5 Steps to a Smart Compensation Plan
- 1. 5 Steps to a Smart Compensation Plan
- 2. www.payscale.com PayScale's compensation and data platform gives you insights into how to invest in your people, so you can build and retain the right team
- 3. Camie Bailey Software Implementation Manager PayScale Speaker
- 4. www.payscale.com What are the benefits of having a comp plan? Fairness Communication Alignment
- 5. Pay Equity Can Make or Break Your Brand
- 6. www.payscale.com 37% have a compensation strategy. 39% are developing one. 56% have done a market study within the past year. 25% have done one less than 6 months ago. 80% have a pay structure in place. 30% use pay ranges for each position. 2019 PayScale Compensation Best Practices Report
- 7. www.payscale.com Elements of a Comp Plan Philosophy Strategy Guidelines (e.g. pay ranges) Policies Processes
- 8. www.payscale.com Lay the Ground Work
- 9. Get Buy-in From Executives
- 10. Develop a Clear Compensation Philosophy, Based on Your Company Values If you believe employees are your most valuable asset, pay fairly If you have a fast-paced organization, examine pay frequently If you value open communication, prove it If you give your managers autonomy, support them
- 11. Start getting your jobs in order Job descriptions need to clearly list the essential functions of the role (the key compensable factors).
- 12. www.payscale.com 2. Define a Compensation Strategy
- 13. www.payscale.com Where do you compete for talent? Step 1.1: Define your target candidate profile Step 1.2: Define your talent market(s): • Industry • Org size/stage • Org type • Location
- 14. www.payscale.com How competitive do you want to be? What do you want to reward?
- 15. www.payscale.com 3. Select Market Data Source(s)
- 16. www.payscale.com Types of Salary Data •Free data •Crowd-sourced data (paid subscriptions) •Company-sourced data •Employer-sourced surveys provided by consulting firms
- 17. Crowdsourced Google Search & Original Research Free Salary Information Dynamic Survey Detailed Profiles PayScale crowd-sourced data collection methodology
- 18. Company-sourced data ✓ No Participation Required ✓ No Friction ✓ Quarterly Releases ✓ Smart Geography Differentials Automatically matched and quarterly refreshed data aggregated from PayScale customers.
- 20. How do you know which data sources are right for you? Breadth Precision Age Ease of Use
- 21. 4. Set Pay Guidelines
- 22. Creating Pay Ranges: Key Steps 1. Determine the range mid-point 2. Determine the width of the salary range 3. Create guidelines for each compensation scenario
- 23. Step 1: Determine the range midpoint Key tip: do not take market data at face value. Key considerations: 1. How critical is this role to your organization? 2. What’s your organizational profile and company stage? 3. What can you afford? 4. How much would you like to spend on base pay versus other parts of the rewards mix?
- 24. www.payscale.com 25th 50th 75th $49,907 $63,927 11.2% 12.1% $48,900 $56,205 $63,500 MidMin Max 15% 15% Spectrum of Market Data Based on Your Market Strategy $56,205 Pay Range Built Around Your Target Percentile Building a pay range Key tip: When benchmarking, look at essential function and key skills for the role, not job title. Use selected market target as midpoint of pay range
- 25. Step 2: Determine the Width of a Range Range Spread (or Range Width) = (Range Max – Range Min)/ Range Min
- 26. Step 3: Create Guidelines for Each Scenario Account for different situations, including • Where new employees enter ranges • How & how quickly current employees move within range • What happens when an employee is promoted • How much discretion managers have to move someone through the range.
- 27. Use Metrics to Stay Consistent
- 28. www.payscale.com 5. Implement the Plan
- 29. Define the Implementation Plan 3 key components • Compare incumbent pay to new ranges • How will you handle green-circled and red-circled employees? • Make plan for gaining executive support & approval • Decide how transparent to be with employees about new ranges
- 30. www.payscale.com Decide how transparent you want to be with employees
- 31. Develop Policies and Processes Review your pay ranges on an annual basis Keep an eye on your key jobs: • Newer jobs • Technology jobs • Mission-critical jobs for your organization Consider adjusting the range if it deviates >5% from the market
- 32. Checklist Processes • Add or evaluating a job • Market study • Budget • Increase cycle • New hire process (pay) • Promotion process Policies • Increases • New hire • Promotion • Outliers • Eligibility
- 33. www.payscale.com Key take-aways • A comp plan helps ensure fair pay, alignment and facilitates honest conversations about pay between employees and managers • Start by creating a compensation philosophy based on values • Understand competitive you need to be • Create a range for each position based on market data & internal factors • Develop policies and processes to ensure adherence to plan • Communicate your comp plan with employees to build trust