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THE DATA TELLS A STORY

Determining the appropriate salary level is never as simple as we would like. The reason is that despite all the diligent work that goes into salary surveys, the resulting pay data for a given job is always a broad range.  So deciding what precisely to pay an individual takes good judgment that comes with experience.

The challenge in the interpretation of salary survey data is that it requires a combination of good analytics and common sense. The reality is that often a lot of work is required in order to analyze market pay and determine your pay point and pay range. This often involves analyzing several surveys and/or survey reports and considering other factors such as company strategy, payroll budget, and internal equity before landing on an appropriate salary.  As Compensation and HR professionals we have to be able to say, here is the data, here is how it is analyzed, and here are the judgments we made as experienced professionals.

The WageWatch PeerMark ™ report allows our survey participants to build their own competitive sets, select from a list of 300+ job titles, and quickly generate a market variance report for the participant’s local market.  For the more demanding and complex data needs, a WageWatch Consultant can build your custom reports for you that will meet your specific needs. We will work with you to define your report specifications, target market areas, competitive set and any other specifications.

WageWatch compensation consultants are your data partners on whom you can rely on to get the most comparable data from your market, with the expertise to know how and what data to extract from each market or sub-market in order to provide you with survey report(s) containing the best competitive results.  Custom reports solve many compensation problems.  For example you may run into a market area that is heavy with one or two competitors not allowing you to report any data or perhaps the survey market does not contain enough competitors of a similar size and scope that fits your organizational needs.  This is where our compensation consultants can assist having the experience needed to work around some of these challenges and capture your specific needs such as peer groups, industry focus or geographic cut.  This additional data analysis can enhance the overall story that you will have to present back to your executive team.   We can build multi-market competitive sets across multiple locations. These many be niche markets in highly competitive hyper segments or broad multi-city or state benchmarks for management companies entering new markets. Custom reports can also be powerful resources for developing union defense strategies, management and executive job pricing, pricing jobs in rural markets with few competitors, segmenting markets into micro markets, and blending markets into macro markets.

WageWatch compensation consultants can also help you with your analysis of the market data compared to your current salary ranges and incumbent salaries to update your current structure or in creating a whole new structure.  Perhaps you are looking at moving more toward performance-based pay.  We are prepared and experienced to be able to help you with a variety of compensation needs, for example,  analyzing the compensation impact of organizational changes with an internal equity and external competitiveness analysis. Our analysis is full service.  In addition to the compensation review, our consultants can help with FLSA classifications, hybrid jobs, writing job descriptions, mapping new organization charts, and crafting employee communications.

As the economy continues to improve, we expect to see more pressure put on salary budgets and merit increases in order to meet rising demand for talent. Our consultants can work with you to get the balance right on budgeted wage increases and their relationship with structure adjustments.  When wage increases and adjustments are made, often other potential concerns are uncovered such as wage compression and paying out of range. WageWatch consultants are here to offer comprehensive guidance on your structure maintenance and adjustment requirements.

WageWatch salary surveys provide data tools and report statistics for analysts of all experience levels. Please contact WageWatch if you need assistance with interpretation the statistics reported, help building custom reports, or have a need for our wide range of consulting services. For more information on our services and surveys please call WageWatch at 888-330-9243 or contact us online.

 

 

BEST PRACTICES FOR BONUS COMMUNICATION AND DELIVERY

The primary purpose of an annual incentive or bonus plan is to drive and reward behaviors that have an impact on the operating success of the company.  When designing your incentive plan you need to have a clear measurement system for what success is in your company and then make sure the measurements are meaningful to the employees who are doing the work.  For any incentive plan to be effective it needs to be meaningful and have clarity relating both to the plan provisions and to the results needed to earn and maximize an award and the award should be attainable.  Employees need to see a link between how their job performance affects results, and the award amount needs to be sufficient enough to motivate.

Generally, two to four performance metrics are included in a bonus plan design.  The metrics are primarily financial, though quantifiable business objectives can also be used. Corporate or business unit financial metrics are used to fund the incentive pool, and individual performance measures may also be used to determine final individual payouts.   Results that are measured can be quantitative and qualitative, such as customer service quality, the number of customers served, and the effectiveness of programs, etc. Often a balanced scorecard approach is used.

Employers should give careful attention not only to the design but also to the implementation and communication of incentive programs.  The most common pitfall when creating a bonus program is inadequate communication.  Bonus plan communications should be both clear and timely.  Make sure the plan is communicated prior to the beginning of the bonus period and this initial bonus communication should address the structure of the plan, decision-making criteria, fairness, measurability, and target.  Equally important are follow-up communications regarding the progress toward attainment of the goals that should happen at frequent and regular intervals throughout the bonus plan period.  You want your employees to have an on-going understanding of where they are and what they need to do to meet and/or exceed their bonus target.

When bonuses are paid or awarded, clear communications again are very important.  Managers should have individual meetings with each bonus plan recipient and clearly communicate the outcome for the incentive period.  Whatever the amount, be sure to let the recipient know that he/she is valued.  Be sure to discuss specific accomplishments and strengths that went into the bonus award.  If the employee was expecting more, be sure to emphasize the broader context of the company’s approach to bonuses.   Let each person know how the bonus was calculated.  No matter what the award is, the conversation regarding the award amount is an opportunity not only for clarity and understanding but to thank the individual for their hard work and to hopefully improve morale and motivate for future performance.

Employees want to know they are being fairly compensated for their work and their job performance.  Bonus plans that are meaningful to your employees and aligned with the bottom line of your company can help build moral and drive behaviors that are critical to the success of the company.

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, incentive 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.

JOINT EMPLOYER LIABILITY

The use of sub-contractors, temporary staffing, leased employees and independent contractors can provide employers with quick temporary staffing and reduce benefits and payroll costs. However, the employer client can be considered a joint employer with the leasing or temporary agency when they share certain key employment terms such as the ability to hire, fire or discipline the workers, affect their compensation and benefits, and direct and supervise their performance.  When businesses use temporary agency, leased, or contract workers, though the employer is the temporary help, leasing, or contracting company, the client business may be regarded as a joint employer under some laws.

The Family and Medical Leave Act has specific language regarding joint employer relationships. While the leasing or temporary help agency is the primary employer, the client company may be required to place the worker in the same or comparable position upon his or her return from FMLA leave.  Additionally, leased and temporary workers will count as employees of the client company for the purposes of determining whether a business is subject to the FMLA regulations.

In the Tax Equity and Fiscal Responsibility Act of 1982, leased and temporary workers are the client’s employees for the purposes of qualifying retirement plans and certain fringe benefits such as life insurance and cafeteria plans (does not apply to health insurance benefits), if the workers have been engaged with the client company on a full-time basis for a minimum of one year and the client company primarily controls or directs their work.

An employer can face a charge of discrimination under Title VII anti-discrimination legislation brought by an individual who worked for the employer under one of these leasing or sub-contractor relationships.

It has also come into question with the National Labor Relations Board (NLRB) whether leased and temporary workers must be included in collective bargaining agreements that cover the client’s regular employees.

Some states have passed legislation on joint employer liability as it pertains to workers’ compensation regulation.  New York ruled that the client is the common law employer of leased employees and is therefore primarily responsible for providing workers’ compensation benefits. To date there have been no guidelines for joint employer status under OSHA or other health and safety regulations.

Employers need to be aware of and have guidelines regarding the degree of control they have over these temporary, leased and contract workers. The greater the degree of control, the greater the likelihood that the employer could be determined to be a joint employer.

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 FLSA OVERTIME REGULATIONS ARE IN TURMOIL

In September, 21 states sued the Department of Labor to block implementation of the FLSA overtime regulations slated to go into effect on December 1st of this year.  Separately, over 50 business groups challenged the DOL’s authority to establish a salary test for determining if an employee is or is not exempt from overtime. Those two cases were eventually consolidated.  On November 22nd, federal judge Amos Mazzant, a judge for the eastern district of Texas, appointed by President Barack Obama, entered a nationwide preliminary injunction to stop the implementation of the new overtime regulations. The new regulations would have increased the minimum salary for exempt “white collar” executive, administrative and professional employees from $455 per week to $913 per week, or $47,476 per year.

The Federal Court ruled that Congress intended the EAP exemption to apply to employees doing actual executive, administrative, and professional duties rather than an employee’s salary.  The Court concluded, that the new regulations, which raise the salary threshold significantly would have created “essentially a de facto salary-only test.”  The Court explained, “[t]he [DOL’s] role is to carry out Congress’s intent.  If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”

This past Thursday, December 1st, the DOL filed an appeal asking the Fifth Circuit Court of Appeals to overturn the preliminary injunction against its new overtime regulations. Since an appeal in the Fifth Circuit can take a year or more, many labor experts and attorneys expect there will be further legislative or administrative action once the Inauguration occurs and a new Secretary of Labor is in place and this likely will happen well before a final court ruling takes place.

However, many employers have already implemented changes, by either raising exempt employees’ salaries to meet the new threshold or reclassifying employees who are still earning less to nonexempt status.  Employers who have already implemented such changes, may want to leave decisions in place as It would be difficult to take back salary increases.  Employers may want to postpone reclassifications that have not yet been done to give the litigation a chance to play out.  And Employers may want to communicate that there may be future changes depending on Federal Court, Congressional, or Trump administration activities.  Employers shouldn’t assume that the overtime rule will be permanently barred and should have a plan to move forward if necessary in the future.

This said, here are a few possible future scenarios that could unfold:

  • A lame-duck Congress comes up with a compromise bill for President Obama’s signature (not likely);
  • President Elect Trump addresses this after his confirmation by abandoning the Obama administration’s defense of the final rule; and
  • The new administration may introduce legislation seeking a compromise, with a lower, or graduated salary threshold increase, and without the automatic escalator clause.

Regardless of what action the current administration or the new administration take, it is very likely we will see more activity at the state and local government levels. Unions are leading the effort for a $15 minimum wage at the state and local levels. They have had some success in California, Oregon, Washington and New York. As part of that effort, adding a doubling of salary for exempt employees is a logical extension of the unions’ efforts. Why? Because the minimum wage effort impacts exempt employees under FLSA. Exempt employees who are not paid for overtime may see their line employees earning more than they do.

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.

ALIGNING COMPENSATION WITH COMPANY CULTURE

Many organizations today are focusing on their company’s culture including determining their culture, deciding what it should be, aligning with strategic goals and transitioning to the desired culture.  Culture is important because it reinforces the values in the organization, which in turn shapes team members behavior.  There are many success stories of companies with cultures that are aligned to their business goals including Google, Zappos, and Patagonia.  These companies have not only developed a culture that supports their business, but have fully embraced their culture.

Organizational culture is the collective behavior of the people who are part of the organization and has important effects on the morale and motivation of the organizational members.  It includes the values, norms, systems, beliefs, attitudes and habits of the organization and affects the interactions of the employees with each other, and with customers.  Even before you define it, you know it is there and that it has an impact on your business. This is why it is so important to internalize the culture and understanding when company activities are in sync or not with the culture.

Once the company values and desired culture are defined, compensation can support and help drive the values and corporate culture.  It is important that the role of compensation in an organization and the compensation strategy are also defined.  For example, where does the organization want to set pay levels in comparison to the competitive market?  Perhaps the organization’s culture is strong on training and developing its employees, acknowledging their successes and offering advancement opportunities. This in turn may allow the organization to set lower pay levels than what is paid in the market.  Of course, when recruiting it is important to align the compensation strategy to support the values of the culture through highlighting performance management, performance appraisals and the goal setting process for each team member.

Once values, business objectives and desired behaviors are determined then compensation plans can be put in place to support the culture.  For example, if the business objective is innovation and the desired behavior is risk-taking, then short term incentives may be the compensation strategy.  If the goal is for a highly trained workforce and the behavior is learning and upgrading skills, then skill or competency based pay may be the compensation strategy.

Corporate culture is about people’s behaviors – how goals are accomplished – so to establish a culture that drives company success, organizations should link a significant component of their compensation systems to behaviors.

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 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 .

MERIT BUDGET ALLOCATION

A primary goal of any compensation program is to motivate employees to perform at their best. Most organizations have pay for performance at least in the form of a merit pay system. An accurate, reliable and credible performance-appraisal program that is aligned with company goals, core values and industry best practices is the foundation of a successful merit pay program. Performance measures should be tailored specifically for the organization and its jobs with clear outcomes that minimize bias and misinterpretation. Consistency, manager training, effective communications and a periodic review are also essential for success.

The merit pay budget has two aspects to it: 1) determining the size of the budget and 2) allocating the budget to organizational units and its employees. Determining the size of the budget will be based on competitive trends, the organization’s financial situation and other factors that may impact pay such as minimum wage and cost of living changes. For the past several years merit budgets have been small and therefore it has been a challenge to adequately reward top performers as well as those that are rated ‘Good’ and ‘Average’. Employees with performance ratings of ‘Good’ and ‘Average’ can be the largest percentage of employees and therefore the backbone of the workforce. These employees should not be overlooked but raises for these employees often do not keep up with the cost of living. Also the differentials between performance levels may not be large enough to motivate and retain employees. These factors reduce the motivational potential of the merit pay program.

Using a merit increase matrix may help to maintain internal equity but may not properly reward top performers. You want your reviewing managers to be engaged in the merit award process and to give appropriate thought and consideration to their pay decisions. A certain amount of guidance and training is needed but the merit matrix can be too structured and rigid as well as make it too easy for reviewing managers to simply follow the formula rather than spend the time and effort for a thorough review. Greater rewards for top performers and greater deviation of awards between good and average performers can be accomplished by providing zero increases to employees whose performance falls below average. Providing broad increase guidelines in lieu of a matrix to your reviewing managers using factors such as performance rating, time in position, and position in salary range can eliminate the rigidity of the merit matrix and drive a more thoughtful approach to the merit award process. Once tentative award amounts are determined, reviewing managers should perform an analysis of the awards looking at the whole department and at each individual award using these and other factors as well as any unique or special circumstances.

Annual pay increases not only help keep employees’ pay at market, providing awards that are accurately linked to performance are important in retaining employees, especially your best ones. Compensation frequently emerges as a driver of retention, and when pay increases aren’t provided regularly and fairly, it will negatively impact job satisfaction.

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 and that your pay practices are fair, equitable and non-discriminatory. We can provide your business with compensation surveys and salary reports to help you establish a budget for your merit pay program, including bonuses and incentives. Our innovative company is a leader in the collection of data for surveys and salary reports, which allows us to provide services to a wide range of industries in both the private and public sector. To learn more about our compensation surveys, salary reports and other services, please call 480-237-6130 or contact us online.

WELCOMING IN THE NEW YEAR

The New Year has already sprung, and it looks like 2016 will be another record employment year for leisure and hospitality industries. The Accommodations Sector of the BLS reports 20 straight months of record employment levels for hotels across the country. The Food Services Sector has had 54 straight months of record employment growth. Finally, the Healthcare and Social Assistance sector employment has grown every month this century increasing from 12.7 million employees in January 2000 to over 18.8 million as of November 2015.

What we at WageWatch have been watching and speaking with our lodging and healthcare customers about for the past year are the increasing competition for employees at all levels of the service industries. We have identified 22 job positions that hotel management companies and healthcare systems are in direct competition for hiring employees. We will be adding these crossover jobs to our wage surveys this year so that the two industries will be able to compare wages for these 22 job positions. This should be a great help to HR Managers around te4h country.

This week, we will also be surveying the gaming and lodging sectors for their budgeted wage increases for 2016. Our Forecast of Wages for 2016 reports will issued the end of January. Our survey last January for 2015 budgeted wage increases resulted in a forecast of 3.4% on average for hotels and slightly less for gaming properties.  Based on our PeerMark™ wage survey of over 5,100 properties last year, our forecast was accurate.

We anticipate that by the middle of this year that the Department of Labor will issue its new rules on overtime. Nationally, it is estimated that over 5,000,000 middle level managers across all industries who are now exempt under the EAP (or so-called “white collar” exemption), but would fall under the proposed 40th percentile of earnings for full-time salaried workers ($50,440 in 2016 dollars). WageWatch analyzed the impact on the lodging sector last July and estimated 190,000 exempt salaried employees would be affected by the rule change.

Finally, with the record employment and added pressure on wages and salaries this year, Wagewatch should another very busy year assisting its customers with their wage and salary analytics. In 2015 the WageWatch Consulting Team successfully completed numerous compensation and human resource projects for many of our Hotel Industry Customers.  Our consulting assignments included individual hotels and resorts, large national independent hotel companies as well as large hotel brand management companies. We assisted clients with benchmarking for their hotels, creating salary ranges and salary programs for both hourly and management employees. We also partnered with clients this year to manage projects working with their hotel human resource representatives on the proper execution of their wage policies.

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 and that your pay practices are fair, equitable and non-discriminatory. We can provide your business with compensation surveys and salary reports to help you establish a budget for your merit pay program, including bonuses and incentives. Our innovative company is a leader in the collection of data for surveys and salary reports, which allows us to provide services to a wide range of industries in both the private and public sector. To learn more about our compensation surveys, salary reports and other services, please call 480-237-6130 or contact us online.

THE IMPORTANCES OF METRICS FOR HUMAN CAPITAL (Resources)

In a research report entitled, The State of Human Capital 2012, ( Report ) prepared by The Conference Board and McKinsey & Company, they concluded that the one word that describes the state of the Human Capital Department in most companies today is “paralysis”. What they meant by that was there were too many factors to manage including a changing workforce, too much uncertainty, too many risks and too little support. One area that was identified as a key success factor for the future was developing stronger workforce analytics and metrics. While HC professionals agree that metrics are critical to their future success and importance to the executive suite, overall metrics utilization by the HC departments is considered to be lagging when compared to other departments within their organization.

HC metrics are a vital way to quantify the cost and the impact of employee programs and HC processes and measure the success or failure of HR initiatives. The use of metrics on the labor force can have a positive impact on profit.  Metrics can quantify the dollar impact that HR processes and actions have on business goals.  The ability to illustrate trends and impacts with numbers is a very effective way for HC professionals to influence and get the support of managers and executives.  Metrics can highlight inefficiencies, reduce expenses, and drive improvements and financial results. 

Critical to the success and value of HC metrics is that they are accepted by colleagues and executives.  Contrary to popular belief, more often than not, the metrics don’t require a degree in mathematics or complex formulas.  Not every metric idea will succeed.  Many workplace metrics seem like great ideas, until you actually put them on paper and find they tell you little or nothing of value.  Careful selection of what is measured places the focus on business goals and lets everybody know what is important. Make sure you know what you want to measure, how you will measure it and how the results will be used for improvement.   The basic goal of any HC metric is to provide managers with information that allows them to improve the measured item.  In order for metrics to be useful, first you need to ensure that the data is accurate and easily accessible. 

A basic but important HC metric is workforce productivity or employee return on investment (ROI) measured by dividing the total dollar amount spent on labor costs by total revenue, or revenue per employee (total revenue/the number of employees).  Ask executives to weigh in on the biggest workforce issue(s) and the resulting metrics. A best practice is to have a current or hot issue metric that needs executive attention. 

With the tightening labor market, turnover is returning as a hot issue. Turnover is a common HC measurement and is calculated by dividing the number of terminations by the average number of active employees during the same time period.  This simple measurement as it is applied and modified can be used for many HC metrics.  For example, using the basic turnover measurement: how many employees leave during their first year of employment – this may signal a problem with the recruiting process or with the on-boarding process; how many top performers are leaving – perhaps a problem with compensation or a lack of promotional opportunities; how many employees are leaving from each department – departments with high turnover may signal a problem with management. The cost to replace employees can then be applied to highlight the bottom-line cost of turnover.

Some other examples of HR metrics are:

  • Recruiting Process Metrics:
    • Number of overall days that “key positions” were vacant
    • Year over year comparison of average new hire performance appraisal scores
    • Manager satisfaction with new hires
    • Percent of diversity hires in managerial and senior positions
  • Compensation & Benefits Metrics
    • Survey employees on their perceptions of fair pay as compared to work expectations.
    • Percent of employees satisfied with their compensation
    • Percent of top performers that are paid above the average salary for their position
  • Employee relations  Metrics
    • Compare year over year results of % of employees that rate their manager poorly
    • Turnover % of low performing managers and employees within one year of receiving the low performance score
    • % of low performance rated employees that are on a performance improvement plan
    • % of employees that are all in any performance improvement plan that improve at least one level on performance appraisal ratings within 1 year
  • Training & Development Metrics
    • % of employees that report that they are satisfied with the learning and growth opportunities
    • % of employees that report that they are satisfied with on-the-job learning

As you decide on and develop your HC metrics, it is important that you have asked your executives for their input regarding factors that help the organization and departments run smoothly, satisfy customers and turn a profit.  And your metrics should provide information, and not just numbers. As you identify what’s important to your organization’s strategic success, the metrics that matter most should rise to the surface.  Your goal is not to inundate executives and managers with numbers, but to provide critical information that they can use in making decisions about business issues.

WageWatch offers accurate, up-to-date market surveys of pay practices, benefits, 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.

Budget Boot Camp

For many HR Directors, drafting the annual HR department budget comes with the understanding that future project costs will be hyper inflated with the expectation that the majority of it will be left on the cutting room floor leaving a shoe-string level of funding for critical projects. If this matches your experience, this week’s blog on budgeting fundamentals and best practices can help. What the C-suite is trying to do is systematically collect financial data from the department heads and then prioritizes the budget dollars based on the degree to which they support organizational objectives. Developing a budget is a process with two common methods.

  1. Incremental budgeting – the current budget as a starting point and a new budget is developed by making adjustments upwards or downwards to each item based upon expectations.
  2. Zero-based budgeting – every item included in the budget must be justified before being included; therefore, the process begins with a blank page.

Regardless of which method your company uses, the critical step in preparing to write the budget is understanding the company’s objectives and how HR will need to respond in support. This means not only talking with the C-suite but also the other department heads. Will the company opening a new warehouse or office?  When is the next new product scheduled to be brought to market? Is a new IT system rolling out? Are there any mergers or acquisitions planned? Entering any new markets?

 Providing market based salary and benefits data for current and new job classes is a key part of the budgeting process. From a human resource perspective, the answers to these objectives impact company labor in several ways:

  1. The number of full and part time employees needed next year;
  2. Number of temporary staff or contractors needed next year;
  3. Benefit cost increases due to changes in headcount, vendor fees, or policy;
  4. Projected turnover rate with associated recruitment and onboarding costs;
  5. New compensation and benefit plans offered; and
  6. Impact of new or changed laws such as minimum wage, worker’s compensation, or insurance.

Most HR budgets cover operating expenses, such as the items listed above. Your HR budget may also contain capital expenditures. The difference between these two types of budgets is that operating expenses are for goods and service that are consumed or used up during the budget period whereas a capital expenditure is for an asset or project with a useful life beyond that period. For example, criminal background checks for new hires are an operating expense and a new HR information system is a capital expense. It is important to identify capital costs because they may require special funding sources such as a bank loan or selling of other assets.

It is also important to determine which projects and services are recurring or non-recurring. A recurring cost would be payroll expense. A non-recurring cost would be employment attorney fees. Knowing which items are recurring will help after the fact in managing expenses and identifying budget variances.

The opening paragraph spoke to inflated budgets and deep cuts. Much of this occurs to areas considered discretionary and contingency spending. Wide budget variances, both positive and negative, often result due to inaccurate forecasting or misunderstanding of company goals. WageWatch salary survey data provides the most current industry market metrics needed to build your compensation and benefits budgets.

At WageWatch, our expert HR team provides businesses in a large range of industries with accurate and timely survey data, Our benefits surveys and salary reports ensure that salary and benefits plans are on par with those in the industry. For more information on market compensation data, please call WageWatch at 888-330-9243 or contact us online at (WageWatch.com).

Selecting the Right Salary Structure for Your Organization

Salary structures are the foundation for base pay administration.  The salary structure you determine for your organization will have an impact on your business operations, especially related to talent management and cost containment, so the selection of a compensation philosophy is an important one.

There are four main types of salary structures; traditional, market-based, broadband and step.  According to recent surveys, market-based salary structures are by far the most prevalent type of structure in use today, followed by traditional and next by broadband.

  • Traditional structures have numerous pay grades with small distance between each range.  It is a hierarchal system conducive to promotions between pay grades.  Typical range spreads 20% – 40%, midpoint progression 5% – 10%
  • Market-based structures are based on what other businesses in your industry and or region are paying for similar jobs.  Typical range spreads  30% – 80%, midpoint progression 10% – 15%
  • Broadband structures group several related jobs, such as the administrative staff. A pay range is assigned, to the job group rather than to a job title.  Typical range spreads 80% – 200% and no defined midpoints
  • Step structures use standard progression rates within a pay range for a job in which employees can progress based on seniority and performance.  Typical range spreads 20% – 40%, midpoint progressions of 5% to 10% with defined points (steps) within the ranges.

Other factors in developing a salary structure are job evaluations, management fit, training and communication.

You can also look into alternative structures that are based more on what the employee can do and less on what the job description is such as skill-based pay, competency pay and variable pay.

Before designing a pay structure, you need to consider competitive salary practices, the organizational culture and the organizations budget tolerance for pay levels.  Designs considerations for pay structure include the number of range levels, width of the ranges from minimum to maximum values (i.e., range spreads), midpoint differentials and the degree of overlap between adjacent ranges.  A strategic plan for employee compensation determines how much you want to pay employees and what type of employees you want to attract.  A total compensation plan includes pay scales, reward programs, benefits packages and company perks. A successful strategic compensation plan allows your business to compete in the market for the best employees in your industry.

As a company, it is important to analyze benefits survey data, compensation surveys and salary reports. Having this information at hand allows you to plan a budget, including competitive employee salaries and benefits, which will help you to hire and retain a happy, talented team. At WageWatch, our expert evaluators provide businesses in a large range of industries with accurate and beneficial benefits survey data, compensation surveys and salary reports to ensure that payment and benefits plans are on par with those in the industry. For more information on market compensation data, please call WageWatch at 888-330-9243 or contact us online at (WageWatch.com).