Salary administration, median points and seniority

by on June 30, 2009 · 0 Comment POSTED IN: HR Info Center

Timelines and rules in salary administration

We often find that our rule of thumb is that it takes about three years for a person who gets into a new position to reach the median of the market place if that’s the targeted area the company’s salary administration. The actual levels of compensation that we see are generally driven by the position that someone has and that’s kind of common sense – the sales clerk is paid differently than CFOs is paid differently than the head of human resources. Industry is very, very important, and size is generally an important factor in salary adminstration

Exceptions to the rule in salary administration
We can find those items can often get tossed out of the window when a company decides, “I want to hire a particular executive”, because may be they’re much more experienced than we really need. But we think it’ll help drive the company forward faster. And we often talk about, you know, buying an executive that has a lot more horsepower than a car can handle, but we think it’s going to pay off in the end, that’s why we’re willing to do a little bit more.

Base Salary administration
The last consideration for base salary is where are we trying to position our compensation, is it at the 50th percentile where generally the middle of the market place where half the executives are paid more, half less? Or are we trying to go above that? A very common positioning, especially in today’s world is the client position – base salary is around the 50th percentile or middle of the market place.

Salary administration and total compensation packages
When we talk about annual incentives or that other component that gets added to come up with total compensation – in general, it’s paid in cash. There are times where we see that it may also be paid in a combination of cash and stock or cash and equity or even in certain situations deferred cash where “You’ve earned the money that’s here and I’ll pay part now and I’ll pay part later.” Sometimes done in situations where there’s a performance that fluctuates from year to year, and we want to make sure we’re not paying a lot in a great year, and then seeing nothing earned in a poor year when we’ve – when really we would like to recapture something.

Edited remarks from the Rapid Learning Institute webinar-Executive Compensation: What Worked and What’s Fair by Steve Hall

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