Companies have recently started toward the trend of pay transparency. The term can lead some to believe that workers will have a big number stamped to their forehead, but this isn't the case. Pay transparency generally means that pay ranges for specified positions are made public, and for the most part, these ranges are adheared to. Whether each individual is at the bottom or top of that range is left up to the employee to share.
The rise of sites like GlassDoor, where employees can freely, yet annonymously share salary information has forced companies to practice in the confines of open and fair compensation policies. Companies can no longer low-ball, and employees and candidates can gain a better understanding of what to expect.
Here are some key survey findings from the 2010 Culpepper Salary Range Structure Practices Survey:
- 72 percent of surveyed North American companies reported having formal base salary range structures.
- Most companies with formal base salary structures review their structures annually.
- 93 percent use compensation survey market data when designing salary structures.
- 82 percent use traditional salary structures, while 7 percent use broadband structures.
- 55 percent have multiple structures varying by job and/or geographic location.
- Salary range spreads and midpoint-to-midpoint differentials vary significantly by job level.
1) Evaluate Jobs to Create a Heirarchy
Each key postion that can be matched externally to a corresponding level should be placed in order. Research, online statistics or surveys will offer information about the compensation practices of other companies inside of your industry for each individual position. This information should be continually updated and it should take into account education level, years with the company and geographic location. These positions that are pretty universal throughout your given industry are given a place in a heirarchy.
2) Plug in Company Specific Positions
No two companies are exactly alike. You are bound to have several positions that don't have an established industry standard of placement. Additionally, differing titles between companies in the same industry can present a challenge in creating pay ranges based on external information. These such positions will then be placed into the heirarchy of positions as they compare to established positions. Things like workload, tenure, education level and location should all be considered when assigning these postions their given place in the heirarchy. A white paper from Kenexa states, “Building the salary structure is a process of identifying groups of jobs that cluster together by virtue of having similar values.”
3) Establish Broad Ranges
Once your heirarchy is fully established, you can create salary ranges tailored to your specific company. Let's say you have 20 spots in your position heirarchy, this shouldn't translate to 20 salary ranges. Successive positions within the heirarchy should often fall into the same pay range. For instance, the bottom level positions 1 and 2 (maybe even 3 and 4) could fall within the range of $25,000-$35,000. Wider ranges that cover more levels of the heirarchy ensure that every aspect of what the employee brings to the table is considered. A level one employee who has been with the company for 15 years will perhaps be at the top of the range, whereas a new comer at level two might take some time to reach the ceiling of their range.
The idea here isn't to assign a number value to each position. Using a broader scope to establish pay ranges sets everyone up for more fair and competative compensation practices. Pay transparency isn't so much a choice that companies make, as it is the new way of doing business. While this is merely the starting point to creating salary ranges, this little article will make the number crunching, 12 page white papers on “How To Create Salary Ranges” a whole lot easier to swallow.