7 steps to a market-based compensation program
March 8, 2018
By Jason Rowe, courtesy of SBAM Approved Partner ASE
In today’s society, the right talent is hard to find. When searching for the best candidate for a complex position, compensation is key to attracting the level of talent you need. Having a market-based compensation program is one way to ensure that a company remains competitive. The following seven steps will provide an overview for creating such a program within an organization.
1. Develop a compensation philosophy
As an employer, it is vital for compensation objectives to align with business objectives. If an organization does not consider business objectives when determining compensation, employees may be incentivized to act in ways that do not allow the organization to reach its goals.
2. Review job descriptions
Accurate descriptions for positions within an organization will better serve the company when market pricing for the role.
3. Find suitable data sources
It is very important to find a source that fits well with your organization. A source that works for one company may not be a good fit for another.
4. Market price benchmark positions
Job descriptions need to be compared to the survey sources that have been selected as the best fit for an organization. This will allow for accurate identification of the market price for positions within the company.
5. Develop a compensation structure
Both the lowest and the highest paid positions should be used as anchors for the bottom and top grades of a structure. Art meets science here, and the number of grades and range spreads may vary in order to create a structure that meets an organization’s needs.
6. External versus internal equity
Positions with similar value to a company should be located in similar grades. In certain cases, internal equity does not align with the market data. In this instance, a compromise must be made to ensure that current and future employees are paid appropriately. Non-benchmark positions should be slotted into grades with positions of similar worth to the organization.
7. Communicate effectively
Organizations today are more willing to talk about what has been historically thought of as the “black box of compensation.” However, serious thought and consideration needs to be given when deciding what/how much information will be shared with the company. Things to consider: If too little is shared, employees may not trust the system and buy-in from them will not exist. If too much information is shared, there may be feelings of discontent when employees discover compensation details about their colleagues.
The steps above will help to form a solid foundation for an organization, allowing it to reach its full potential. Compensation is key for a happy workplace.
Benchmark Data – ASE conducts yearly local and national benchmark surveys to get the most accurate overview of current compensation levels, benefits, policies, and more.
Compensation Consulting – ASE can work with you to develop a compensation program that will help your organization attract and retain the right people. Whatever unique considerations your organization may have, our expert resources are here to guide you in the right direction.