1. Compensation 101 A Primer for HR Professionals
CISHRP Conference Workshop
May 30, 2019

2. You…..
Name and role?
Organization you serve?
Pay issues?

3. Objectives Understand and Learn How to properly pay your staff
Components of Compensation
Fairness
How to build a pay structure

4. Definition of Compensation
Payment or reward in exchange for work.
All forms of financial returns, perquisites and benefits employees receive as part of an employment relationship.
It represents multiple transactions:
Economic (dollars)
Psychological (behaviour)
Sociological (status)
Political (power)
Ethical (fair play)
A tool used to drive employee behaviour

5. World at Work Total Rewards Model
- Strategies to attract, motivate and retain employees

6. Types of Pay Base Pay (Hourly/Salary)
Variable Pay (Performance Pay, Commissions)
Expatriate Compensation
Overtime
Stand By / Call In Pay
Short Term Incentive (Bonus)
Long Term Incentive
Types of Salary Ranges
Government
Steps
Private / NPO
Min – Mid - Max

7. The Importance of Fairness
Group Exercise
Let’s test your sense of fairness!
What is fairness?
Impartial and just treatment or behaviour without favouritism or discrimination.
Just and reasonable treatment in accordance with accepted rules or principles.
Is this fair?

8. The Importance of Fairness (2)
What is fairness?
“The more an employee will perceive a high level of internal equity (in comparison with other employees of the same department and/or the same company) and external equity (in comparison with individuals occupying a similar job in other organizations) in regard to issues such as compensation and benefits, performance evaluation, and promotions, the less s/he will intend to leave his/her current employer. It seems clear that the notion of equity, both internal and external, must be considered as a critical component of a corporate retention strategy.”
(Paré and Tremblay, Ecole des Hautes Etudes Commerciales, August 2000)
Is this fair?

9. Four Types of Equity Internal Equity Employee Equity Pay Equity
Job Analysis
Job Descriptions
Job Evaluation
Employee Equity
Seniority
Performance
Starting Salary
Pay Equity
Male / Female Comparisons
Equal Pay for Work of Equal Value
External Equity
Market Definitions
Surveys
Pay Policy Decision

10. Compensation Objectives
Internal Equity
External Competitiveness (Employer’s Viewpoint)
External Equity (Employee’s Viewpoint)
Ability to Pay (Employer’s Viewpoint)
Compliance with Laws
Administrative Efficiency

11. Elements of a Compensation Program
Job Evaluation
Ladder Chart
Salary Ranges
Market Surveys
Incentive Pay
Pay Structure
Salary Administration
The Pay Model

12. Building a Pay Structure
Job Analysis
Job Description
Job Evaluation / Classification
Ladder Chart
Internal Equity Assessment
External Equity Assessment
Pay Structure

13. Determining Job Worth - Job Descriptions
A written statement identifying key information about positions.
Uses: Job evaluation, recruitment, performance assessment, HR planning, training and development.
Must relate to the job, not the incumbent.
Should be written in plain language.
No relationship between length of JD and value of job.

14. Determining Job Worth - Job Evaluation
The process of determining the value of a job within an organization relative to all the other jobs in that organization.
A systematic procedure to determine the relative worth or value of a job.
Focuses on the job; not individual skill, ability or performance.
Objective is to establish a hierarchy of jobs in the organization.

15. Compensable Factors - Job Evaluation
Characteristics of a job that are important. Therefore, the organization is willing to pay for them.
Their presence gives the job its value.
Point Factor Method
Method used to evaluate jobs
Job evaluation system that assigns point values to a set of compensable factors
Job is evaluated on each factor and points are assigned

16. Compensable Factors (2)
Working Conditions
Physical working environment
Psychological working environment
Responsibility
Problem Solving Decision Making
Supervision Exercised
Impact
Effort
Physical
Mental
Sensory
Skill
Knowledge
Education
Experience
Interpersonal

17. When to Use Job Evaluation
When you’re building a new organization, or reorganizing
When there have been major changes to the job description of a position
When a new position is created
Before posting a job advertisement for a vacant position

18. When NOT to Use Job Evaluation
Give a valued employee a raise
Reward a good performer
Forestall a key person from leaving
Address the problem of an employee being at the top of the salary range

19. Ladder Chart

20. Internal Equity Assessment (Sample Scattergram)

21. Market Comparisons
Organization’s overall pay policy and competitive positioning.
Determine your relevant labour market:
Who do you compete with for labour?
Industry, region, job / function or company size.
Consider total compensation – base, cash and non-cash incentives, benefits, and perquisites.
Statistics (mean, median, percentile, quartile - Q2, Q3).

22. External Equity Assessment

23. Market Position
HR professionals have three basic options to determine their organization’s market position:
Match the market: i.e. positioning at the median or average, where half of your comparators pay less and half pay more.
Lag the market:
i.e. positioning at the 30th percentile, where 70% of your comparators pay better.
Lead the market: i.e. positioning at the 75th percentile where 75% of your comparators pay less

24. Pay Structure

25. Annual Salary Increases
Structure Movement
Progress Through the Range
Individual actual increases (budgeted)
COLA
Step Increase
Performance / Merit Pay

26. McConnell HR Consulting Inc.
Questions?
Tim McConnell
Managing Partner
McConnell HR Consulting Inc.