Transcript Position Review:

Market Based Pay
System
The Market Based Pay System
Project
Objective:
Wages and Salaries are a very large part of the business expense.
• Excessive costs jeopardize the business.
• Employees need to believe they are paid for their contribution.
Process Outline:
Part 1:
Job Descriptions
Part 2:
Market Data Collection
Part 3:
Market Data to Current Pay Analysis
Part 4:
Develop Pay Structure
Part 1: Job Descriptions
•
Without a Job Description, any pay plan is “rational”.
•
No Job Description? Then look at the process to develop them.
•
Job Descriptions identify the following:
•
•
•
•
Reason for the position
Key duties
Qualifications
Knowledge, skills, and abilities
Part 2: Market Data Collection
•
Published Market Data is obtained for the Job Description.
•
•
Generally at least two sources are used.
Data should represent same labor area, current time period.
Process…
Market Data Sheet
10 - Sales/Marketing Asst
Oregon
ERI Advertising Supervisor - Madison, 2 yr
ERI Web Developer - Madison, 2 yr
ERI Market Research Analyst - Madison, 4 yr
ERI Marketing Specialist - Madison, 4 yr
GMA SHRM 2007 Market Research Analyst, All respondents,
calculated)
GMA SHRM 2007 Web Developer 1, All respondents,
calculated)
GMA SHRM 2007 Advertising Manager, All respondents,
calculated)
Averages
Trachte,
Inc. Overall
Incumbent
Average
This position
has multiple
components,
as a result several
Number
of incumbents
different sets of market data are used.
Market Survey Base Compensation
25th
Percentile
$51.2
$53.3
$46.2
$42.0
Annual
Median
$56.0
$57.0
$49.7
$45.9
75th
Percentile
$62.3
$61.9
$54.2
$51.1
$43.3
$50.7
$56.0
$46.7
$54.2
$62.6
$56.0
$47.1
$58.0
$68.4
$52.2
$58.0
1
$96.4
$58.0
$58.0
Part 3: Market Data to Current Pay
Collect:
Market data presents a picture of the existing “job-worth hierarchy”.
Comparisons will determine whether the company is currently paying above or below
market for each job and allow calculation of projected costs to implement any proposed new
pay structure.
Process…
Market Data Sheet
Since there is one incumbent, the actual compensation 25th and
75th are same. Otherwise, these would be lowest and highest
reported compensation for the job.
Part 4: Develop Pay Structure
Pay structure has multiple pay or salary ranges. Each pay range has a minimum, maximum and
midpoint value. The difference between minimum and maximum is range spread.
Range spread does not have to be uniform throughout the pay structure. Typically positions
quickly mastered skills that are have narrower pay ranges than supervisory, managerial or
high level technical positions.
Job Grades should be designed to provide midpoints that reflect market rate and minimum and
maximums that are reasonably close to the minimum and maximum rates paid in the
market. Job (pay) grades are groups of jobs that have been determined to be
approximately equal in difficulty or importance.
Number of Job Grades typically ranges from 10 to 16. The grades can be established by number
of job evaluation points or by the points on a trend line that represents the midpoints of the
market averages.
Part 4: Develop Pay Structure
Job (Pay) Grades:
Cluster Create a scatter diagram from the set of compensation and market averages. Freehand
the groups that appear similar.
Equal Spread Using the same basic set of data, divide the x-axis into equal divisions based on
the number of grades to be used.
Midpoint Progression should be designed to provide midpoints that reflect market rate and
minimum and maximums that are reasonably close to the minimum and maximum rates
paid in the market.
Continuous typically ranges from 10 to 16. The grades can be established by number of job
evaluation points or by the points on a trend line that represents the midpoints of the market
averages.
Rate Ranges typically ranges from 10 to 16. The grades can be established by number of job
evaluation points or by the points on a trend line that represents the midpoints of the market
averages.
Part 4: Develop Pay Structure
Trachte, Inc.
Relationship between Current Job Grades and
Incumbents' Current Average Actual Pay
January, 2009
Cluster
$40.00
$35.00
Hourly Compensation
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
0
2
4
6
8
Job Grade
10
12
14
16
This structure does not require the grades be equal in width. It tends to be used with ranking or
slotting methods of job evaluation.
Incumbents' Actual Average
Lowest actual pay in job grade
Highest actual pay in job grade
18
Done…for now.
Part 4: Develop Pay Structure
Trachte, Inc.
Relationship between Current Job Grades and
Incumbents' Current Average Actual Pay
January, 2009
Equal Divisions
$40.00
$35.00
Hourly Compensation
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
0
2
4
6
8
Job Grade
10
12
14
16
This structure uses equal widths. The x-axis is job evaluation points.
Incumbents' Actual Average
Lowest actual pay in job grade
Highest actual pay in job grade
18
Part 4: Develop Pay Structure
Trend of midpoints for Schedule I
$250
Pay Mid Point ($000's)
$200
$150
$100
$50
$0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
-$50
Pay Grade
Mid Pts
Linear (Mid Pts)
This structure uses pay grades that are percentage increases of each grade (starting at 8% and
increasing to 20%) The trend line indicates a linear relationship. This structure perhaps should be
split into two structures.
Process…
Market Data Sheet
8 - Electrician 2
Oregon
Multiple
ERI Electrician Journeyman - Madison, 3 yr
Market Survey Base Compensation
25th
Percentile
$20.32
Averages
$20.32
$20.00
Average
This Trachte,
position Inc.
has Overall
multipleIncumbent
incumbents.
The minimum and
Number
of be
incumbents
maximum differ significantly. This situation
should
reviewed for incumbents mis-graded or perhaps otherwise misNote: 1) Incumbent actual average base reported in "median" columns above
classifed.
Hourly
Median
$22.28
75th
Percentile
$24.78
$22.28
$21.57
7
$24.78
$24.00
Process…
Market Data Sheet
Market Survey Base Compensation
Position Title
25th
Percentile
Annual
Median
75th
Percentile
Total Compensation
25th
Percentile
Annual
Median
Company
75th
Avg Base
Percentile Compensation
Loc
A/H
Director of Supply Chain Mgmnt
1
A
17
$85.3
$97.3
$112.7
$85.3
$97.3
$112.7
$78.0
Design Manager
1
A
16
$79.3
$87.2
$97.5
$79.3
$87.2
$97.5
$75.5
Accounting Manager
1
A
15
$61.3
$71.8
$85.6
$61.3
$71.8
$85.6
$62.0
Electrical Manager
1
A
14
$67.6
$75.1
$84.6
$67.6
$75.1
$84.6
$67.2
Sales/Marketing Asst
1
A
10
$47.1
$52.2
$58.0
$47.1
$52.2
$58.0
$58.0
Materials Manager
1
A
9
$37.0
$40.1
$44.1
$37.0
$40.1
$44.1
$38.6
Purchasing Manager
1
A
9
$39.7
$43.3
$47.8
$39.7
$43.3
$47.8
$38.5
Regional Sales Coordinator
1
A
4
$31.4
$34.0
$37.4
$31.4
$34.0
$37.4
$36.4
This is a report that compares market survey data with the company under evaluation.
Process…
Market Data Sheet
Market Survey Base Compensation
Position Title
25th
Percentile
Annual
Median
75th
Percentile
Company
Avg Base
Compensation
Loc
A/H
Director of Supply Chain Mgmnt
1
A
17
$85.3
$97.3
$112.7
$78.0
Design Manager
1
A
16
$79.3
$87.2
$97.5
$75.5
Accounting Manager
1
A
15
$61.3
$71.8
$85.6
$62.0
Electrical Manager
1
A
14
$67.6
$75.1
$84.6
$67.2
Sales/Marketing Asst
1
A
10
$47.1
$52.2
$58.0
$58.0
Materials Manager
1
A
9
$37.0
$40.1
$44.1
$38.6
Purchasing Manager
1
A
9
$39.7
$43.3
$47.8
$38.5
Regional Sales Coordinator
1
A
4
$31.4
$34.0
$37.4
$36.4
This table compares market compensation to company actual compensation. The existing “grade structure”
is shown.
Process…
Job title
Market Data Sheet
(A)
(B)
(A/C)
Current ($/Yr)
$000
Market ($/Yr)
$000
Comparatio
(B/C)
Market
Comparatio
(A/B)
Market
Index
(C)
Current
Grade
Min
($000)
Mid
($000)
Max
($000)
Director of Supply Chain Mgmnt
$78.0
$97.3
80.2%
100%
80%
17
$85.3
$97.3
$112.7
Design Manager
$75.5
$87.2
86.6%
100%
87%
16
$79.3
$87.2
$97.5
Accounting Manager
$62.0
$71.8
86.4%
100%
86%
15
$61.3
$71.8
$85.6
Electrical Manager
$67.2
$75.1
89.5%
100%
90%
14
$67.6
$75.1
$84.6
Sales/Marketing Asst
$58.0
$52.2
111.0%
100%
111%
10
$47.1
$52.2
$58.0
Materials Manager
$38.6
$40.1
96.2%
100%
96%
9
$37.0
$40.1
$44.1
Purchasing Manager
$38.5
$43.3
89.0%
100%
89%
9
$39.7
$43.3
$47.8
Regional Sales Coordinator
$36.4
$34.0
106.9%
100%
107%
4
$31.4
$34.0
$37.4
This table presents “Compa-ratio” that analyzes the expresses the relationship between base salary and the
midpoint.
Process…
Market Data Sheet
Proposed 2009 Ranges for EXEMPT Positions
(Market Median Suggested Rates - $000's)
Market Survey Base Compensation
Current Job
Grade
Proposed
Job Grade
Max
Spread (%)
Director of Supply Chain Mgmnt
17
17
$73.8
$96.0
$118.1
60%
$85.3
$97.3
$112.7
$78.0
Design Manager
16
16
$68.6
$89.2
$109.8
60%
$79.3
$87.2
$97.5
$75.5
Quality Assurance Manager
15
15
$63.4
$82.4
$101.4
60%
$70.9
$80.3
$87.9
$78.0
Electrical Manager
14
15
$63.4
$82.4
$101.4
60%
$67.6
$75.1
$84.6
$67.2
Accounting Manager
15
14
$60.5
$75.6
$90.8
50%
$61.3
$71.8
$85.6
$62.0
Electrical Operations Supervisor
(Oregon)
12
12
$49.7
$62.1
$74.5
50%
$52.8
$58.2
$65.2
Structural Production Superintendent
11
12
$49.7
$62.1
$74.5
50%
$55.8
$63.0
$70.8
$52.5
Sales/Marketing Asst
10
11
$44.3
$55.3
$66.4
50%
$47.1
$52.2
$58.0
$58.0
Materials Manager
9
10
$38.8
$48.5
$58.3
50%
$37.0
$40.1
$44.1
$38.6
Purchasing Manager
9
10
$38.8
$48.5
$58.3
50%
$39.7
$43.3
$47.8
$38.5
Regional Sales Coordinator
4
8
$28.0
$35.0
$42.0
50%
$31.4
$34.0
$37.4
$36.4
Min
25th
Percentile
Annual
Median
75th
Percentile
Company
Avg Base
Compensation
Annual
Midpoint
Position Title
This table now uses revised grades and computes new ratios. Revised grades are highlighted.
Process…
Market Data
Sheet
Company
Relationship between Current Job Grades and
Incumbents' Current Average Actual Pay
January, 2009
$40.00
$35.00
Hourly Compensation
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
0
2
4
6
8
Job Grade
10
12
14
16
18
This graph depicts the “first cut” for the relationship of actual compensation and
Actual Average is poor.
Lowest actual
pay in job grade
actual pay in job (job
grade description is
grades.Incumbents'
The relationship
Incumbents
may beHighest
misclassified
faulty), paid inconsistently, or placed in an incorrect grade.
Process…
Market Data Sheet
Company - EXEMPT
Proposed 2009 Job Grades and Pay Ranges (Midpoint = Market Median Suggested Rates)
January, 2009
($000's)
$140.0
Annual Compensation (000's)
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
8
9
10
11
12
13
Job Grade
14
15
16
17
This graph depicts a “second cut” for the relationship of actual compensation and
Proposed Midpoint
Range Minimum
Range Maximum
Current Compensation
grades
after an initial re-grading.
The relationship
is improved, but this schedule
Linear (Proposed Midpoint)
Linear (Range Minimum)
Linear (Range Maximum)
considers both exempt and non-exempt personnel.
18
Process…
Market Data Sheet
Company
Relationship between Incumbents' Current Average Actual Pay
and Market Median Rates
January, 2009
$50.00
$45.00
$40.00
Hourly Compensation
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
0
2
4
6
8
10
12
14
16
18
Job Grade
This graph depicts relationship of actual compensation,
market compensation, and
grades. The
relationship
is
not
good,
suggesting
that
the
grading
structureLinear
can(Market
be Median)
Average Actual)
Linear (Incumbents'
Market Median
Incumbents' Average Actual
improved.
Process…
Market Data Sheet
Company
Relationship between Incumbents' Actual Average Pay and
Proposed Ranges (All Employees)
January, 2009
$50.00
$45.00
$40.00
Hourly Compensation
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
0
2
4
6
8
10
Job Grade
12
14
16
This graph depicts a “second cut” for the relationship of actual compensation and
Incumbent'sre-grading.
Actual Average
Suggested
Lower Rangeis improved,
Suggested Upper
grades after an second
The
relationship
but Range
this schedule
considers both exempt and non-exempt personnel.
18
Process…
Market Data Sheet
Company
Relationship between Exempt Incumbents' Current Pay and
Proposed Ranges
January, 2009
$120.0
Annual Compensation (000's)
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
0
2
4
6
8
10
Job Grade
12
14
16
This graph depicts the results when only exempt employees are considered. The
Incumbent's Actual Average
Suggested Lower Range
Suggested Upper Range
relationship of actual compensation and grades.
18
Done…for now.
Done…for now.