Ten years ago I completed my certification in Compensation Management, about the time the Great Recession hit. This was bad timing on my part. Employers didn’t do much with compensation for years. Although the recession officially ended in 2012, employees didn’t see their salary increase for many years. This is certainly not the case today! Salaries are now on the rise. Employees want raises. Employers are once again paying attention to salaries because turnover rates have increased. Employee turnover across industries is now at 19.3% (Report by Compdata).
Want to review salaries in your organization? Contact me and see if they are competitive.
The reasons why employees leave their jobs are multi-faceted. However, the opportunity to earn more is a clear trigger for employees who are dissatisfied with their job or their boss! One of the ways to combat turnover is to ensure that pay in your organization is both externally competitive and internally equitable.
Competitive Pay – Starting Salaries and Salary Management
In the past year, I have done more compensation work for clients than ever before. Competitive pay requires having starting salaries at levels where prospective employees will pay attention to your organization.
Starting salaries require a balancing act. Although money is not everything, it’s a “tool” candidates use to select their list of “players.”. However, there are a couple of watch-outs:
- Pay too high a starting salary and you have no room left for increases after a year of strong performance. In other words, you pay a premium for a new hire and you cannot afford to provide pay increases.
- Consider your internal equity. How much are other employees earning? Can you justify salary differences with the new hire? If your exisiting employees earn less than the new hire for comparable work, you will surely bring resentment and trigger resignations!
How to Manage Salaries
In my experience, few small and mid-size employers do compensation planning. This means pay is all over the place! At a time when competition for employees is high, having solid pay practices is a competitive advantage. It starts with creating salary ranges.
Focus on key positions or the primary “job families” that support your business. Gather compensation data from reliable sources. Salary survey companies and professional associations are good place to look for pay data. The level of compensation is heavily influenced by location, scope of job duties and breadth of responsibilities. Consider the details of the position descriptions. Job titles alone don’t guarantee a good match.
Once you have found reliable data, you will be able to create salary bands and evaluate how each employee is situated in the range of compensation for their position.
Here are some of the questions to guide your salary analysis:
- Are we competitive in our industry? In our market?
- Are we paying top performers top dollar?
- Do we have employees overpaid (they are called “red circled” in compensation jargon)?
- Do we have employees who are paid less than their worth on the market?
No time to create your own salary ranges? No problem!
Contact me and let’s see if I might be able to work some compensation magic for you 😊
It’s not so difficult when you are guided by an experienced compensation professional!
