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Planning a competitive compensation plan that will attract and retain the desired quality of employees.
What it is: Compensation and analysis planning includes identifying the job requirements, skills, and capabilities desired in the target candidate, comparing the compensation offer with alternative employers in your company's competitive talent market, and comparing your compensation philosophy with the actual compensation measurement to determine whether you are meeting your compensation goals. This analysis may require you to make adjustments to your current compensation plan.
What it does: Having a competitive compensation plan that meets your philosophy of compensation will allow you to attract, retain, and incentivize high-quality employees.
How it is used: Compensation and analysis planning assures that you can attract, retain, and incentivize employees with the skill and quality your company seeks.
Where: Compensation planning is used everywhere. Even if you are a small fast food business, you need to attract and retain employees. If you pay too little, you risk not being able to hire employees or having high turnover when employees leave to find higher wages. If you pay too much, you may not be able to make enough profit at competitive food prices, or if you raise food prices to pay for the higher wages, you may lose business to competitive fast-food businesses. This same analogy is true for large corporations.
Why: To attract and retain quality employees and remain competitive in your marketplace, you need a compensation plan that will meet the company goals.
Where it shouldn't be used: Every business needs a compensation plan.
Any restrictions: You must meet all government regulations. Do not discriminate based on race, gender, national origin, etc.
Warnings: While it is illegal to collude with your competitors on how you will compensate employees in the future, it is not illegal to share what you have paid in the past. Many companies will share compensation data with a consortium that lists average pay to a group of competitors.
[Vdeo: HR Management: Compensation & Incentives]
Step 1: Plan ahead.
1. Get buy-in from company leadership.
2. Complete your job descriptions.
3. Develop your compensation philosophy.
Step 2: Perform salary benchmarking (good sources include Glassdoor, PayScale, and Hay and Associates).
1. Select sources of salary market data.
2. Choose positions to benchmark.
3. Age your data.
4. Weigh your data.
Step 3: Establish your pay grades and salary ranges.
1. Create pay grades.
2. Calculate the midpoint of each salary range.
3. Determine the salary range widths by position or grade.
4. Calculate the minimum and maximum of each salary range.
5. Set incentive plans in line with company goals (not included by PayScale, but very important).
6. Fit your compensation into your budget (not included by PayScale, but very important).
Step 4: Complete compensation analytics.
1. Analyze employee pay.
2. Choose who to green or red circle.
3. Be sure you meet all federal and state laws and regulations (not included by PayScale, but very important).
Step 5: Be consistent and schedule regular updates.
A PowerPoint that covers the compensation philosophy, the competitive benchmarking, the pay tables and levels, and the overall compensation and benefits plan.
This content is provided to you freely by Ensign College.
Access it online or download it at https://ensign.edtechbooks.org/projectbased_internships/compensation_analysis_and_planning.
