Budgeting Part 1: Managing Internal Pay Inequities

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

PayScale Delivers Where Other Compensation Providers Fall ShortPayScale leads the world in compensation knowledge with the freshest and most detailed data from over 40 million salary profiles. More than 3000 organizations use PayScale’s software and intelligence to get the greatest return on their talent. Smart businesses use PayScale Insight to recruit, retain and motivate their people.

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Mykkah Herner, MA, CCPHead of Professional Services

Ian Englund, CCPCompensation Professional

www.payscale.com