Compensation Budgeting Part II: Determining Raises We will be sending out slides and accreditation information following the presentation. Mykkah Herner, MA, CCP Head of Expert Services Ian Englund, CCP Senior Compensation Professional www.payscale.com
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Compensation Budgeting Part II: Determining Raises
We will be sending out slides and accreditation information following the presentation.
Mykkah Herner, MA, CCPHead of Expert Services
Ian Englund, CCPSenior Compensation Professional
www.payscale.com
www.payscale.com
14,000 Positions 3000 Customers 11 Countries
250 Compensable Factors40 Million Salary Profiles
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Three-part Series on Compensation Budgeting
Part I: Managing Pay Inequities
Part II: Determining Raises Part III: Putting it all together with PayScale Insight
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Agenda
Recap of Part I
Part IIWhat do you want to reward?
o Market, performance, proficiency, tenure, etc
Can you streamline your increase process?How to calculate pay increases
o Paying to marketo Merit matrix (pay-for-performance)
Putting it all together for budget recommendations
Next month: putting it all together with PayScale Insight
• Range Penetration = (Current Annual Base – Range Min) / (Range Max – Range Min)• Annualized Increase = Increase % * Current Annual Base• New Annual Base = Annualized Increase + Current Annual Base• New Range Penetration = (New Annual Base – Range Min) / (Range Max – Range Min)
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Using a Matrix (Merit or Proficiency)
Tier increases by position in range & performanceo Start with a budget increase %o Allocate increases to EEs based on range penetration
and performance
o Create spreadsheeto Note: Proficiency, or another factor, can work like
• Range Penetration = (Current Annual Base – Range Min) / (Range Max – Range Min)• Annualized Increase = Increase % * Current Annual Base• New Annual Base = Annualized Increase + Current Annual Base• New Range Penetration = (New Annual Base – Range Min) / (Range Max – Range Min)
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Developing Budget Recommendations
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Part Io Org Level Solutions – Range Adjustments• Cost of changing ranges (adjusting green outliers)
o Position Level Solutions – Market Adjustments• Cost of adjusting positions or adding temporary
position premiumso Employee Level Solutions – Equity Adjustments• Cost of correcting individual pay inequities
Part IIo Increase Budget – Pay Increase Adjustments
Putting it all Together
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Org Level Solution Costs
Range Adjustmentso If you decide to maintain range penetrations, this cost will be equal to the %
you are increasing your ranges.
For example, if your total base pay budget is $15,000,000 and you increase your ranges by 2%, the total impact is $300,000
o If you decide to ensure no green outliers, this cost is equal to the adjustment necessary to keep all EEs in range at the low end
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Position Level Solution Costs
Market Adjustments
o Moving positions to a new gradeo What will be the cost of ensuring all incumbents are in range
o For example, Driver I and CSR = 100 + 400 = $500o Offering a market premium
o Calculate yearly market premium payment to all incumbents in the roleo For example, Software Engineer = 21 * $1000 = $21,000
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Employee Level Solution Costs
Equity Adjustmentso Determine the amount to resolve critical issues
• For example, bump HRM/F to 73,600 ($3700)
o Calculate amount to resolve compression issues – increases to existing?
o Any necessary market adjustments for individuals?
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Pay Increase Adjustments
Pay Increase Adjustmentso Typically this is the easiest to budget as it is usually a
percentage of total salary budget.
o For example, if your budget is $15,000,000, a 3% increase would be $450,000.
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Summary of Comp Budget Requests
2015 Compensation Budget Requests
Total Salary Budget: $15,000,000
Percent Dollar Amount2015 Range Adjustments 0.06% $9,200
2015 Pay Increase Adjustments 3% $450,000 Total Increase $484,400
2015 Salary Budget $15,484,400
Detail for comp budget request is in the following attachmentsCosting for Range AdjustmentsCosting for Market AdjustmentsCosting for Equity Adjustments2015 Pay Increases
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Next Month:
Using PayScale’s Insight and Insight Expert to support compensation budgeting
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