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  1. Compensation Deborah Marsh November 2006

  2. Total Rewards • Total Rewards definition • Why Total Rewards? • Elements of Total Rewards • Compensation • Benefits • Work Environment • Total Rewards Strategy

  3. FLSA • Law impacting compensation more than any other law • Enacted in the 30’s • Major components • Child labor restrictions • Minimum wage • Overtime provisions

  4. Elements of Compensation • Fixed pay • Variable Pay

  5. Determining Base Pay • Build Job Worth Hierarchy • Job analysis • Job documentation • Job evaluation • Job worth hierarchy • Base pay structure

  6. Determining Base Pay • Job analysis • Document work methods and processes • Training • Performance Appraisal • Qualifications • Legal compliance

  7. Determining Base Pay • Job documentation • Job analysis questionnaires • Job families (leveling) • Job descriptions • Nature of work • Level of work • Job specifications (what is required for competent performance)

  8. Determining Base Pay • Job Evaluation • Ranking • Classification • Point factor • Market pricing

  9. Determining Base Pay • Market Pricing • Most common • Collect market data • Going rate • Pay trends • Competitive pay practices • Benchmark jobs • 50-60% of jobs should be benchmarked • 70-80% similar content for match

  10. Determining Base Pay • Job Worth Hierarchy • Based on job evaluation method • Perceived value of jobs in relationship to each other • Determines jobs to be group together • Determines internal equity

  11. Example Job Worth Hierarchy Position Market Director of HR $100,000 Accountant $ 85,000 Marketing Analyst $ 75,000 Payroll Clerk $ 40,000 Receptionist $ 25,000

  12. Base Pay Structure • Includes policies • Tied to philosophy • Hire rates, promotion, demotion • Pay range • Minimum, midpoint, maximum • Often multiple

  13. Example Base Pay Structure Grade Min Mid Max 10 $48 63.6 78.2 9 $41.7 54.3 66.8 8 $37.1 47.3 57.5 . . 4 $27.8 32.7 37.5

  14. Types of Base Pay • Salary • Weekly • Monthly • Biweekly • Hourly • Piece Rate

  15. Base Pay Adjustments • Merit • Skill based • Step rate • Lump Sum • Cost of living • Adjustments

  16. Base Pay Adjustments • Differentials • Shift • Weekend/holiday • Ex-patriate • Geographic

  17. Variable Pay • Pay at risk • Commissions • Bonuses • Annual • Spot • Profit sharing • Equity • Options • Stock grants • Restricted stock

  18. Putting it all Together • Evaluate programs: • Are they achieving the objectives you wanted them to? • Are the elements balanced for maximum impact? • Are they in alignment with HR strategy? • Attract • Retain • Motivate