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Surveying market pay & Compensation practices 2013

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For most people, pay is a primary reason for working. Indeed, compensation is at the core ofany employment exchange, and it serves as a defining characteristic of any employmentrelationship.The study focuses on critical points of compensation and incentivesmanagement.The fundamentals of a good incentive program include the elements ofvision,potential, communication and motivation and can be realized if incentive promises arefulfilled by both employer and employee. The aim of the paper is to identify the mostimportant attributes of compensation and incentives management.Research method is theanalysis and synthesis of scientific literature, logical, comparative and graphic representation.On the base of analysis, authors of this paper present the model of incentive system forpositive employee attitudes and behaviors.Compensation refers to all forms of financial returns and tangible services and benefitsemployees receive as part of an employment relationship. Pay may be received directly in theform of cash or indirectly through benefits and services Programs that distributecompensation to employees can be designed in an unlimited number of ways, and a singleemployer typically uses more than one program.Frequently, incentive programs do not go thedistance because they were weak from the start. The development of an effective incentiveand compensation program is rooted in a companys vision for the future and the role of key

employees will play in those expectations.

Market pay is a wage and salary rate paid for a specific job that is determined by analysis of

the competitive job market and an alignment of internal equity. Survey conducted with other

employers in the same labor market to determine pay levels for specific job categories.

Generally wage and salary surveys are conducted in the surrounding community or

metropolitan area for the purposes of comparability. Just as skill, effort, responsibility, and

working conditions have been used to differentiate rates of pay among major job groupings,

surveys have been used to determine a specific rate of pay for a particular incumbent /

jobholder.

Market pay based on-

Identify and describe benchmark jobs Benchmark job is a job that is commonly found and is used to make pay

comparisons. Identify, survey and collect relevant labor market data on identified benchmark job. Develop a Market Policy Position (MPP) for each grade using regression analysis


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Compensation is the total amount of the monetary and non-monetary pay provided to anemployee by an employer in return for work performed as required. Compensation is the

total amount of the monetary and non-monetary pay provided to an employee by an employerin return for work performed as required.We will discuss about the surveying market pay andcompensation practices in thigs term paper.

Compensation is based on-

market research about the worth of similar jobs in the marketplace, employee contributions and accomplishments, the availability of employees with like skills in the marketplace, the desire of the employer to attract and retain a particular employee for the value

they are perceived to add to theemployment relationship, and the profitability of the company or the funds available in a non-profit or public sectorsetting, and thus, the ability of an employer to pay market-rate compensation.

Compensation also includes payments such as bonuses, profit sharing, overtime pay,recognition rewards and checks, andsales commission.Compensation can also include non-monetaryperks such as a company-paid car, stock options in certain instances, company-paidhousing, and other non-monetary, but taxable, income items.

In the surveys first section, which queried about organizational compensation philosophyand goals,91% of the survey respondents reported that their organizations have acompensation philosophy. About 62% said their compensation philosophy is physicallydocumented ,29% reported theirs is not written.

The majority of organizations (almost 63%) reported that about half or more of their

professional and managerial employees do not understand the organizations compensationphilosophy.

The vast majority of organizations (81%) reported having a base salary target between the40th and 60th percentiles compared to the relevant labor market. Surprisingly, 72% reportedbelieving that they are actually paying between the 40th and 60th percentiles.

In terms of total annual cash compensation, 56% reported targeting between the 40th and60th percentiles, and 55% reported actually paying at the 40th to 60th percentile.
http://humanresources.about.com/od/glossarye/g/employment-job.htmhttp://humanresources.about.com/od/glossaryb/g/bonus.htmhttp://humanresources.about.com/od/glossaryp/g/profit_sharing.htmhttp://humanresources.about.com/od/glossaryo/g/overtime.htmhttp://humanresources.about.com/od/salaryandbenefits/a/sales_comp.htmhttp://humanresources.about.com/od/glossaryp/g/Perks.htmhttp://humanresources.about.com/od/glossaryp/g/Perks.htmhttp://humanresources.about.com/od/salaryandbenefits/a/sales_comp.htmhttp://humanresources.about.com/od/glossaryo/g/overtime.htmhttp://humanresources.about.com/od/glossaryp/g/profit_sharing.htmhttp://humanresources.about.com/od/glossaryb/g/bonus.htmhttp://humanresources.about.com/od/glossarye/g/employment-job.htm


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Data from the surveys first section revealed that 91% of surveyed organizations have acompensation philosophy, but only about a third (34%) believe that most employeesunderstand it. Clearly,the creation of an organizational philosophy about compensation evenhaving it written does not mean that it is widely communicated, let alone understood.

By definition, only 20% of organizations can pay between the 40th and 60th percentiles, yet72% believe they are in that range for base salary. Further, 55% believe they are in that rangefor total annual cash.

Valuing Work-

Most organizations (97%) have some job descriptions, but 33% admitted that many of theirdescriptions are out of date.

Ninety six percent of organizations use some form of job evaluation; the two most commonmethodologies are point factor (27%) and whole job comparison (23%).

When there are conflicts between job evaluation and market data results, an even 38% ofrespondents give priority to job evaluation over market pricing and 38% give priority tomarket pricing over job evaluation.Eleven percent determine job grade based on jobevaluation and the salary range on market and only 6% change grades based to match marketpricing.

The HR department alone is typically accountable for assigning jobs to salary grades. In 28%of responding organizations,HR and line employees collaborate on assigning jobs to salarygrades.

Review of job evaluations is typically done (60% of the time) in reaction to requests fromline managers. Only 18% of respondents reported a program of proactive job evaluationreviews.Fifty-three percent of the respondents believe that more than 60% of their jobs canbe directly matched in the job market.Sixty percent of organizations report a belief that atleast 80% of their jobs are in the right salary ranges or grades.The data indicate that thenotion of job evaluation is very much alive and well in organizations today, contrary to somecomments in contemporary literature. For the vast majority of organizations, overall jobvalue is based on a combination of internal value (job evaluation) and external value (marketpricing).

Despite this combination of efforts to value jobs, approximately 40% of organizations report

that a substantial percentage of jobs (more than 20%) are not in the appropriate salary range.This represents a significant cost to organizations because having jobs inappropriately valuedwill either increase compensation costs or increase unwanted turnover.

Line management has not apparently taken a leadership role in assigning jobs to salarygrades, as much of the compensation literature suggests.

Performance Measurement and Linkage to Pay-


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Most organizations (80%) have performance appraisal processes resulting in a performancemetric that is tied to a pay decision (66%). Only 2% of organizations report not having aperformance assessment program. Pay increases are primarily determined by a combinationof individual performance compared to job standards (68%), performance compared toobjectives (50%), or the market value of the position (50%). Competency or skill acquisition

impacts salary increases in 22% of organizations.Forty three percent of respondents reportperformance ratings in a bell-shaped distribution. Nearly half report performance ratingsare skewed higher than a normal distribution.Top performers receive base salary increasesthat are two or more times as high as middle performers in 32% of organizations reporting.The majority of organizations (68%) reported variation of 1.5 times or less between topperformers and middle performers.

Most organizations try to maintain a fairly direct linkage between the performancemanagement and compensation programs. A high percentage of organizations pay forachievement against objectives in the base salary program versus a bonus/incentive program,and there is a relatively small percentage of organizations paying in base salary for

competencies or skill acquisition, which are strong indicators of long-term performance.Thedifference between increases for top performers and middle performers appears to be basedon budget constraints and the desire to give most or all employees increases rather than ondifferences in contribution to the organization.

Pay Communications-

As noted previously, 91% of respondents report having a written compensation philosophy,

but most say that few managers or professional employees understand it.Only slightly morethan half of the managerial and professional employees know their own salary range.Lessthan 25% of the respondents communicate base salary ranges for all pay grades or jobs.Only

13% of respondents reported providing a considerable level of detail when communicatingthe rationale for individual pay increases.

Pay communications within organizations are very limited and respondents report that it isineffective. Although the importance of communicating pay policies, practices and decisionshas been emphasized a number of recent studies, pay communication is still apparently verylimited in practice.

Effectiveness of Specific Salary Policies and Practices -

Job analysis and job evaluation methodologies and processes are believed to be effective by60% and 63% of respondents, respectively. According to respondents, the most effective jobevaluation methodology is point factor evaluation, followed by functional job familymodeling. Broad banding is viewed as the least effective methodology.Most respondentsthought that their market pricing processes were effective or very effective (84%).Althoughaligning organization and individual performance goals is a core objective of most paysystems, only 44% of respondents rated their organizations as effective or very effective atachieving this goal.Approximately 33% of the respondents evaluated their managerial andprofessional salary policies and practices as not effective or marginally effective. Only


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5% evaluated their salary policies and practices as very effective.Respondents were asked toevaluate the effectiveness of specific aspects of their pay programs for managerial andprofessional employees 74% said that they were not effective or only marginally effective incommunicating information about their pay system 68% said that they were not effective oronly marginally effective in the information shared about pay.62% said that they were not

effective or only marginally effective in using their pay programs to motivate employees25%said that they were not effective or only marginally effective in achieving internal equity21%said that they were not effective or only marginally effective in achieve external equity19%said that they were not effective or only marginally effective in their ability to attract andretain talent.

According to these evaluations, the effectiveness of pay policies and practices varies greatlyboth across organizations and across different compensation program aspects withinorganizations. In most cases, there seems to be considerable opportunity for improvement,especially with respect to motivating employees, aligning pay to performance andcommunicating about compensation areas with the most opportunity to significantly

leverage employee behavior.

Obtaining a Proper Job Match-

In moving from a manufacturing economy where jobs have been fairly well defined to a

service economy where jobs have historically been poorly defined, and where jobs with

similar titles have significantly different duties, accurate job matching becomes both more

difficult and more important.

Collecting useful data-

The kinds of pay data collected incorrect and harmful to worthless to extremely usefull.For

participants in a survey,providing pay data is often a time consuming futile assignment.

Often, those who actually complete the pay survey questionnaires are some of the least

experienced,lowest-paid members of the human resources/compensation or payroll

departments and may not even understand the kinds of data being requested.Because a survey

may clearly state the kinds of pay data desired,that does not mean that those responding tothe survey will understand the instructions and provide the specific requested data.

Essentially,collecting data means putting your design for collecting information intooperation. Youve decided how youre going to get information whether by directobservation,interviews,surveys,experiments and testing,or other methods.Theres a bit moreto collecting data.


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Recording and organizing data may take different forms, depending on the kind ofinformation being collected.Collect data should relate to how planning to analyze are usingit. Regardless of what method has been decided to use, recording should be done concurrentwith data collection if possible,or soon afterwards,so that nothing gets lost and memorydoesnt fade.

Some of the things might do with the information has been collected include-

Gathering together information from all sources and observations

Making photocopies of all recording forms, records, audio or video recordings, andany other collected materials, to guard against loss, accidental erasure, or otherproblems

Entering narratives, numbers, and other information into a computer program, wherethey can be arranged and/or worked on in various ways

Performing any mathematical or similar operations needed to get quantitativeinformation ready for analysis. These might, for instance, include entering numericalobservations into a chart, table, or spreadsheet, or figuring the mean (average),median (midpoint), and/or mode (most frequently occurring) of a set of numbers.

Transcribing (making an exact, word-for-word text version of) the contents of audioor video recordings

Coding data (translating data, particularly qualitative data that isnt expressed innumbers, into a form that allows it to be processed by a specific software program orsubjected to statistical analysis)

Organizing data in ways that make them easier to work with. How they do this will dependon the research design and the evaluation questions.They might group observations by the

dependent variable (indicator of success) they relate to,by individuals or groups ofparticipants,by time,by activity, etc. They might also want to group observations in severaldifferent ways, so that you can study interactions among different variables.

There are two kinds of variables in research. An independent variable (theintervention) is a condition implemented by the researcher or community to see if itwill create change and improvement. This could be a program, method, system, orother action. A dependent variable is what may change as a result of the independentvariable or intervention. A dependent variable could be a behavior, outcome, or othercondition. A smoking cessation program, for example, is an independent variablethat may change group members smoking behavior, the primary dependent variable.

Ensuring an acceptable sample of organizations & jobs-

A job description is a basic HR management tool that can help to increase individual and

organizational effectiveness. The HR Council has developedjob profiles for key positions in

small organizations that are available for you to use and adapt for your own use.
http://hrcouncil.ca/hr-toolkit/right-people-job-descriptions.cfm#_secA6http://hrcouncil.ca/hr-toolkit/right-people-job-descriptions.cfm#_secA6


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For each employee, a good job description helps the incumbent to understand: Their duties and responsibilities The relative importance of their duties How their position contributes to the mission, goals and objectives of the organization For the organization, good job descriptions contribute to organizational effectiveness by: Ensuring that the work carried out by staff is aligned with the organization's mission Helping management clearly identify the most appropriate employee for new duties and

realigning work loads

Relating data to Organizational Pay Policies:

Panal valuable inputsy surveys should be additional.Also,if significant demands are to beplaced on pay survey data,the costs involved in acquiring valid and reliable data must beunderstood and accepted.

Companies pay for compensation data because the benefits exceed the costs.The amount

companies spend on surveys is just a fraction of a percent of their total payroll costs.Forexample,although a company with 5,000 employees may spend $12,000 on compensationsurveys,its total payroll is probably at least $15 million in which case, their survey costwould be just eight one-hundredths of one percent of payroll.

Companies that participate in surveys customarily receive a discount on the final report.Feesfor compensation surveys range considerably depending on the scope of the surveyParticipants could pay as little as a few hundred dollars for a small regional survey or a fewthousand dollars for a comprehensive,national survey.Perhaps the most expensive surveys arevery specific regional surveys those that pinpoint a very particular segment of the recruitingmarketplace.Regardless of the survey, non-participants typically pay more than participants.

The process of collecting data and producing a salary survey takes careful planning and

execution that requires economic investment, people resources and time.Some companies

conduct surveys in house using their own staff and compensation experts.However, most

companies contract a third party to collect the data and do the number crunching.The third-

party approach provides a level of independence that most participants want.Some salary

surveys are co-sponsored to attract more participants and to add credibility to the numbers.

An experienced data provider in survey methods and statistical analysis is expected to put out

high-quality, reliable, accurate data.

Integrating market pay data with internally generated job worth data and pay structuredesign data.-

Just as the data requested may not be the data received, the designers and operators of a pay

survey may have their own "hidden agenda".


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Recognizing the goals of pay survey data designers and implementers-

Although this text focuses on pay systems and recognizes the importance of pay in the

physical, emotional, and intellectual well-being of employees, it is only one component of

the reward system.

Using Third-Party Data vs Performing A Survey-

Major considerations other than cost when selecting third-party surveys are thedetermination of the jobs or groups of jobs for which pay data is needed. Theorganizations by geographic location, product, revenue, and number of employees,

from which the most useful and comparable data is obtainable.

The use of the survey to identify trends in order to make pay structure adjustments.Analyzing And Making Inferences Form Collected Pay Data-

A major goal of most pay surveys is to predict accurately the so-called market rate of pay.Typically, this market rate of pay is the median or average rate of pay for the jobs for which pay

data have been collected.

Recognizing Pay As One Component Of The Total Compensation Or Total Reward System Of

The Organization

Although this text focuses on pay systems and recognizes the importance of pay in the physical,

emotional, and intellectual well-being of employees, it is only one component of the reward

system.

Employers must be aware of how their reward system compares with others competing for

workers in the same geographic areas and in the same industry or for those workers with specific

knowledge and skills.

But they may be making the comparison on only one part of the total rewards being provided. If

the goal is to provide a sound basis for developing a pay structure that is competitive with

external markets and in alignment with established pay policy criteria then an organization must

to ensure that compensation data and information are as correct and valid as possible. The mosteffective response is a formalized market survey process.


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Hiring and retaining competent employees. Promoting worker productivity. Developing an adequate and acceptable pay structure. Recognizing pay trends in the marketplace. Defending pay practices In a court of law.

Once a decision has been made to go forward with a survey the next step is to determine its

scope

Having determined internal requirements, the survey designer's next step is to decide

where to look for the needed data.The next step is to identify organizations that hire from the

specified labor markets.

As a variety of organizations responding to a survey broadens, the need for different kinds of

compensation data and for different statistical methods for analyzing these data increases.

Those responsible for managing and conducting the survey should be experienced

professionals who are familiar with and understand the process......Individuals capable of

using the available tools and techniques to identify its fine differences.

Development, Implementation, and Analysis- Skills, talent, and equipment should beavailable

Classification of Job or Occupation -Where is (are) the problem jobs and are they unique.

Pay Structure -Multiple of single pay structures and are other organizations compatible.

Identification of labor market What labor market and how complex Influence of competing organizations Selection of respondents

For preparing for the survey we have to find out who are the competing organizations, what

do they look like, and does anyone dominate the labor market are required.Which

organizations are the best to look to for information.

Cooperation of respondent-Identify likely contacts and establish communication links which

are required is given below-


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Kinds of data to be collected. Maintenance of confidentiality How will be the confidence of the participants

:

Telephone -Useful for collecting data on a relatively small number of easily identified and

quickly recognized jobs.

Mailed Questionnaire -The most common technique for collecting formal survey data.

Face-to-Face Interview-The best technique for collecting data is the completion of a

questionnaire during a face-to-face interview.

Conference-Conference is also a significant way.

After deciding for the techniques to be used for collecting survey daa,the next problem is to

determine the best method for identifying benchmark jobs or classes of jobs or even

occupations for which data are to be requested.They are-

Job Matching-

Higher engagement levels correlate to higher stock value.

When The talentsa person has are aligned withWhat the job calls for,they perform better and are happier at work. Instead of the stress ofstruggling to keep up, their energy flows into building momentum on the job and they enjoyan Productivity goes up and labor costs come down because you can get more performancerequiring fewer staff.People who like their jobs take less sick leave and tend to show up ontime because they want to come to work. This is in stark contrast to a workplace without jobmatching. People who arent job matched experience stress because they must struggle tomeet the requirements of a position that isnt a good fit for their natural inclinations and

talents. This is a source of conflict between them, the needs of the position and their co-workers. They are likely to respond to higher stress levels with higherabsenteeism. Instead ofchanneling a passion for their work into productivity, as job-matched employees do, their

performance suffers.

Class Matching :The identical procedures and problems used for job matching apply to matching classes ofjobs because a class of jobs is nothing more than a grouping of comparable jobs.The surveysconducted by the Bureau Of Labour Statistics(BLS) are of the class matching nature.

Occupational Survey Method:


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This method has been developed to overcome many of inadequacies and the weaknesses ofthe job or class comparison methods.Proponents of the occupational method credit it with thefollowing advantages-It does not require the respondent to match specific jobs.It is easier for the respondent to report objectives data

It provides pay data on greater number of jobsIt simplifies summariztio and an analysis of raw data.

Job Evaluation Method:

A set of compensable factors are identified as determining the worth of job evaluation

method. Typically the compensable factors include the major categories of-

Skill Responsibilities Effort Working Conditions

These factors can then be further defined as-

Skill Physical Working Conditions Location Extremes in Environment Hazards Education Responsibilities Supervisory Mental Effort Experience Ability Fiscal

Job Evaluation Method-

Each factor is then divided into levels or degrees which are then assigned points. Each job is rated

using the job evaluation instrument. The points for each factor are summed to form a total point

score for the job. Jobs are then grouped by total point score and assigned to wage/salary grades so

that similarly rated jobs would be placed in the same wage/salary grade.

Advantages-

The value of the job is expressed inmonetary terms.


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Can be applied to a wide range ofjobs.

Can be applied to newly createdjobs.

Disadvantages

The pay for each factor is based onjudgments that are subjective.

The standard used for determiningthe pay for each factor may havebuilt-in biases that would affectcertain groups of employees(females or minorities).

By using a job evaluation process in your business organization, you assess the relative content

and value of positions and determine equitable, understandable and competitive compensation.

Job content is evaluated based on work type, skills and knowledge required; value is evaluated

based on each job's contribution to company goals. Three of the most commonly used methods

of job evaluation, upon which other methods are based, can be customized to your company's

specific needs.

Broad Classification Method:

Two major broad classification methods,the maturity curve and the frequency distribution.

Nearly all agencies,ad platforms and advertisers are now using audience targeting to serve digitaldisplay ads.More than nine out of 10 agencies and ad platforms said they usedtargeting,according to data platformexelates research from April 2013, and more than eight outof 10 advertisers said the same.But how they go about that audience targeting and what data theyuse to determine their audience is a varied proposition.The study found that third-party data wasa key element for targeted digital ad campaigns. More than half of agencies surveyed used third-

party data in their digital advertising efforts, and 39% of advertisers and ad platforms each saidthe same.

The compensation survey facilities an understamding of the competitive forces in the market

The compensation data business is a custom study of what each individual job within a
http://www.exelate.com/http://www.exelate.com/http://www.exelate.com/


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company should pay based on very specific, targeted market data. A large company could

pay hundreds of thousands of dollars, or more, for this type of in-depth companywide

analysis.This term paper discussed about statistical tools available for evaluating and

validating collected information and provides compensation survey dta collection

instrument.Possible the greatest value of this survey is that it informs the user of what ishappening in the market place.

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