WageWatch Ibrief Blog

Login

Blog Archives

EFFECTIVE JOB DESCRIPTIONS

Job descriptions describe the major duties and responsibilities of a position or job and are an essential part of hiring and managing employees. They are tools to help your applicants and employees understand their roles and accountabilities. They can be used to establish a training checklist for new incumbents, as guideposts in the performance appraisal process, and as market benchmarks for compensation surveys. Job descriptions are not required by law, however, they can provide evidence of the essential functions of a job for purposes of complying with federal employment laws. They can also be used for disability and worker’s compensation claims. It’s good practice to get legal advice to ensure that your job descriptions are compliant. Below are some of the legal requirements to keep in mind while writing your job descriptions.

• Fair labor standards Act (FLSA): Exempt or Non-exempt classification should be included in all job descriptions.

• Occupational Safety and Health Act (OSHA) and the Americans with Disabilities Act (ADA): Working conditions and any required physical activity should be noted in all job descriptions.

• Equal Employment Opportunity: Include, “we are an equal opportunity employer” in all job descriptions.

• Age Discrimination in Employment Act (ADEA): Job descriptions should not indicate age preference.

The first steps in writing job descriptions are the data collection and job analysis processes which begin with questionnaires and/or interviews with both the supervisors and current employee incumbents to gather and determine the key facts about the job. You will need to collect information that will later be summarized in your job description template. Generally, the data will include Job Title, Immediate Supervisor, Department, Pay Grade, Working Hours, and Travel Requirements, FLSA Status, Mission/Summary, Essential and Non-Essential Tasks and Responsibilities, Supervisory Responsibility, Job Requirements (education, skills and experience required for the job), Working Conditions, Physical Demands, Equipment Usage, and Disclaimer for Management Ability to Modify.

A job description should be practical and summarize the key elements of a job in a clear, concise manner. Be specific and avoid using subjective adverbs or adjectives such as “frequently,” “some,” “occasional,” and “several.” It’s important to build flexibility into a job description and ensure that it is dynamic and functional. Flexible job descriptions will allow your employees to evolve within their positions as processes, technology, and organizational changes occur. A well-written job description will require an investment of time and effort to accurately reflect your organization and unique jobs.

The duties list should contain each essential job duty or responsibility that is critical to the successful performance of the job. The list should be prioritized with the most important listed first down to the least significant. Do not include tasks that comprise less than 5 percent of the overall time. Each Essential and Non-Essential Duty should be assigned a percentage of time and all duties together should total 100 percent. Each duty should be described in one to three sentences; the first sentence should begin with an action verb. Generally, there are one or two non-essential duties that total five to ten percent of the total time and are duties such as “Assist in special projects as required” or “Any other task assigned by the supervisor.” This provides flexibility to change duties over time and captures occasional and unforeseen needs that arise.

At WageWatch our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. WageWatch also offers accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

FAMILY MEDICAL LEAVE ACT (FMLA) AND JOINT EMPLOYMENT

Joint employment exists when an employee is employed by two or more employers who both benefit from the employee’s work and are sufficiently related or associated with each other. The analysis for determining joint employment under the FMLA is the same as under the FLSA.

Joint employment can exist when employers have the arrangement to share the employee’s services or when one employer acts in the interest of the other in relation to the employee. Joint employment is based largely on the degree of association between the employers and how they may jointly control the employee.

Factors key to determine joint employment include:
1. Do the employers have any overlapping management or share control over operations;
2. Is supervisory authority over the employee shared and/or do they share clients or customers?

According to the Department of Labor’s fact sheet, employees who are jointly employed by two employers must be counted by both employers in determining employer coverage and employee eligibility under the FMLA, regardless of whether the employee is maintained on one or both of the employers’ payrolls.

When joint employment is determined, one employer will be deemed primary and one will be secondary. The employee’s worksite which the employee is assigned and reports to is the primary employer. However, if the employee has physically worked for at least one year at a facility of a secondary employer, the employee’s worksite is that location.

Under the FMLA, the primary employer is responsible for following and administering the FMLA for the employee including 1) providing required notices, 2) providing FMLA leave, 3) maintaining group health insurance benefits during the leave, 4) restoring the employee to the same job or an equivalent job upon return from leave, and 5) keeping all records required by the FMLA with respect to primary employees.

The secondary employer, whether an FMLA-covered employer or not, is prohibited from interfering with a jointly employed employee’s exercise of or attempt to exercise his or her FMLA rights or from firing or discriminating against an employee for opposing a practice that is unlawful under the FMLA. The secondary employer is responsible in certain circumstances for restoring the employee to the same or an equivalent job upon return from FMLA leave and they must keep basic payroll and identify employee data.

WageWatch offers accurate, up-to-date HR metrics, benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes. Our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

HIRING STRATEGIES IN A TIGHT JOB MARKET

It is becoming increasingly challenging to recruit top talent due to the relatively low unemployment rate, the increase in job openings, and the lack of experienced candidates. These factors require that companies need to be more creative and aggressive in their hiring practices. In addition, there has also been an attitude change; it is much less of ‘who do I want’ and more of ‘who wants me’ attitude. Listed below are some tips that may help provide success in the search for new talent:

• Use multiple forms of social media: LinkedIn, Twitter, Facebook and be actively engaged. Connect to a related industry and review the posts and comments. If there is someone who stands out, you may have found a new employee

• Turn part-time positions into full-time positions

• Provide training opportunities for current employees to fill open positions

• Restructure work in ways that adapt to the new workforce; reduce education and other requirements

• Review the list of job skills and keep essential skills versus losing a perfect candidate

• Partner with a local community college and offer to speak with students; provide internship opportunities

• Participate in job fairs and get involved in the local community

• Speak at professional organizations and/or special interest meetings to meet potential candidates

• Offer incentives to current employees who refer new hires, post open positions for visibility to all employees

• Post for positions that you may have no intention of filling to gain a supply of candidates when a job becomes open

• Provide a sign-on bonus to new employees

• Ensure company website is mobile-friendly; a high percentage of searches are conducted using mobile devices

Another important factor is to understand the current perceptions of your company. It is much easier to keep current employees versus hiring new employees. It may be valuable to consider the following tactics to retain your current talent:

• Be more competitive in wages
• Provide employees stock ownership and/or stock options
• Offer training programs for current employees to enhance bench strength
• Provide a sense of organizational purpose and mission (valued by Millennials)
• Permit flexible work schedules and work at home opportunities (valued by Millennials)

During the interview process, it is more important than ever to ensure that the process is as quick as possible to not lose viable candidates; ensure ongoing communication throughout the process to demonstrate interest.

WageWatch offers accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes. Our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

LINKING PAY PRACTICES WITH BUSINESS OBJECTIVES

Compensation plays a critical role in organizations’ ongoing and increasingly challenging efforts to attract, retain, and motivate a talented workforce. Compensation design and management play a vital role in aligning employee behavior with business objectives. Human capital costs represent a significant part of most organizations’ cost bases and need to be spent as effectively as possible. It is vital to understand the consequences pay decisions can have on your organization.

Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are competitive externally and equitable internally. A well-designed salary structure allows management to reward performance and skills development while controlling overall base salary cost with a salary range cap. Market pricing is the most common method companies use to design base salary structure ranges using external market data combined with a focus on internal pay equity. The goal of market pricing is to keep the organization from 1) underpaying, resulting in losing talent to competitors, or being unable to attract the talent it needs and, 2) over-paying which wastes organizational resources and impedes desirable turnover. The secret to effective market pricing is the ability to spot and adequately analyze and level the data anomalies and imperfections using both science and experience.

Some organizations elect to pay lower than the market and offset lower than market wages with offers of ‘good’ benefits, meaningful work, and stability. This practice can lead to employee disengagement and organizations risk losing people. Also, the organization will likely attract people who couldn’t get ‘better’ jobs with higher pay. One of the key determinants of job satisfaction or dissatisfaction is how employees feel their pay package compares to others.

Pay-for-performance programs are used to award employees for desired behaviors and outcomes and they take many forms, including cash bonuses, company stock, and profit sharing. Pay-for-performance plans have a learning curve, and they require regular maintenance in order to be and remain effective. Incentive compensation plans need to align with the company’s business strategy, mission, goals, and objectives. They should address root causes of performance and the goals must reflect a balance of financial results and the key business drivers. Payout opportunities should be both consistent with the performance value and meaningful to employees.

While pay-for-performance plans provide a financial incentive to employees, there can be disadvantages. If not crafted carefully, they can cause employees to focus more on quantity over quality. They may impede teamwork if workers view helping another employee as wasting valuable time that could be spent on reaching their own goals. And just like base pay, incentive pay should be competitive with the market or it could fall short of motivating the employees.

Smart, successful organizations do the regular planning and evaluating of their compensation and performance rewards systems. Compensation is visible and important to employees. It is critical to have a solid and competitive pay strategy where pay decisions and policies match the objectives of the organization. At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to help you ensure that your compensation programs are supporting your company’s business strategy and objectives. WageWatch also offers accurate, up-to-date benefit surveys, salary surveys and pay practices data that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

INTERNAL PAY EQUITY COMPLIANCE

A company’s approach to internal pay equity is as important as the actual pay programs it implements. Many factors can impact internal pay equity such as internal increases remaining low while new hires demand salaries that exceed current tenured employees. Organizations should conduct periodic pay equity studies to keep on top of potential pay equity risks and ensure an understanding of the pay structure, as well as knowledge of and ability to explain pay differences among comparable employees.

When conducting your pay equity study, be aware of these five major federal laws that address equal pay:

1. The Equal Pay Act: equal pay for equal work among women and men.
2. Title VII of the Civil Rights Act prohibits discrimination on the basis of race, color, religion, sex or national origin in all employment terms and conditions, including pay
3. The Lilly Ledbetter Fair Pay Act clarifies that each paycheck containing discriminatory compensation is actionable under Title VII.
4. Executive Order 11246 prohibits federal contractors and subcontractors from discriminating in employment decisions, including compensation, on the basis of race, color, religion, sex or national origin, when contracts or subcontracts exceed $10,000.
5. The National Labor Relations Act (NLRA) protects the rights of most private-sector employees to join together, with or without a union, to improve their wages and working conditions.

Most companies keep a close eye on pay decisions, such as merit raises and starting pay and the processes that guide them. Unfortunately, tracking individual decisions might not be enough. The Ledbetter Act requires knowledge of past pay decisions that may have impacted a discrimination claim. Pay today equals the pay at hire plus all subsequent changes in pay. Comparing the current pay of employees who were dissimilar in the past means that more historical information may be needed to understand their pay differences.

Pay differences can be defended by differences in knowledge, skill, education, ability, effort or responsibility provided it is required to perform the job. Pay equity studies typically rely on the data that is available such as job title or grade, the length of time in a job, company seniority, performance ratings and increase percentages, geographic locations, education and prior job experience.

A pay equity study may involve the appropriate legal counsel, an experienced analyst as well as HR information systems and compensation specialists. Detailed analysis can point to employees who should be paid similarly but who are subject to large pay differences and will highlight additional factors that explain the difference or highlight inexplicable differences that merit adjustment. Conducting a well-designed and well-executed pay equity study using well-maintained and complete data is a good business practice that serves as an important tool in managing the risk associated with allegations of pay discrimination.

At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to help you ensure that your compensation programs are supporting your company’s business strategy and objectives. WageWatch also offers accurate, up-to-date benefit surveys, salary surveys and pay practices data that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

KEY OBJECTIVES OF A COMPENSATION PROGRAM

Compensation can be defined as a reward earned by employees in return for their time, skills, effort, and knowledge.  Compensation includes direct financial compensation, such as:
Wages
Bonus and commissions
Indirect financial compensation such as health and welfare, retirement and leave benefits
Non-financial compensation such as job training and development
Recognition and advancement opportunities

A large percentage of the company budget is compensation, and therefore, it is a key component of the overall strategic human resource management plan.

A compensation package can include more than salary and bonus.  It can include health and welfare benefits, retirement plan, leave benefits and various other benefits and perks.  Companies that offer a mix of salary and incentives have the highest employee morale and productivity.  It is most effective to pay incentives as soon after goals are met as feasible such as monthly or quarterly incentive payments, rather than annual.  A good incentive plan should be easily understood by employees with no more than two to four performance factors.  How you train, develop and manage your employees will also drive retention and performance.

When developing your compensation program, primary objectives to consider are:

To attract the best people for the job
Retain high performers and lower turnover
Reward performance on specific objectives by compensating desired behaviors
Motivate employees to perform their best
Improve morale, job satisfaction, and company loyalty
Align with overall company strategy, goals and philosophy
Achieve internal and external equity
Comply with all pay and non-discrimination regulations

While compensation is not the only thing that motivates people, compensation that is too low will demotivate employees.  Studies have found a direct correlation between top performing companies and employees that are satisfied with their pay and benefits package.  Competitive and appropriate pay can positively impact customer service.  Employees receiving fair and competitive compensation packages are generally happier with their jobs and are more motivated to perform at their peak.  Motivated employees can add to the bottom line of the organization and contribute to growth and expansion. Studies show that motivated employees take fewer sick days and have fewer disability claims.

While there are many objectives to a successful compensation program, two key objectives are ensuring internal equity and ensuring external competitiveness.  Salary Surveys provide the necessary market data to build competitive pay structures.  Good Salary Survey data provides you with the information needed to ensure your compensation package is competitive.  Salary Surveys are an invaluable tool for the setting right compensation strategy and for following and monitoring the desired pay market.  It is important that you select the right salary and benefits surveys and market data for your employees based on where you are competing for talent in your industry and outside your industry as well as geographic location.

WageWatch offers accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes.  Our experienced compensation consultants can assist with your organization’s compensation needs.  We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives.   For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

 

THE COMPENSATION MODEL

The compensation discipline seeks to maximize competitive advantage by attracting and retaining the most qualified workers to an employer.  Best practice in today’s workplace considers total compensation to include base salary, bonus or incentive plans, benefits, and non-cash compensation. A pay philosophy is a company’s commitment to how it values employees.

A consistent pay philosophy gives the company and the employee a frame of reference when discussing salary in a negotiation.  This usually requires a competitive well-rounded pay philosophy, including benefits and work life balance.  Compensation philosophies reap little reward without the knowledge and alignment to the organization’s overall business strategy.  Armed with the right information, compensation professionals can create a philosophy that will stimulate a more engaged workforce and lead to a higher-performing organization

A compensation system will price positions to market by using local, national and industry-specific survey data, will include survey data for more specialized positions and will address significant market differences due to geographical location.  The system will evaluate external equity to the competitive market and internal equity which is the relative worth of each job when comparing the required level of job competencies, formal training, experience, responsibility, and accountability of one job to another.  The system must be flexible enough to ensure that the company is able to recruit and retain a highly qualified workforce while providing the structure necessary to effectively manage the overall compensation program.

Organizations should establish and communicate clear pay policies. At a minimum, organizations need to ensure that their compensation policy adheres to employment legislation including:

Minimum wage

Overtime pay

Pay equity

Vacation pay

Holiday pay

Incentive pay

Tips and Gratuities

Pay method and pay frequency

Pay deductions

Payroll records tracking and reporting

Many organizations adopt transparency in compensation practices.  Transparency involves compensation plans that are simple to understand, easy to implement and published internally to all employees.  Many companies provide an annual Total Rewards Statement to each employee that outlines and explains all compensation elements included in their compensation package including cash and non-cash.

Bonus and incentive pay are tied to specific performance results against pre-set goals and objectives at the individual and organizational level. Results that are measured can be quantitative and qualitative. When establishing bonus schemes, organizations often apply a balanced scorecard approach: looking at financial, human resources and customer results.

A compensation model that encourages innovation should strike a balance between the risks and rewards associated with the work. Rewards programs can recognize innovation within all elements of a company and at all or the majority of employees.   When only the top 10% of high performers are eligible for recognition and associated rewards, approximately 70% of employees who fall in the middle of the performance bell curve and who are consistent performers day after day, can become discouraged and disengaged. The goal should be to properly calibrate your awards approach to reach far more employees with recognition rewards, thereby creating a culture of innovation.

Compensation is a part of the complex HR processes, policies, and procedures. Top management needs to decide, the primary role of compensation in the organization, whether it will be a supplementary role or a dominant role.  The compensation philosophy is the foundation for all organizational compensation decisions.

Maintaining a competitive advantage and being able to retain key employees is increasingly important.  At WageWatch our compensation consultants can assist with your organization’s compensation needs and help you ensure that your compensation programs are supporting your company’s business strategy and objectives.  WageWatch also offers accurate, up-to-date benefit surveys, salary surveys and pay practices data that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online .

WHEN TO EMPLOY SHORT-TERM AND LONG-TERM INCENTIVES

An employee compensation plan should provide a competitive wage and reward employees fairly and equitably for behaviors while accomplishing goals and objectives for the organization. Compensation is the reward an employee receives in return for his or her contribution to the organization.  Basic components of a compensation package include base salary, incentives, and benefits.

Organizations implement incentive plans to help reach overall goals and objectives.  Incentive plans range from variable pay plans to prizes and recognition awards.   Incentive plans can motivate employees to go beyond expectations and produce results that contribute to business success.  They also can attract new talent and encourage company loyalty.  For an incentive plan to be effective, the goals must be obtainable.

So how do you determine whether a short-term or long-term incentive is appropriate?  Short-term incentives are used to create the focus on short-term or immediate goals, and align rewards with individual and business performance.  Long-term incentives are typically designed for executives who make strategic decisions for the company.  They can ensure focus on what’s best for the organization’s future outcomes by placing importance on medium and/or long-term goals and creating a sense of ownership of those goals.  Successful incentive plans can also help organizations align rewards with shareholder interests, and help retain key talent.

Short-term incentives can be for all employee levels from entry level to middle management to the executive level and they can be big or small and can cover a week, month, quarter or year of performance measurements and goals.  Short term incentives can create a better work environment and motivate employees to work to their greatest potential.  Without short-term incentives, employees may feel that their work is unappreciated and morale can be low.  Short-term incentives align employees work with the overall success of the company and can clearly define an employee’s specific role in contributing to that success.  Short-term incentives such as prizes, free airline tickets or hotel stays, tickets to events or a paid day off can have high impact.  Short-term incentives can be individual and/or team based.  Rewarding employees for clearly defined goals can go a long way to creating happy employees who work well alone and together striving for success.

It is important to use both the short and the long-term initiatives to produce desired results. Incentive programs that are carefully and strategically crafted and aligned with company goals and timeframes should lead to more productive, motivated and loyal team members.  Retaining good employees saves organizations the expense of recruiting and training new workers.

At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to help you ensure that your compensation programs are supporting your company’s business strategy and objectives. WageWatch also offers accurate, up-to-date benefit surveys, salary surveys and pay practices data that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.

NEW GUIDANCE ISSUED ON FEDERAL ANTITRUST REGULATIONS

The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued joint guidance on Oct. 20, 2016, https://www.ftc.gov/system/files/documents/public_statements/992623/ftc-doj_hr_guidance_final_10-20-16.pdf, on how Antitrust Law applies to employee hiring practices and compensation decisions.  The guidance focuses on managers and human resource (HR) professionals who are normally responsible for regulatory compliance and can, therefore, implement safeguards.  In addition, the guidance announces a significant shift in the DOJ’s enforcement policies stating that the DOJ intends to proceed criminally against “naked wage-fixing and no-poaching agreements”.  The agencies underscored the fact that violators could be pursued both civilly and criminally. The new guidance makes it clear that DOJ and FTC will look suspiciously at employers sharing information regarding terms and conditions of employment — such as industry wage surveys.

As part of their guidance, the DOJ and FTC issued what they called Antitrust Red Flags for Employment Practices. The link to these nine Red Flags is https://www.ftc.gov/system/files/documents/public_statements/992623/ftc-doj_hr_red_flags.pdf. The list is a starting point for what they will be looking for and is not exhaustive of possible indications of antitrust violations. They note that if you notice these red flags or other suspicious behavior and believe that there may have been an antitrust violation, they encourage you to report it to the DOJ and FTC.

The DOJ and FTC caution employers about sharing compensation information with competitors. While not per se illegal (like wage-fixing and no-poaching agreements), the agencies note that such information-sharing such as salary and benefits surveys conducted by industry associations and trade groups could be suspicious.  The guidance directs HR professionals to avoid sharing competitively sensitive information with competitors.  Evidence of exchanges of wage information such as discussion of compensation levels or policies at industry meetings or events could be sufficient to establish an antitrust violation.  Exchanges are permissible in certain circumstances (i.e., it may be appropriate for a company to obtain competitively sensitive information in the course of M&A due diligence), but only if suitable precautions are taken.

Statement of Department of Justice and Federal Trade Commission Enforcement Policy on Provider Participation in Exchange of Prices and Costs, an issue in August 1996, remains as the primary guidance in the exchange of compensation information for employees that will not result in a challenge of an antitrust violation by the DOJ and FTC. From an antitrust perspective, firms that compete to hire or retain employees are competitors in the employment marketplace.  Managers, HR professionals, and employees with access to compensation information should not communicate the company’s policies to other companies competing to hire the same types of employees.

Not all information exchanges are illegal.  It is possible to design and carry out information exchanges in ways that conform to the antitrust laws.  For example, an information exchange may be lawful if:

  • A neutral third party manages the exchange;
  • The exchange involves information that is relatively old;
  • The information is aggregated to protect the identity of the underlying sources; and
  • Enough sources are aggregated to prevent competitors from linking particular data to an individual source.

WageWatch surveys are fully compliant with all antitrust guidelines including aggregating the results to protect the identity of the participants, ensuring that the age of the data is at least 90 days old, and ensuring that data results contain at least 5 participants.  At WageWatch, we offer accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including market compensation data, benefits survey data and salary reports, please call WageWatch at 888-330-9243 or contact us online.

PAY COMPRESSION: CAUSES AND SOLUTIONS

Pay compression is when either a subordinate’s base pay is very close to or more than their supervisor’s or when a less tenured employee is equal to or paid more than a senior employee in the same position.  One of the most common causes of pay compression is when pay increases for current employees are low, but new employees are paid a higher salary to attract them.  This problem becomes more severe in economic downturns when pay increases are limited but it occurs even in better economic times.  Pay compression is most evident in pay systems where lower level jobs, either through union contracts or other market forces, create a situation where first-line supervisors are paid less, on an hourly basis, than their subordinates.

When the job market is weak, many organizations hire people who had already done the same work for another organization, eliminating the need for training. Rather than hiring people with high potential and developing them for the long term, they have opted for people who can “hit the ground running,” regardless of their potential.

When salary compression and the policies that enable it are sustained over several years, it can be demoralizing and lead to widespread employee dissatisfaction. Employers should be concerned because salary compression can transform compensation from a motivator into a de-motivator.

Salary compression may be accompanied by pay inequities which could violate equal pay regulations. In situations where newer staff earn more than experienced staff, it could create a pay equity problem if the experienced staff are a protected class.

There are steps that can limit the detrimental effects of salary compression. For instance, when a new job opens, organizations should try to promote someone from within, rather than hiring from the outside. Many organizations have policies that limit how high within a range new hires can be paid.  When new hires are brought in at higher salaries or when across the board increases are given due to market movement or minimum wage increase, have a policy that requires internal equity analysis and adjustments.

Institute a policy of transparency and calibration across units.   Disparate actions between different organizational units can create salary compression and other inequities. Transparency can take the form of a simple scorecard showing the rates of increases and promotions in each unit. Calibration can involve managers sharing planned compensation actions with their peer managers. It can also include several levels of approval for any actions before they take place so that a senior leader can spot any actions that appear suspect and will cause inequities, including compression.  This tends to create a norm and, over time, leads to decisions that are more consistent and responsible.

Salary compression can be a serious problem that eventually causes an organization to lose some of its most talented employees. Although many organizations have unintentionally allowed salary compression to take root, there are actions they can take now and in the future to keep it from reoccurring.

At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to help you ensure that your compensation programs are supporting your company’s business strategy and objectives. WageWatch also offers accurate, up-to-date benefit surveys, salary surveys and pay practices data that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.