Compensation Deborah Marsh November 2006

Total Rewards Total Rewards definition Total Rewards definition Why Total Rewards? Why Total Rewards? Elements of Total Rewards Elements of Total Rewards Compensation Compensation Benefits Benefits Work Environment Work Environment Total Rewards Strategy Total Rewards Strategy

FLSA Law impacting compensation more than any other law Law impacting compensation more than any other law Enacted in the 30’s Enacted in the 30’s Major components Major components Child labor restrictions Child labor restrictions Minimum wage Minimum wage Overtime provisions Overtime provisions

Elements of Compensation Fixed pay Fixed pay Variable Pay Variable Pay

Determining Base Pay Build Job Worth Hierarchy Build Job Worth Hierarchy Job analysis Job analysis Job documentation Job documentation Job evaluation Job evaluation Job worth hierarchy Job worth hierarchy Base pay structure Base pay structure

Determining Base Pay Job analysis Job analysis Document work methods and processes Document work methods and processes Training Training Performance Appraisal Performance Appraisal Qualifications Qualifications Legal compliance Legal compliance

Determining Base Pay Job documentation Job documentation Job analysis questionnaires Job analysis questionnaires Job families (leveling) Job families (leveling) Job descriptions Job descriptions Nature of work Nature of work Level of work Level of work Job specifications (what is required for competent performance) Job specifications (what is required for competent performance)

Determining Base Pay Job Evaluation Job Evaluation Ranking Ranking Classification Classification Point factor Point factor Market pricing Market pricing

Determining Base Pay Market Pricing Market Pricing Most common Most common Collect market data Collect market data Going rate Going rate Pay trends Pay trends Competitive pay practices Competitive pay practices Benchmark jobs Benchmark jobs 50-60% of jobs should be benchmarked 50-60% of jobs should be benchmarked 70-80% similar content for match 70-80% similar content for match

Determining Base Pay Job Worth Hierarchy Job Worth Hierarchy Based on job evaluation method Based on job evaluation method Perceived value of jobs in relationship to each other Perceived value of jobs in relationship to each other Determines jobs to be group together Determines jobs to be group together Determines internal equity Determines internal equity

Example Job Worth Hierarchy PositionMarket Director of HR$100,000 Accountant$ 85,000 Marketing Analyst$ 75,000 Payroll Clerk$ 40,000 Receptionist$ 25,000

Base Pay Structure Includes policies Includes policies Tied to philosophy Tied to philosophy Hire rates, promotion, demotion Hire rates, promotion, demotion Pay range Pay range Minimum, midpoint, maximum Minimum, midpoint, maximum Often multiple Often multiple

Example Base Pay Structure GradeMinMidMax 10$ $ $ $

Types of Base Pay Salary Salary Weekly Weekly Monthly Monthly Biweekly Biweekly Hourly Hourly Piece Rate Piece Rate

Base Pay Adjustments Merit Merit Skill based Skill based Step rate Step rate Lump Sum Lump Sum Cost of living Cost of living Adjustments Adjustments

Base Pay Adjustments Differentials Differentials Shift Shift Weekend/holiday Weekend/holiday Ex-patriate Ex-patriate Geographic Geographic

Variable Pay Pay at risk Pay at risk Commissions Commissions Bonuses Bonuses Annual Annual Spot Spot Profit sharing Profit sharing Equity Equity Options Options Stock grants Stock grants Restricted stock Restricted stock

Putting it all Together Evaluate programs: Evaluate programs: Are they achieving the objectives you wanted them to? Are they achieving the objectives you wanted them to? Are the elements balanced for maximum impact? Are the elements balanced for maximum impact? Are they in alignment with HR strategy? Are they in alignment with HR strategy? Attract Attract Retain Retain Motivate Motivate