Compensation: Creating an Equitable and Market-driven Pay System YWCA –USA National Capacity Building Institute February 2014 Alice Conner, M.S., SPHR HR Consultant alice.conner@cox.net alice.conner@cox.net

Today’s Objectives Compensation Philosophy Legal Considerations Sources of market data Setting a fair and equitable pay structure Job evaluation methods Strategies for market adjustments and other pay increases Benefits as part of total compensation alice.conner@cox.net

alice.conner@cox.net

What People Earn http://parade.condenast.com/210590/parade/what-people-earn-2013/ alice.conner@cox.net

Compensation Strategy and Philosophy Value of pay Market competitiveness Benefits’ Package Pay as a motivator alice.conner@cox.net

Compensation Philosophy and Strategy Market Adjustments Skill Differentials Internal Promotions Capping Pay at the Max Acting/ Interim Roles Supervisory Authority Demotions Geographic Differentials Academic Degrees

Legal Considerations Exempt classifications Overtime pay for non-exempt Independent Contractor vs. Employee IRS sanctions for excessive executive pay Compliance with collective bargaining agreement alice.conner@cox.net

Job Descriptions: The Basis for Determining Fair and Market-driven Pay Job descriptions should include: Essential functions Core competencies Education Experience level Supervisory responsibility Level of independent judgment alice.conner@cox.net

Job Descriptions’ Link to Pay Compensable factors include: Scope of responsibility Knowledge (education and experience) Problem-solving Financial management responsibility Internal and external relationships For “hybrid” jobs, estimate % of time spent in each functional area (i.e.—Facilities and Executive Assistant) alice.conner@cox.net

Market Analysis Techniques Use third party survey data, not individual employers Mean vs. median Use job summaries, not just job titles Match 80% of essential functions “Age” the data to a common date Determine local, regional or national data for each job alice.conner@cox.net

Reasons for Job Evaluation Objective analysis of the job’s worth to the organization Ensures internal equity Assists in determining pay grades Rational basis for negotiating pay rates in collective bargaining Identifies a ladder of progression for employees Complies with Equal Pay Act and Fair Pay Act (2009) Develops a base for merit or pay for performance increases alice.conner@cox.net

Comparing Unlike Jobs Compensable Factor Child Care Provider Director of Advocacy Scope of responsibility Clearly defined procedures Faces critical, complex challenges Problem Solving Solves routine, recurring problems Knowledge H.S. diploma B.A./B.S. plus 4 years management experience Fiscal Responsibility Conserves costs, attentive to revenue Develops and administers dept. budget Relationships External clients Board, donors, elected officials alice.conner@cox.net

Method A: Establishing a range Use the market median as the mid-point of the pay range for each position Build a 30% spread on either side of the median for non-exempt; 40% for exempt, 50-60% for senior management Example of an exempt pay range: 34,000-----42,500----51,000 Minimum-----Mid-point---Maximum alice.conner@cox.net

Method B: Establishing a Range Establish a range for the most entry level non-exempt position and then build each subsequent ranges using a 10-12% differential between ranges. Example: Min. Mid Max N-1 Receptionist 10.20 12.00 13.80 N-2 Child Care Asst. 11.42 13.44 15.46 N-3 Admin. Asst. 12.79 15.05 17.31 N-4 Payroll Clerk 14.32 16.86 19.38 alice.conner@cox.net

Placement in the range Calculate “compa-ratio” (each position compared to the mid-point) Use clear criteria to determine appropriate placement in new range Length of service Performance documentation Performance rating by supervisor Current placement in range Combination Recommend capping salaries at maximum of range alice.conner@cox.net

Salary Increase Methods General Cost of Living Market adjustment within range Merit or performance based Skill-based differentials Productivity based Lump sum bonus alice.conner@cox.net

2014 Compensation Forecast: Partially Cloudy with an 90% Chance of Raises Retention is a primary concern of most employers 3.1% budgeted for pay increases 2.1% projected for salary structure increases Sources: 2013-14 World at Work Salary Budget Survey 2013 PayScale Compensation Best Practices

Benefits as a recruitment/retention tool Benefits typically cost 30% of payroll Recommend annual benefits statements 401k or 403b plan designs Paid time off plans Cost analysis of benefits

Salary and wage data sources ERI (www.economicresearchinstitute.com) Bureau of Labor Statistics (www.bls.gov) Business and Legal Reports (www.blr.com) Medical Group Management Association (www.mgma.org) Kenexa CompAnalyst www.salary.com Local surveys produced by universities, United Way, non-profit associations, human resource associations, professional associations Towers Watson data available at World at Work (WAW) library, Scottsdale, AZ Mercer… Data available at WAW library alice.conner@cox.net

Resources and References External compensation consultants World at Work coursework Society of Human Resource Management (SHRM) www.dol.gov (FLSA exempt classifications) Solving the Compensation Puzzle by Sharon Koss alice.conner@cox.net

Questions? Comments! Suggestions Thank you, YWCA! alice.conner@cox.net