Mykkah Herner, MA, CCPDirector of Professional Services

Jenni Marquez, CCPSr. Compensation Professionalwww.payscale.com

Compensation Budgeting Part I:

Managing Pay Inequities

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14,000 Positions 3000 Customers 11 Countries

250 Compensable Factors40 Million Salary Profiles

Compensation Budgeting

Part I: Managing Pay Inequities

Part II: Determining Increases

AgendaStart with a Plan

Identify Compensation Inequities

o Organizational Levelo Department Levelo Position Levelo Individual Level

Develop solutions

Next month: determining increases

Start with a (comp) plan

Comp Design ElementsPhilosophyHigh-level view on the aims of the organization with regard to compensation

Strategyo Define your talent market(s)

o Determine level of competitiveness

o What do you want to reward?

StructureMathematically sound way of aligning your positions to market and internally

PolicyEnsures that the comp plan is carried out

Get Reliable Market Data

Compensable factors for benchmarking jobs

Defining your competitive set

Accurate and current market data

Build Compensation StructureDefine Grades & Ranges

Assign Jobs to Grades

Test for Pay Inequities

Types of Pay Inequities

Plan Level

Department level

Position level

Employee level

Plan-wide Pay Inequities

• Pay Fairly to Market–Determine your target market percentile

• Budget

• Competitiveness and impact on retention/attraction

• Stay competitive relative to market–Annually, keep ranges current

Analyze Ranges to Market

Create a report: range midpoints, market values, and delta

Identify Solutions: Plan LevelPlan Level Options

Do nothing

Make small incremental

change

Update comp strategy

Adjust all ranges at once

Plan Level Costing

Increase plan

$ impact of green outliers

Former red outlier

eligibility for increase

Cross-Department Pay Inequities Target / Strategy

Determine appropriate target(s) by department

Build ranges around targets

Position-specific Pay Inequities

Market movement & critical positions

Listen to your employees

Identify Solutions: Position Level

Position Level Options

Keep position static

Move position to new

grade

Offer market premium

Position Level Costing

Cost to move to new

grade

Cost to market premium

Employee-specific Pay Inequities Pay according to your comp plan

Compression issues

Examine compa-ratio (.8-1.2)

Look at range outliers

Disparate Pay & EEO ConcernsCreate a Disparate Pay Report

o High disparity is a flag for litigation

o Low disparity may indicate not following your comp plan

Identify Solutions: Employee Level

Employee Level Options

Identify critical issues

Compression

Disparate pay

Green outliers

Employee Level Costing

$ for critical issues

$ for compression

$ for market adjustments

Identify options

Determine cost to remedy

Examine budget allowance

Consider multi-year strategy

How critical to resolve?

Develop multiple scenarios

Create communication plan

Identify Solutions

Communicate Pay InequitiesDevelop Budget Request

Ask for what the organization needs

Help the organization manage the budget once approved

Next MonthCalculating Increases to Base Pay

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Mykkah Herner, MA, CCPHead of Professional Services

Jenni Marquez, CCPSr. Compensation Professional

www.payscale.com