used for comparison
with other organizations that have
similar positions.
Where do I find market data?
 Unlimited number of compensation
surveys are available:
 Do you develop your own survey?
 Purchase external surveys?
 Rely on “free” survey data?
Survey Options
 U.S. government surveys
 Internet data (from free salary sites)
 Online survey sites
 Computer data banks
 Research outsourcers
 Surveys conducted by a professional or
trade association, a large consulting
firm, or an independent consultant
Survey Options
 Joining an informal group of
employers to conduct a survey
 Conducting a survey for your own
organization
Government Surveys
 Free and statistically reliable
 May not be sufficiently timely or
specific to meet needs
Government Surveys
 Two well-known surveys published
by the Department of Labor’s
Bureau of Labor Statistics:
 The Occupational Employment
Statistics Survey
 The National Compensation Survey
Occupational Employment Statistics
Survey
 www.bls.gov/oes/
 The Occupational Employment Statistics
(OES) program conducts a semi-annual mail
survey designed to produce estimates of
employment and wages for specific occupations.
The OES program collects data on wage and
salary workers in non-farm establishments in
order to produce employment and wage estimates
for about 800 occupations. Data from self-
employed persons are not collected and are not
included in the estimates.
National Compensation Survey
 www.bls.gov/ncs/home.htm

 Analyzes jobs found in the federal


government so these jobs can be
paid competitively.
Internet Data
 Internet compensation data comes
in three forms:
1. Free salary sites
2. Online survey reports
3. Computer data banks

Remember – you get what you pay for!


Internet data – free salary sites
 The most popular sites provide data
designed for general employee, not
the employer
 Compensation administrators deal
with employees asking for raises
based on this free, accessible, and
typically inflated information.
 Revenue comes from advertising, so
they need to increase their “hits”
Internet Data
 Be wary of sites that don’t provide
sources, surveys, methodology, and
a standard error
Online surveys
 www.SalariesReview.com
Four interactive surveys covering
salaries for up to 4,000 jobs in
6,000 cities including cost of living,
competitive benefits, and
salary/merit increases. Reduced
price to survey participants.
Online Surveys
 www.SalarySource.com – one-time
survey retrievals for individual fees,
or you can subscribe to the site.

 www.WageWeb.com – salary
information for an annual fee
Computer Data Banks
 Computer data banks let you tap
into their data files to make your
own survey. Expensive, but less so
than conducting your own custom
survey.
Computer Data Banks
 Salary Information Retrieval System
(SIRS)
 Comprehensive cross-industry
database. Covers 600 companies in 11
industry groups, and lets you select
specific companies to compare. SIRS
requires participation and an annual
fee. Maintained by Organization
Resource Counselors
www.orc-sirs.com
Computer Data Banks
 Other database systems:
 Mercer HR Consulting
www.imercer.com
 The Hay Group www.haygroup.com
 Towers Perrin www.towers.com
 Radford – a leader in high-tech and
biotech survey reports. Requires
participation and is expensive
www.radford.com
Research Outsourcers
 Alternative to collecting and
analyzing survey data yourself is
utilizing the skills of a service.
 ERI Economic Research Institute
collects, analyzes and reports data
from thousands of salary and cost
of living surveys
www.erieri.com
Surveys by Private Organizations
 A large number of trade
associations, industry groups,
professional societies and consulting
organizations conduct wage and
salary surveys. Some are free and
some cost several thousand dollars.
Informal Groups
 Formation of informal groups within
specific areas or specific companies
to perform pay research
Conducting your own survey
 It can be very expensive to conduct
your own survey. It’s a large and
time consuming task.
 May be worth it if you need to
 Control the data sought or
 Maintain confidentiality of results
Conducting your own survey steps
 Planning the survey
 Purpose of the survey
 Jobs to be included
 Markets to be surveyed
 Organizations to be invited to
participate
 Information to be obtained
 Methodology
 Determine who conducts and prepares
results
Conducting your own survey steps
 Conducting the survey
 Collect information
 Ensure job comparability
 Preparing results
 Tabulate the data
 Analyze the results
 Present results in report form
What’s next?
 Once market data is collected from
the desired competitive markets,
the hierarchy of relative worth is
priced.
 Unlikely that a survey match can be
found for every job. Benchmark
jobs are those that can be matched.
Benchmark jobs
 Are representative of the types of
work performed in the organization

 Represent a broad cross section of


employees (high to low job
categories)

 Represent a significant portion of


the employee population
Benchmark jobs
 Hold duties and responsibilities that
are identifiable in the marketplace

 Exist in the organizations and


geographic areas to be surveyed
Identify the Reference Point
 Compare job duties and
responsibilities that:
 Reflect the scope of the position and
reporting relationships – can’t rely on
titles
 Focus on the specific job or industry
 Are within market based on size,
profitability, sales/assets, geographic
area, and/or industry
Approaches to market pricing
 Pure market pricing – evaluation based on
market value

 Guideline method – combination of


traditional job evaluation method and
market based job evaluation

 Maturity curves – method used as a


premium pay mechanism to correlate pay
in relation to tenure in a professional field
such as teaching
Cautions
 Pure market pricing carried to an
extreme deemphasizes internal
alignment and can result in an
inefficient pay structure
Balance
 Internal and external employee
pressures for a fair and equitable
pay system is a matter of
judgment.
Ignoring Internal Pay Alignment
 Deemphasizing may result in:
 Feelings of unfair treatment
 Inconsistency in fundamental culture in
relation to recognizing and rewarding
employees
 Employees seeking other employment,
filing grievances, or foregoing
opportunities for advancement within
the organization
Ignoring External Pay Alignment
 May affect the ability to attract, hire
and retain applicants who match the
organization’s needs
Where do you go for help?

 WWW.SHRM.ORG

 WWW.WORLDATWORK.ORG

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