Compensation and Benefits
In traditional method, an organization has particular pay structure on daily basis known as salary administration, compensation administration or pay administration. It follows job analysis, job evaluation, job price, creating salary structure and evaluation results.
It is the traditional method to determine the value of jobs relative to each other in organization. It is conducted when a job is developed where their job duties change or as part job evaluation process. Compensable factors define and differentiate jobs from one another where it is used in job-evaluation method.
Ranking method needs evaluators to compare value of jobs to each other where evaluators are influenced by preconceptions about different positions or job duties where it has impact on jobs ranked. This method is implemented in complex organization with much position to compare unrelated jobs.
Classification method is used in organization for determining key benchmark position which is common for organizations in terms of size or industry.
Job pricing is the method to determine pay/salary based on job and their performance in the organization. It is compared based on relative industry and regional values and data analysis.
Organization uses salary survey to gather compensation and benefits data shows present trends in labor market. Through consulting firms and professional services vendors, salary surveys are performed. Surveys determine median or average compensation paid for employees in the organization. Data are collected from surveys are complied into aggregated format.
It determines labor cost and benefits program to attract, retain and motivate employees, it consists of different types of salary survey for an organization such as,
• Employee survey determines employee satisfaction, equity pay and labor requirements related to compensation and benefit offerings.
• Government Surveys is a statistical agency to distribute statistical data which is independent source compared with other survey methods
• Industry surveys explains about industry-specific salary survey across organization
• Commissioned surveys have a method to collect data which is used as informal process by HR professionals to exchange information in other organizations. It is used to build competitive salary structure stated as time-consuming process.
Salary Structure Development
Salary structure consists of specified number of salary grades with specified range of compensation where salary structure needs to be analyzed both internal and external labor market conditions through job-pricing. In pricing process, job description is compared with benchmark positions give market range. Based on data point, jobs are categorized in the survey which is included in the structure as describe in PHR. These job groups are similar to market levels gives base for determining number of job grades in the structure. Midpoint progression or difference between the midpoints of consecutive grades generally narrow for lower grades and increase for maximum grades.
Salary ranges between minimum and maximum pay for job grade where ranges can be stated in hourly basis, monthly of semi-monthly for salaried workers. In early-level grades, ranges could be based on assumption where it progress to higher job grades. In highest grades, it provides information about salary progression for longer periods of time.
Communicating the structure
Salary structure used to influence behavior where the manager encourages employees to achieve goals and objectives. Main goal for communication plan is to buy-in all levels in the organization.
Administering the compensation plan
Salary administration handbook are combined by manager throughout the organization which contains some information such as,
• Organization's compensation philosophy
• Roles played by HR, Line managers and executives in salary administration
• Information about pay increases
• Brief description about salary or wages for new hire
• Minimum placement are in entry-level employees where employees are new to the organization/below the standard
• Midpoint placement refers fully proficient employees.
• Maximum placement refers to employees highly valued by the organization basis such as technical skill level, company-specific experience and consistently outstanding level of performance
Wage compression is the term used for new employees hired for the pay greater than employee similar skills, education and experience. Based on organization's pay practice and line with market to minimize compression where salary adjusted for incumbent populations.
Compa-ratio calculation is uses to compare employee's base pay to mid-point of pay range. It is used for comparison of employees during promotion, merit increases and so on.
Base Salary ÷ Midpoint of Salary Range × 100
Increases to Base Pay
Salary increment differs based on organization condition and reason.
General Pay Increases is the pay provided to all employees without considering performance and market pressure. It is given in the situation where the organization has potential to raise the fund by non-union employer.
Seniority Pay Increases is gives based on timeline of the employee worked in the organization, which is common in unionized setting and salary would be increased by comparing seniority with performance.
Lump Sum Increases is based on performance bonus or part of annual pay. It have huge impact on wages and benefits which includes overtime, shift differentials, sick leave, vacation pay and holiday pay also increased.
Market-base increases are given where employers provides increment based on market levels.
Base pay increased for various reasons such as,
Cost-of-living adjustments are implemented in public-sector than private sector in order to continue compensation in a specific labor market based on market level.
Annual reviews are conducted once in a year to determine annual performance where merit program are compared with performance management systems in PHR.
Reviews are conducted during focal review for all employees at same time. Merit-based salary increase has some factors, such as
• Employee's position in salary range
• Tenure in position
• Skill set and performance compared to peer group
In PHR, promotions occurs when employees gets into new positions where their job roles and responsibilities varies with level of experience and skills.
Pay structure: Nontraditional
Competency-based compensation program focus on employee key factors where individual pay is increased. Competency profile states job descriptions consists of 10-12 key competencies where determines job requirements performed in higher level.
In PHR, Competency profiles consist of technical skills specific to individual jobs determined as value to organization which includes communication skills, teamwork or adaptability.
Competency-based compensation is to increase flexibility where employees attain greater levels of competence. Broad-banding is the term used to divide positions linked to specific pay ranges also includes variety of jobs. Broad-banding helps the organizations to become more even and facilitates lateral career movement.