Salary Administration General First and foremost, fair and equitable salary administration is predicated on having accurate salary ranges that reflect the reality of the relevant outside labor market over a given period of time which is typically for a budget year. Without such salary ranges, effective administration of salaries is very difficult to attain.
Market-priced salary ranges from a reputable source that are appropriate for your exempt professional and management positions typically nationwide and non-exempt positions typically from the local geographic area are more preferable than those developed from a job evaluation system because of the direct link of the key positions to relevant outside salary data.
If your company advocates a pay-for-performance culture, there should be some formal or semi-formal performance review policy and practice in place which is designed to evaluate an employee's specific performance results, especially those at the top two or three levels of management. In any case, the evaluation of performance should be supported by some form of performance documentation.
In addition, making an appropriate salary increase recommendation should never be solely left up to the supervisor's verbal comments, while at least two and preferably three upward levels of management review should occur at all times. Almost every manager has a natural tendency to want to give his or her employees a pay increase at their regular review time interval unless performance is totally unsatisfactory.
When this is not possible, it is much better to give the employee their earned merit increase percentage at an elongated time interval than it is to give him or her a lower merit increase percentage at their regular review time interval. During difficult financial periods in which tight salary budgets exist, it is better to withhold pay increases or elongate the time interval between increases for the lesser performing employees in an effort use the available monies to reward your higher performing employees.
External and internal inequity situations are best corrected in the Salary Administration plan, though it may take a year or more to correct the entire problem. Specific 1. Since the division or business unit head will much prefer to spend the majority of the salary budget monies on the key positions and departments that are crucial to the upcoming business plan, HR can provide valuable departmental position-in-range data, similar to the following, to help achieve that end: The above data suggests that the Senior Software Developers and Software Developers are significantly below the market and should be given higher than normal salary increases to help correct the problem.
Bonus Administration General At a minimum, and consistent with the availability of budgeted bonus monies and the standard practice in the outside labor market, bonuses should be provided for appropriate technical, professional, management and executive employees.
Bonus monies should be placed into the financial budget for both spot bonuses that can be utilized as needed throughout the year and annual, end-of-year bonuses. Typically, spot bonuses are "triggered" by the achievement of certain important, specific performance results by an employee or team of employees, while annual bonuses are "triggered" by the achievement of certain specific division or business unit end-of-year financial objectives.
For management and executive personnel, salary and bonus amounts are considered together as "total cash compensation" when determining whether an employee's pay level is fair and equitable. There is usually a hierarchy of ascending "target" bonus levels for each bonus plan, which is expressed as a percent of salary for each plan participant, that increases by regular percentage intervals e.
Recommended bonus amounts should be reviewed and approved by all management levels, prior to the review by the CFO and CEO. Learn More. Follow Us. Colette Edwards. Distributing Rewards for the Distributed Workforce.
The use of salary surveys is critical to your ability to determine if your compensation and benefits are comparable to similar jobs in other organizations. It is important to ensure that the key responsibilities and goals of the jobs being compared are similar, as well as the sector the organization is aligned with. A number of organizations have tried to address quality of life concerns by only requiring full-time employees to work a hour week, while many other organizations require their employees to work Many ECEC employers depend on funding and therefore salary increases are tied to available funds.
Unfortunately, the ECEC sector in general pays below other occupations. There are a number of components that need to be addressed when developing your compensation systems to ensure they align with your organizational strategy and objectives. One key to remember is that your compensation strategy must help to create the work culture you want. How you structure your systems and manage the internal and external equity issues will directly inform the culture of your organization.
A compensation philosophy is developed to guide the design and complexity of your compensation programs. Understanding what balance you want to achieve between direct salary and indirect benefits is critical in developing your overall total compensation approach.
A consistent philosophy provides a strong foundation for both the organization and the employee. Without a philosophy, leaders often find themselves unsure of what to offer as a starting salary for a new employee.
This can lead to offering too high a total compensation package for a new employee in relation to existing employees, or being unable to successfully hire because the total compensation offer is too low to be competitive. Imortant: Your philosophy should be consistent with the size of your organization. If you have a small to mid-size employee base, keep your strategy simple and easy to administer. Ensuring your compensation guidelines are clearly communicated and consistently administered is a key to success.
Once you have developed the over-arching philosophy aligned with your strategic plan and organizational culture, it is important that you determine if any differences should exist in pay structures for management, professionals or front-line staff. Compensation systems must be consistent with the existing legislation in the areas of labour standards, equal pay, human rights, Employment Insurance, pension or retirement benefits, labour relations and occupational health and safety.
Issues may include, but are not limited to, wages, leave options, bonuses, advancement opportunities, termination pay and more. Auditing your compliance with legislation annually is time consuming yet critical to the sustainability of your organization. In this Section: Compensation defined Equity Organizational strategy Legal compliance Compensation defined Compensation can be defined as all of the rewards earned by employees in return for their labour.
This includes: Direct financial compensation , consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals. Sometimes these are built in to wage rates, and sometimes they are separate e. Indirect financial compensation , including all financial rewards that are not included in direct compensation and can be understood to form part of the social contract between the employer and employee, such as benefits, leaves, retirement plans, education and employee services.
Non-financial compensation , referring to topics such as career development and advancement opportunities, opportunities for recognition, and work environment and conditions. It can be defined in the following three ways: Workplace equity refers to the perception that all employees in an organization are being treated fairly.
External pay equity exists when employees in an organization perceive that they are being rewarded fairly in relation to those who perform similar jobs in other organizations. Internal pay equity exists when employees in an organization perceive that they are being rewarded fairly according to the relative value of their jobs within an organization.
When comparing base pay in a specific job, it is important to take into account any difference in hours. For example: While the difference in hours may seem small, a person who worked a This could seem inequitable unless the difference in hours was clear. Organizational strategy There are a number of components that need to be addressed when developing your compensation systems to ensure they align with your organizational strategy and objectives.
Develop a compensation philosophy A compensation philosophy is developed to guide the design and complexity of your compensation programs.
Components Once you have developed the over-arching philosophy aligned with your strategic plan and organizational culture, it is important that you determine if any differences should exist in pay structures for management, professionals or front-line staff.
We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop, and motivate their people. Our 7, colleagues serve clients in more than 50 countries. Skip to content. Not only must organisations pay Read More. Four steps to manage pay equity Put in place a robust approach to measure jobs and salaries to diagnose, understand and address salary variance in your workforce.
Be transparent about pay policies, trends and the changing demands of your workforce. This is not necessarily confined to your company — there may be a need for this on a national or international level, especially when it comes to training young people. Be realistic and plan for these changes.
Develop a compensation strategy that includes a risk management plan. Map out all the internal and external pressures that have historically affected salary levels, as well as those likely to in the future. And devise solutions to mitigate each risk when they occur. From skills shortages, to downturns, rogue business managers who recruit their own talent and ignore salary bands: Each eventuality can be planned for and tackled.
Develop people to move up the ladder, improve their wages and how skills are taught at work. This is particularly needed with young people. Our Best Companies for Leadership study shows the best companies develop these skills internally and promote from within , which is both cost effective and more reliable than going to the market.
This can take the form of placements in different areas to diversify skills. Print this article. Related Articles. Reward and Benefits. Leave a Comment Cancel reply Your email address will not be published. Comment Name Email Save my name, email, and website in this browser for the next time I comment. Receive regular updates Subscribe to our mailing list to receive regular updates on new content.
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