Comp-ratio is allow for a blind and equitable distributiuon of employee compensation

by on June 11, 2009 · 0 Comment POSTED IN: HR Info Center

A equitable system for dividing employee compensation budgets

Allocate your employee compensation budget based on comp-ratio. Now, we would tell you, disconnect from last year’s performance evaluation. Get rid of performance evaluation entirely.

If you disconnect performance and career development discussions from employee compensation administration then you’re going to have something else to base it on, which you already have. Allocate things based on comp-ratio.

So, divide things up such that the folks naturally get a little more in the bottom areas or below midpoint. They get a little higher percentage in the lower part of the range, in the little lower percentage in the higher part of the ranges and divide it up that way.

Plug everybody into the employee compensation spreadsheet, run the numbers, see if that works and then tweak the formula to make sure that you know you’re on budget. This is an HR thing.

Ultimately, once you got that done, obtain approval on using that scheme, okay, then give all their managers their list of people and tell them what the computer would tell them they get, okay, and allow them to come back and adjust their people up and down, up or down based on performance, okay, and potential as well.

Make managers justify changes up or down
But, you know, if they move anybody up they got to get the money from somewhere so they got to have somebody else who’s going down. So, it’s a zero sum game. You got to stay on budget. HR can have a little bit of fun money if left over to help with these situations.

But just by these moves with one to two sentences – that’s all you’re going to have, 80% of your people will get computer-generated recommendations. In other words, the higher percentage of people lower in the band and lower percentage of people on the other side, 20% required two sentences explanation. It’s very simple to run this program. And just make sure you don’t exceed the budget.

Okay, now, if you go to this kind of program where you’ve disconnected your employee compensation administration from last year’s performance and you break that mythology, okay, you can have some great conversations with people that are kind of quick.

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