budgeting part 1: managing internal pay inequities
DESCRIPTION
It’s budget season again, and that makes it time to update your data for next years comp plan. The first critical step is to get a sense of where the issues are.TRANSCRIPT
Compensation Budgeting Part I: Managing Pay Inequities
Mykkah Herner, MA, CCPHead of Professional Services
Ian Englund, CCPCompensation Professional
www.payscale.com
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
Part III: Putting it all together with PayScale Insight
www.payscale.com
AgendaStart with a Plan
Identify Compensation Inequities• Organizational Level• Department Level• Position Level• Individual Level
Develop solutions
Next month: determining increases
Start with a (comp) plan
CompDesignElements
PhilosophyHigh-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
Policy Ensures 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 Structure
Define 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 MarketDetermine your target market percentile
BudgetCompetitiveness and impact on retention/attraction
Stay competitive relative to marketAnnually, keep ranges current
Analyze Ranges to Market
Create a report: range midpoints, market values, and delta
Cross-Department Pay InequitiesTarget / StrategyDetermine appropriate target(s) by departmentBuild ranges around targets
Position-specific Pay Inequities
Market movement & critical positionsListen to your employees
Employee-specific Pay Inequities
Pay according to your comp planCompression issuesExamine compa-ratio (.8-1.2)Look at range outliers
Disparate Pay & EEO ConcernsCreate a Disparate Pay Report o High disparity is a flag for litigationo Low disparity may indicate not following your comp
plan
Develop Solutions
Identify Solutions
o Identify options
o Determine cost to remedy
o Examine budget allowance
o Consider multi-year strategy
o How critical to resolve?
o Develop multiple scenarios
o Create communication plan
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
Identify solutions: Position LevelPosition 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
Identify solutions: Employee LevelEmployee Level Options
Identify critical issues
Compression
Disparate pay
Green outliers
Employee Level Costing $ for critical issues
$ for compression
$ for market adjustments
Communicate Pay Inequities
Develop Budget Request Ask for what the organization
needs Help the organization manage the
budget once approved
Next Month
Calculating Increases to Base Pay
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Mykkah Herner, MA, CCPHead of Professional Services
Ian Englund, CCPCompensation Professional
www.payscale.com