9/30/2017 1 | 1 Money Talks Communicating Pay to Employees HRTennessee Conference & Exposition October 2017 | 2 Overview • Session objective – equip human resources professionals to have constructive conversations about compensation • Keys to effective communication – Knowledge – Confidence – Fluency • Session is divided into two parts – Compensation Fundamentals – Communicating Pay | 3 Expectations • Communication about pay is not easy • Most effective communication through fluency • HR Business Partner audience – People managers – Staff – Leaders • Role of Compensation function – Provide market intelligence – Identify evidenced based recommended practices – Consult with business partners as part of overall HR strategy – Offer compensation solutions to business objectives as defined by operations leaders
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Transcript
9/30/2017
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| 1
Money TalksCommunicating Pay to Employees
HRTennessee Conference & Exposition
October 2017
| 2
Overview
• Session objective – equip human resources professionals
to have constructive conversations about compensation
• Keys to effective communication
– Knowledge
– Confidence
– Fluency
• Session is divided into two parts
– Compensation Fundamentals
– Communicating Pay
| 3
Expectations
• Communication about pay is not easy
• Most effective communication through fluency
• HR Business Partner audience
– People managers
– Staff
– Leaders
• Role of Compensation function
– Provide market intelligence
– Identify evidenced based recommended practices
– Consult with business partners as part of overall HR strategy
– Offer compensation solutions to business objectives as defined by
operations leaders
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Compensation Landscape
• Competing pressures
• Compensation is a Zero
Sum Game
• Compensation is not
“more art than science”
New, Irrational
Competitors
Pay for Performance
Smaller Budgets
Internal Equity
Employee Retention
Generational Differences
Employee Engagement
Longer Careers
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Compensation Ideals
Compensation Programs
Strategic
Consistent
EquitableUnified
Intentional
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COMPENSATION FUNDAMENTALS
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Compensation Philosophy
• A documented compensation philosophy provides a:
– Framework for senior-level compensation decisions
– “Blueprint” for Human Resources when developing specific pay
programs
– Approach that can be clearly communicated to managers and
employees
• Key elements of the Compensation Philosophy:
– Definition of competitive market
– Competitive positioning of compensation
– Use of incentive compensation and bonus eligibility
– Balance between internal equity and external competitiveness
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Compensation Strategy
• Compensation is cash provided by an employer to an
employee for services rendered
• Primary objective of compensation function is to pay the
exact amount necessary to attract and retain talent
needed to meet business objectives
• Elements of compensation strategy
– Competitive targets
– Pay mix: base pay, short term incentives, long term incentives
– Variable pay design
– Hiring scales
– Increase methodology
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Compensation Program
Job Evaluation
Job Descriptions
Salary Structures
Pay PoliciesMarket
Assessment
Job Analysis
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Market Assessment
• Collect market data to:
– Analyze pay competitiveness by gathering information on the
going rate for benchmark jobs
– Identify pay trends by watching movement of salaries
– Compare competitive pay practices
• Benchmark job
– Standard job used to make pay comparisons
– Jobs easily defined and found in other organizations
– Job is appropriate for benchmark analysis if 70% of job content is
similar to market job description
• Accurate and current job descriptions critical to valid
market pricing
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The Rules
• Sherman Antitrust Act
– Intended to promote a competitive business environment
– Prohibits price fixing
– Restricts exchange of compensation information
• Survey Safe Harbor Guidelines
– Published by neutral third party
– Composite statistics
• No incumbent or organization specific data
• Minimum five (5) reporting organizations
• No single organization comprises more than 25% of sample
– Data at least three (3) months old
Warning: It is a violation of federal and state antitrust law to obtain and use individual competitor pay information to set compensation levels and practices.
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Implications of Targeting Median
• The median is the value separating the higher half of a
data sample, a population, or a probability distribution,
from the lower half
• Common pay strategy to target market median
Will employees believe that the organization offers competitive compensation when HALF of competing
companies are paying more?
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Compensation Structures Overview
• A compensation (pay) structure is a series of ranges or
grades, each with a minimum and maximum pay rate
• Well designed and properly maintained structures are
essential for effective pay administration
• Organizations may elect to have more than one structure
– Usually in response to differentiation among job groups
– Based on function or job level
– Allows flexibility in design and maintenance
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Importance of Pay Structures
Drive Business Outcomes
• Attract and retain talent needed to achieve objectives
• Support operations leaders
• Optimize compensation spend
Increase Employee Engagement
• Foster internal equity
• Link pay and performance
• Clarify communication
Enhance Human Resources Service Delivery
• Equip business partners to consult with leaders on pay
• Unify pay decisions
• Promote administrative efficiency
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Pay Grade/Range
• Range minimum – lowest financial value a job has to an organization
• Range maximum – highest financial value a job has to an organization
• Range midpoint – midway point between minimum and maximum, usually the target financial value
• Midpoint Progression/Differential - difference between midpoints of adjacent grades