In Part 1, we looked at:
- Pay increase projection for 2018 year-end/2019
- Pay increase guidelines by performance level
- Reviewing internal equity
- The role of the market place
Here in part 2, we’ll further unpack the importance of pay data related to the market place.
- The most important question that has to be answered is this one: Is your pay on target?
- Here’s the question in non-word form for those who prefer a picture or image.
The only way to answer this critical question with certainty is for your organization to periodically conduct a market compensation analysis that examines both base pay and variable pay.
- Without such an analysis you could be either underpaying or overpaying – both of which have unintended consequences.
- Losing a highly valued employee because of her/him being underpaid is such an example.
Four Features a Market Compensation Study Should Have
1) Uses data from relevant organizations, which means those:
- Of comparable size (as measured by revenue and/or number of employees)
- Within your industry
- In the geographical area in which you would recruit for a position – locally, regionally or nationally
2) Data addresses both base pay and incentive pay in order to provide total cash compensation
3) Creates a position match by taking into account factors such as below, not just by a position’s title that can vary greatly from company to company:
- Duties and responsibilities
- Educational level
- Experience requirements
- Key skills and competencies
4) Provides specific recommendations which take into account pertinent position holder factors, such as:
- Qualifications in comparison to the position’s requirements
- Level of performance
- Special value to your organization of certain positions
SPECIAL MARKET PAY ADJUSTMENTS
The Market Study will identify positions and incumbents within positions who are appreciably below your organization’s target relative to the market place.
- For example, you may have set the 50%ile of the market as your pay target.
The Study’s recommendations give you an approach or approach options on how to address these instances.
Points To Keep in Mind
1) A Market Analysis can be conducted internally if an organization has:
These centers provide modernized classrooms and curriculum augmented by effective practical training. icks.org cheapest viagra
- An HR staff with specific expertise in compensation and the availability of the time to accomplish it and
- Access to relevant market data or the ability to buy such data, with data to include both base pay and incentive compensation
- market data’s cost can be prohibitive
2) Most often, unless the organization of a substantial size, it either:
- Disregards the value of a Market Study
or - Hires an HR consulting firm to conduct the Study on its behalf since the consultant has:
- Expertise in compensation matters
- Made the investment to acquire market data specifically for the purpose of conducting Market Studies of total cash compensation
True or false?
1) To be truly effective, a market compensation study has to include all or almost all of the positions within your organization.
FALSE!
- A wisely designed study identifies certain benchmark positions that are used to “fill in the blanks” for positions not included in the study.
- By proper design, the study’s time and expense can be substantially reduced – while still being an extremely valuable and meaningful compensation tool.
2) A small company can derive benefit from a Market Analysis showing where its pay stands in comparison to other companies competing for the same pool of talent.
TRUE!
- Organizations of all sizes can benefit from seeing where they are underpaying and overpaying and using that knowledge to be compensation decisions.
- Trinity’s Team has done Market Analysis for organizations ranging from less than 20 employees to those with thousands of employees, and from those with annual revenue ranging from several million to billion+ size.
3) The data used should not be just base pay, but also variable pay so as to reflect total cash compensation for positions being compared to the market.
TRUE!
- Reviewing only base pay provides an incomplete picture and can lead to incorrect conclusions, such as a false sense of confidence in your pay’s competitiveness.
HOW TRINITY CAN HELP:
- Trinity’s Team has a high level of expertise in all aspects of compensation design and management, as well as performance management systems.
For more information:
- E-mail Trinity at info@TrintyHR.net
- Visit our website at www.TrinityHR.net
- Call us at 856.905.1762 or toll free at 877.228.6310
You have HR challenges…Trinity has solutions!