Spring Ahead: Plan your Approach to Compensation in

2012

Stacey Carroll, M.B.A, SPHR, CCP

Director of Professional Services & Education

PayScale, Inc.

13,000 Positions. 50 Major Industries. 11 Countries.

PayScale Delivers Where Other Compensation Providers Fall Short

PayScale operates the largest online salary database in the world. We allow organizations to price their jobs according to their industry, location, and the employee skillsets which make their workforce unique. PayScale goes beyond supplying the accurate data you need - we also give you the tools to efficiently manage your compensation projects, and the knowledge to stay up-to-date.

Visit our blog: http://blogs.payscale.com/compensation/

Agenda

Start at the end

What will the increase be based on?

Planning for Market Adjustments

Sample Range Recommendations

Sample Merit Matrix

What do you want to change?

General Timeframes

Start At The End

The MOST important event on your compensation calendar is about giving out salary increases to employees. So, this is the end of your process but the beginning of your planning. Align timing with your company philosophy?

Annual review process for all employees Choose a date that aligns with your company’s budgeting process

Anniversary review process Choose a focal point for making decisions about your guidelines and

compensation matrix

Decide if you will stay status quo or make changes to your process.

What are the increases based on?

HOW will you determine how much of an increase the employee with receive?

Aligning increase amounts with your company philosophy

Will all employees be eligible for a cost of living increase?

If you have salary ranges, will you adjust the ranges?

Will you differentiate the increase amount based on merit vs. market?

Will these two pieces be aligned into the same process or different?

Do you give rewards based on longevity with the company or in the position?

What Do You Want to Change About Your Current Process?

Giving out across the board increase (cost of living)

Basing rewards on performance vs. longevity

Differentiating between market adjustments and movement within the range

Moving ranges every year

Planning For Market Adjustments

Benchmark your entire organization – define your baseline

Define your compensation philosophy and goals for 2012

Determine what changes (if any) you want to make to your current process

Provide budget recommendations based on company goals

Sample Recommendations for Range Adjustments

Summary of Midpoints to Market

Structure Employee Base to Mid

2011 Midpoint to Market

2012 Midpoint compared to Market Difference

Denver A -0.26% -5.50% -7.96% -2.46%

Miami A -1.97% -4.36% -8.53% -4.17%

Philadelphia B -4.09% -4.85% -5.96% -1.11%

Baltimore B -6.24% -8.87% -18.77% -9.90%

Costa Mesa C -11.94% -4.31% 3.02% 7.33%

Remote A 14.53% -3.96% -0.12% 3.84%

Remote B -7.89% -5.63% -5.36% 0.27%

Remote C -10.09% -6.49% 13.28% 19.77%

Exec Exec 0.00% 1.94% 1.94%

Reccomendations:

Move A & B structures up by 2%

Keep Structure C the same

Move Baltimore to B

Move Programming Team Lead to 7

Keep Developer II at 6 - but market adjustments may be warranted

Move Sr. Developer to 7

Move Network Engineer to 4

Director Product Management to a grade 10

Job Descriptions Needed:

Customer Advocate Manager

Programming Services Support

Sample Merit Increase Matrix

General Timeframes

Start from the effective date of salary increases

Input payroll changes: 2-4 weeks

HR/Company approval: 1-2 weeks

Managers allocating salary increases: 1-2 weeks

Managers conducting performance reviews: 2-4 weeks

HR preparing instructions, guidelines and recommendations for increases based on budget: 1-2 weeks

HR getting budget support for organizational goals: 2-4 weeks

HR benchmarking the organization: 4-8 weeks

Sample Organization

My company wants to benchmark the organization this year (it’s been 2 years since it was last done). We’ve been losing too many of our top performers, so the Executive team wants to look at rewarding performance this year. Our budgets remain tight due to market conditions, and the executive team wants to know how to invest wisely without “breaking the bank”.

Changes we’ll make to our compensation program for 2012.

Continue to use annual review process for allocating increases to employees at the same time, but break out market adjustments from performance increases

Benchmark the organization Get buy-in on company’s compensation philosophy Provide a compensation matrix that allows managers to reward based on

performance – with consideration for employee’s placement against the market (compa-ratio)

Create a policy for red-circling employees over the top of the max

Sample Timeline

Market adjustments will be effective 10/1/2012

1. Invest in tools/data: 4/1 2. Benchmarking complete: 5/15 3. Decision from leadership team

about compensation philosophy: 6/1

4. HR Analysis on proposed increases: 7/1

5. Leadership sign-off: 8/1 6. Notification to Managers: 8/10 7. Exceptions Finalized: 8/25 8. Communication to employees:

9/1 9. HR final approval date: 9/15 10. HR’s recommendations to finance

for merit increase budget: 10/15

Merit increases will be effective 1/1/2013

1. Manager performance review training: 9/15-10/1

2. Performance Reviews: 10/1-11/1 3. Merit budget approved: 11/1 4. HR sends guidelines, employee

data and communication to managers: 11/15

5. Manager’s allocate salary increases: 11/30

6. HR final review: 12/5 7. Employees are notified: 12/10 8. Data finalized for input: 12/15

PayScale Delivers Where Other Compensation Providers Fall Short

PayScale operates the largest online salary database in the world. We allow organizations to price their jobs according to their industry, location, and the employee skill sets which make their workforce unique. PayScale goes beyond supplying the accurate data you need - we also give you the tools to efficiently manage your compensation projects, and the knowledge to stay up-to-date.

Visit our blog: http://blogs.payscale.com/compensation/

Join our Group on LinkedIN: Compensation Today: HR Best Practices

Stacey Carroll, M.B.A, SPHR, CCP Director of Professional Services & Education PayScale, Inc. Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey