1. Creating a Salary Structure 101
Molly Hegeman, VP HR Services, CAI
For Jennifer Solomonson, TEA

2. Agenda Review market pricing concepts and theory.
Identify sources that can be used to gain competitive market pricing data.
Discuss the steps in the market pricing process.
Learn how to interpret market pricing data to develop comprehensive salary grades.

3. The Concept of Total Rewards and Compensation Philosophy

4. Total Rewards Model
WorldatWork Total Rewards Model

5. Elements of Compensation Program
Goals/Strategy
Legal
Equitable
Security
Competitive
Motivate
COMPENSATION

6. Compensation Philosophy Ask Yourself – What is Your Market Position?

7. Market Position
Lag - Match - Lead

8. Market Pricing

9. Market Pricing Market-based evaluation (Market Pricing)
Use of pay survey data to identify the relative worth or value of the job based on what other employers in the area are paying for similar jobs.
Market data is most often gathered through wage & salary surveys.

10. Market Pricing

11. Market Pricing Steps Analyze and document job content
Identify jobs (benchmark or all)
Identify and select relevant labor markets
Identify data collection options
Collect and analyze data for jobs
Develop a structure of midpoints (market or grade based)
Assign jobs to the structure
Slot non-benchmark jobs into the structure
Address any outliers

12. Market Pricing Sources
Best Sources/Most Reliable Data:
Government agencies (i.e., BLR)
Professional associations and consulting firms
Sponsored custom third party surveys
Additional Sources/Less Reliable Data:
Self reported data
Antidotal reporting/phone calls
Data from one or two competitors

13. Select appropriate measures
Using Survey Data
Select appropriate measures
Weighted Average/Mean
25th, 50th (median) and 75th percentile
Bonus??
Example: HR Manager 2015 NC Wage & Salary Survey

14. Using Survey Data Age all survey data to a common point in time
Determine effective date of each survey.
Determine if weighting will be used
A given survey may be a better match than others.
Compare results of multiple sources
Best practice – at least 3 different surveys.
Goal is to match 50% of all jobs.
70% or higher job duty match.

15. Market Average
NC W&S

16. Building a Salary Structure

17. Developing Salary Structure
Developing Pay Ranges
Review job evaluations
Sort jobs from least to greatest by market average
Look for natural breaks in the results
This is an art as opposed to science.
Develop preliminary ranges by using the natural breaks
Having developed these ranges will help you make edits after applying best practice.

18. Developing Salary Structure
Minimum
Market Rate/Midpoint
Maximum
The lowest salary that should be paid to a person who has the minimum qualifications necessary to perform the job.
The highest salary that should be paid to a person who is fully qualified for the job and is performing the job satisfactorily.
Generally appropriate for someone who has been in the job a longer time with no intent or opportunity to advance.
The equitable rate of pay for a person who is fully qualified to do the job and is performing the job satisfactorily. The job’s “going rate”/market rate.

19. Developing Salary Structure
Range Spread
Width of a pay range from minimum to maximum.
Tradition structure:
Service, Production and Clerical 20% to 40%
Professional and Supervisory 40% to 50%
Managerial and Executive 50% or wider
Modern structure
50% for all positions
Midpoint Progression
The percentage differential between midpoints
Typically %
Increases as you get into higher level jobs

20. Developing Pay Grades

21. Assign Jobs/People to Structure
Compa/Ratio
An individual or group salary expressed as a percentile (or decimal)
Market ratio should be .80 to 1.20
“At Market” is generally defined as .9 – 1.10

22. Identify Outliers Red-Circle Employee Green-Circle Employee
A salary/wage that is greater than the pay range maximum.
Best practice – Greater than 1.20 or 120%
Green-Circle Employee
A salary/wage that is less than the pay range minimum.
Best practice – Less than .80 or 80%

23. Maintaining Your Structure
Annual administrative maintenance of salary ranges
Market Movement – analyze actual and forecast merit movement
Review benchmark and high demand jobs, equity and competitive position
Salary Range Adjustment – company determination based on market movement and organizations budget
Merit Budget – what the company can afford, applied uniformly or focused on need

24. Questions? molly.hegeman@capital.org 919.713.5263