Surveying market pay & Compensation practices

2013

For most people, pay is a primary reason for working. Indeed, compensation is at the core of any employment exchange, and it serves as a defining characteristic of any employment relationship.The study focuses on critical points of compensation and incentives management.The fundamentals of a good incentive program include the elements of vision,potential, communication and motivation and can be realized if incentive promises are fulfilled by both employer and employee. The aim of the paper is to identify the most important attributes of compensation and incentives management.Research method is the analysis and synthesis of scientific literature, logical, comparative and graphic representation. On the base of analysis, authors of this paper present the model of incentive system for positive employee attitudes and behaviors. Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. Pay may be received directly in the form of cash or indirectly through benefits and services Programs that distribute compensation to employees can be designed in an unlimited number of ways, and a single employer typically uses more than one program.Frequently, incentive programs do not go the distance because they were weak from the start. The development of an effective incentive and compensation program is rooted in a companys vision for the future and the role of key employees will play in those expectations.

Market pay is a wage and salary rate paid for a specific job that is determined by analysis of the competitive job market and an alignment of internal equity. Survey conducted with other employers in the same labor market to determine pay levels for specific job categories. Generally wage and salary surveys are conducted in the surrounding community or metropolitan area for the purposes of comparability. Just as skill, effort, responsibility, and working conditions have been used to differentiate rates of pay among major job groupings, surveys have been used to determine a specific rate of pay for a particular incumbent / jobholder.

Market pay based on Identify and describe benchmark jobs Benchmark job is a job that is commonly found and is used to make pay comparisons. Identify, survey and collect relevant labor market data on identified benchmark job. Develop a Market Policy Position (MPP) for each grade using regression analysis

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Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required. Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.We will discuss about the surveying market pay and compensation practices in thigs term paper. Compensation is based on market research about the worth of similar jobs in the marketplace, employee contributions and accomplishments, the availability of employees with like skills in the marketplace, the desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and the profitability of the company or the funds available in a non-profit or public sector setting, and thus, the ability of an employer to pay market-rate compensation.

Compensation also includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and checks, and sales commission. Compensation can also include nonmonetary perks such as a company-paid car, stock options in certain instances, company-paid housing, and other non-monetary, but taxable, income items.

In the surveys first section, which queried about organizational compensation philosophy and goals,91% of the survey respondents reported that their organizations have a compensation philosophy. About 62% said their compensation philosophy is physically documented ,29% reported theirs is not written. The majority of organizations (almost 63%) reported that about half or more of their professional and managerial employees do not understand the organizations compensation philosophy. The vast majority of organizations (81%) reported having a base salary target between the 40th and 60th percentiles compared to the relevant labor market. Surprisingly, 72% reported believing that they are actually paying between the 40th and 60th percentiles. In terms of total annual cash compensation, 56% reported targeting between the 40th and 60th percentiles, and 55% reported actually paying at the 40th to 60th percentile.

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Surveying market pay & Compensation practices

2013

Data from the surveys first section revealed that 91% of surveyed organizations have a compensation philosophy, but only about a third (34%) believe that most employees understand it. Clearly,the creation of an organizational philosophy about compensation even having it written does not mean that it is widely communicated, let alone understood. By definition, only 20% of organizations can pay between the 40th and 60th percentiles, yet 72% believe they are in that range for base salary. Further, 55% believe they are in that range for total annual cash. Valuing WorkMost organizations (97%) have some job descriptions, but 33% admitted that many of their descriptions are out of date. Ninety six percent of organizations use some form of job evaluation; the two most common methodologies are point factor (27%) and whole job comparison (23%). When there are conflicts between job evaluation and market data results, an even 38% of respondents give priority to job evaluation over market pricing and 38% give priority to market pricing over job evaluation.Eleven percent determine job grade based on job evaluation and the salary range on market and only 6% change grades based to match market pricing. The HR department alone is typically accountable for assigning jobs to salary grades. In 28% of responding organizations,HR and line employees collaborate on assigning jobs to salary grades. Review of job evaluations is typically done (60% of the time) in reaction to requests from line managers. Only 18% of respondents reported a program of proactive job evaluation reviews.Fifty-three percent of the respondents believe that more than 60% of their jobs can be directly matched in the job market.Sixty percent of organizations report a belief that at least 80% of their jobs are in the right salary ranges or grades.The data indicate that the notion of job evaluation is very much alive and well in organizations today, contrary to some comments in contemporary literature. For the vast majority of organizations, overall job value is based on a combination of internal value (job evaluation) and external value (market pricing). Despite this combination of efforts to value jobs, approximately 40% of organizations report that a substantial percentage of jobs (more than 20%) are not in the appropriate salary range. This represents a significant cost to organizations because having jobs inappropriately valued will either increase compensation costs or increase unwanted turnover. Line management has not apparently taken a leadership role in assigning jobs to salary grades, as much of the compensation literature suggests. Performance Measurement and Linkage to Pay3|Page

Most organizations (80%) have performance appraisal processes resulting in a performance metric that is tied to a pay decision (66%). Only 2% of organizations report not having a performance assessment program. Pay increases are primarily determined by a combination of individual performance compared to job standards (68%), performance compared to objectives (50%), or the market value of the position (50%). Competency or skill acquisition impacts salary increases in 22% of organizations.Forty three percent of respondents report performance ratings in a bell-shaped distribution. Nearly half report performance ratings are skewed higher than a normal distribution.Top performers receive base salary increases that are two or more times as high as middle performers in 32% of organizations reporting. The majority of organizations (68%) reported variation of 1.5 times or less between top performers and middle performers. Most organizations try to maintain a fairly direct linkage between the performance management and compensation programs. A high percentage of organizations pay for achievement against objectives in the base salary program versus a bonus/incentive program, and there is a relatively small percentage of organizations paying in base salary for competencies or skill acquisition, which are strong indicators of long-term performance.The difference between increases for top performers and middle performers appears to be based on budget constraints and the desire to give most or all employees increases rather than on differences in contribution to the organization. Pay CommunicationsAs noted previously, 91% of respondents report having a written compensation philosophy, but most say that few managers or professional employees understand it.Only slightly more than half of the managerial and professional employees know their own salary range.Less than 25% of the respondents communicate base salary ranges for all pay grades or jobs.Only 13% of respondents reported providing a considerable level of detail when communicating the rationale for individual pay increases. Pay communications within organizations are very limited and respondents report that it is ineffective. Although the importance of communicating pay policies, practices and decisions has been emphasized a number of recent studies, pay communication is still apparently very limited in practice. Effectiveness of Specific Salary Policies and Practices Job analysis and job evaluation methodologies and processes are believed to be effective by 60% and 63% of respondents, respectively. According to respondents, the most effective job evaluation methodology is point factor evaluation, followed by functional job family modeling. Broad banding is viewed as the least effective methodology.Most respondents thought that their market pricing processes were effective or very effective (84%).Although aligning organization and individual performance goals is a core objective of most pay systems, only 44% of respondents rated their organizations as effective or very effective at achieving this goal.Approximately 33% of the respondents evaluated their managerial and professional salary policies and practices as not effective or marginally effective. Only
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Surveying market pay & Compensation practices

2013

5% evaluated their salary policies and practices as very effective.Respondents were asked to evaluate the effectiveness of specific aspects of their pay programs for managerial and professional employees 74% said that they were not effective or only marginally effective in communicating information about their pay system 68% said that they were not effective or only marginally effective in the information shared about pay.62% said that they were not effective or only marginally effective in using their pay programs to motivate employees25% said that they were not effective or only marginally effective in achieving internal equity21% said that they were not effective or only marginally effective in achieve external equity19% said that they were not effective or only marginally effective in their ability to attract and retain talent. According to these evaluations, the effectiveness of pay policies and practices varies greatly both across organizations and across different compensation program aspects within organizations. In most cases, there seems to be considerable opportunity for improvement, especially with respect to motivating employees, aligning pay to performance and communicating about compensation areas with the most opportunity to significantly leverage employee behavior.

Obtaining a Proper Job MatchIn moving from a manufacturing economy where jobs have been fairly well defined to a service economy where jobs have historically been poorly defined, and where jobs with similar titles have significantly different duties, accurate job matching becomes both more difficult and more important.

Collecting useful dataThe kinds of pay data collected incorrect and harmful to worthless to extremely usefull.For participants in a survey,providing pay data is often a time consuming futile assignment. Often, those who actually complete the pay survey questionnaires are some of the least experienced,lowest-paid members of the human resources/compensation or payroll departments and may not even understand the kinds of data being requested.Because a survey may clearly state the kinds of pay data desired,that does not mean that those responding to the survey will understand the instructions and provide the specific requested data. Essentially,collecting data means putting your design for collecting information into operation. Youve decided how youre going to get information whether by direct observation,interviews,surveys,experiments and testing,or other methods.Theres a bit more to collecting data.
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Recording and organizing data may take different forms, depending on the kind of information being collected.Collect data should relate to how planning to analyze are using it. Regardless of what method has been decided to use, recording should be done concurrent with data collection if possible,or soon afterwards,so that nothing gets lost and memory doesnt fade. Some of the things might do with the information has been collected includeGathering together information from all sources and observations Making photocopies of all recording forms, records, audio or video recordings, and any other collected materials, to guard against loss, accidental erasure, or other problems Entering narratives, numbers, and other information into a computer program, where they can be arranged and/or worked on in various ways Performing any mathematical or similar operations needed to get quantitative information ready for analysis. These might, for instance, include entering numerical observations into a chart, table, or spreadsheet, or figuring the mean (average), median (midpoint), and/or mode (most frequently occurring) of a set of numbers. Transcribing (making an exact, word-for-word text version of) the contents of audio or video recordings Coding data (translating data, particularly qualitative data that isnt expressed in numbers, into a form that allows it to be processed by a specific software program or subjected to statistical analysis)

Organizing data in ways that make them easier to work with. How they do this will depend on the research design and the evaluation questions.They might group observations by the dependent variable (indicator of success) they relate to,by individuals or groups of participants,by time,by activity, etc. They might also want to group observations in several different ways, so that you can study interactions among different variables. There are two kinds of variables in research. An independent variable (the intervention) is a condition implemented by the researcher or community to see if it will create change and improvement. This could be a program, method, system, or other action. A dependent variable is what may change as a result of the independent variable or intervention. A dependent variable could be a behavior, outcome, or other condition. A smoking cessation program, for example, is an independent variable that may change group members smoking behavior, the primary dependent variable.

Ensuring an acceptable sample of organizations & jobsA job description is a basic HR management tool that can help to increase individual and organizational effectiveness. The HR Council has developed job profiles for key positions in small organizations that are available for you to use and adapt for your own use.
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Surveying market pay & Compensation practices

2013

For each employee, a good job description helps the incumbent to understand: Their duties and responsibilities The relative importance of their duties How their position contributes to the mission, goals and objectives of the organization For the organization, good job descriptions contribute to organizational effectiveness by: Ensuring that the work carried out by staff is aligned with the organization's mission Helping management clearly identify the most appropriate employee for new duties and realigning work loads

Relating data to Organizational Pay Policies: Panal valuable inputsy surveys should be additional.Also,if significant demands are to be placed on pay survey data,the costs involved in acquiring valid and reliable data must be understood and accepted. Companies pay for compensation data because the benefits exceed the costs.The amount companies spend on surveys is just a fraction of a percent of their total payroll costs.For example,although a company with 5,000 employees may spend $12,000 on compensation surveys,its total payroll is probably at least $15 million in which case, their survey cost would be just eight one-hundredths of one percent of payroll. Companies that participate in surveys customarily receive a discount on the final report.Fees for compensation surveys range considerably depending on the scope of the survey Participants could pay as little as a few hundred dollars for a small regional survey or a few thousand dollars for a comprehensive,national survey.Perhaps the most expensive surveys are very specific regional surveys those that pinpoint a very particular segment of the recruiting marketplace.Regardless of the survey, non-participants typically pay more than participants. The process of collecting data and producing a salary survey takes careful planning and execution that requires economic investment, people resources and time.Some companies conduct surveys in house using their own staff and compensation experts.However, most companies contract a third party to collect the data and do the number crunching.The thirdparty approach provides a level of independence that most participants want.Some salary surveys are co-sponsored to attract more participants and to add credibility to the numbers. An experienced data provider in survey methods and statistical analysis is expected to put out high-quality, reliable, accurate data. Integrating market pay data with internally generated job worth data and pay structure design data.Just as the data requested may not be the data received, the designers and operators of a pay survey may have their own "hidden agenda".

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Recognizing the goals of pay survey data designers and implementersAlthough this text focuses on pay systems and recognizes the importance of pay in the physical, emotional, and intellectual well-being of employees, it is only one component of the reward system. Using Third-Party Data vs Performing A Survey Major considerations other than cost when selecting third-party surveys are the determination of the jobs or groups of jobs for which pay data is needed. The organizations by geographic location, product, revenue, and number of employees, from which the most useful and comparable data is obtainable. The use of the survey to identify trends in order to make pay structure adjustments.

Analyzing And Making Inferences Form Collected Pay DataA major goal of most pay surveys is to predict accurately the so-called market rate of pay. Typically, this market rate of pay is the median or average rate of pay for the jobs for which pay data have been collected. Recognizing Pay As One Component Of The Total Compensation Or Total Reward System Of The Organization Although this text focuses on pay systems and recognizes the importance of pay in the physical, emotional, and intellectual well-being of employees, it is only one component of the reward system.

Employers must be aware of how their reward system compares with others competing for workers in the same geographic areas and in the same industry or for those workers with specific knowledge and skills. But they may be making the comparison on only one part of the total rewards being provided. If the goal is to provide a sound basis for developing a pay structure that is competitive with external markets and in alignment with established pay policy criteria then an organization must to ensure that compensation data and information are as correct and valid as possible. The most effective response is a formalized market survey process.

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Surveying market pay & Compensation practices Hiring and retaining competent employees. Promoting worker productivity. Developing an adequate and acceptable pay structure. Recognizing pay trends in the marketplace. Defending pay practices In a court of law.

2013

Once a decision has been made to go forward with a survey the next step is to determine its scope Having determined internal requirements, the survey designer's next step is to decide where to look for the needed data. The next step is to identify organizations that hire from the specified labor markets. As a variety of organizations responding to a survey broadens, the need for different kinds of compensation data and for different statistical methods for analyzing these data increases. Those responsible for managing and conducting the survey should be experienced professionals who are familiar with and understand the process......Individuals capable of using the available tools and techniques to identify its fine differences.

Development, Implementation, and Analysis- Skills, talent, and equipment should be available Classification of Job or Occupation -Where is (are) the problem jobs and are they unique. Pay Structure -Multiple of single pay structures and are other organizations compatible. Identification of labor market What labor market and how complex Influence of competing organizations Selection of respondents

For preparing for the survey we have to find out who are the competing organizations, what do they look like, and does anyone dominate the labor market are required.Which organizations are the best to look to for information. Cooperation of respondent-Identify likely contacts and establish communication links which are required is given below9|Page

Kinds of data to be collected. Maintenance of confidentiality How will be the confidence of the participants

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Telephone -Useful for collecting data on a relatively small number of easily identified and quickly recognized jobs. Mailed Questionnaire -The most common technique for collecting formal survey data. Face-to-Face Interview-The best technique for collecting data is the completion of a questionnaire during a face-to-face interview. Conference-Conference is also a significant way.

After deciding for the techniques to be used for collecting survey daa,the next problem is to determine the best method for identifying benchmark jobs or classes of jobs or even occupations for which data are to be requested.They areJob MatchingHigher engagement levels correlate to higher stock value. When The talentsa person has are aligned with What the job calls for,they perform better and are happier at work. Instead of the stress of struggling to keep up, their energy flows into building momentum on the job and they enjoy an Productivity goes up and labor costs come down because you can get more performance requiring fewer staff.People who like their jobs take less sick leave and tend to show up on time because they want to come to work. This is in stark contrast to a workplace without job matching. People who arent job matched experience stress because they must struggle to meet the requirements of a position that isnt a good fit for their natural inclinations and talents. This is a source of conflict between them, the needs of the position and their coworkers. They are likely to respond to higher stress levels with higherabsenteeism. Instead of channeling a passion for their work into productivity, as job-matched employees do, their performance suffers. Class Matching : The identical procedures and problems used for job matching apply to matching classes of jobs because a class of jobs is nothing more than a grouping of comparable jobs.The surveys conducted by the Bureau Of Labour Statistics(BLS) are of the class matching nature. Occupational Survey Method:
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Surveying market pay & Compensation practices

2013

This method has been developed to overcome many of inadequacies and the weaknesses of the job or class comparison methods.Proponents of the occupational method credit it with the following advantagesIt does not require the respondent to match specific jobs. It is easier for the respondent to report objectives data It provides pay data on greater number of jobs It simplifies summariztio and an analysis of raw data. Job Evaluation Method: A set of compensable factors are identified as determining the worth of job evaluation method. Typically the compensable factors include the major categories of Skill Responsibilities Effort Working Conditions

These factors can then be further defined as Skill Physical Working Conditions Location Extremes in Environment Hazards Education Responsibilities Supervisory Mental Effort Experience Ability Fiscal

Job Evaluation MethodEach factor is then divided into levels or degrees which are then assigned points. Each job is rated using the job evaluation instrument. The points for each factor are summed to form a total point score for the job. Jobs are then grouped by total point score and assigned to wage/salary grades so that similarly rated jobs would be placed in the same wage/salary grade.

Advantages The value of the job is expressed in monetary terms.

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Can be applied to a wide range of jobs. Can be applied to newly created jobs.

Disadvantages The pay for each factor is based on judgments that are subjective. The standard used for determining the pay for each factor may have built-in biases that would affect certain groups of employees (females or minorities).

By using a job evaluation process in your business organization, you assess the relative content and value of positions and determine equitable, understandable and competitive compensation. Job content is evaluated based on work type, skills and knowledge required; value is evaluated based on each job's contribution to company goals. Three of the most commonly used methods of job evaluation, upon which other methods are based, can be customized to your company's specific needs. Broad Classification Method: Two major broad classification methods,the maturity curve and the frequency distribution.

Nearly all agencies,ad platforms and advertisers are now using audience targeting to serve digital display ads.More than nine out of 10 agencies and ad platforms said they used targeting,according to data platform exelates research from April 2013, and more than eight out of 10 advertisers said the same.But how they go about that audience targeting and what data they use to determine their audience is a varied proposition.The study found that third-party data was a key element for targeted digital ad campaigns. More than half of agencies surveyed used thirdparty data in their digital advertising efforts, and 39% of advertisers and ad platforms each said the same.

The compensation survey facilities an understamding of the competitive forces in the market The compensation data business is a custom study of what each individual job within a
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Surveying market pay & Compensation practices

2013

company should pay based on very specific, targeted market data. A large company could pay hundreds of thousands of dollars, or more, for this type of in-depth companywide analysis.This term paper discussed about statistical tools available for evaluating and validating collected information and provides compensation survey dta collection instrument.Possible the greatest value of this survey is that it informs the user of what is happening in the market place.

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