The cost of shifts in compensation management plan

by on June 25, 2009 · 0 Comment POSTED IN: HR Info Center

Salary grade changes can be tricky for compensation management

We can cost a shift in the historical hierarchy of your compensation management system. They focus on how does the pay for an accountant compare to an RN, for example.

Historically, our accountant and our RN have been in the same grade and it’s been that way for 30 years based on their experience, their problem solving, their supervision, they’re decision making, a number of factors. There are very few people in this country that are qualified to do both of those jobs. The markets, the supply and demand associated with filling those roles is very different.

The past number of years and projected well onto the future, there’s a shortage of nurses and the market for them has been hot. Just recently, the same thing has occurred to accountants. But accountants tend to be a little bit behind, as they haven’t been hot for so long and they haven’t caught up yet. Keeping these unrelated jobs in the same grade can artificially cause you to overpay one job or underpay for another.

Policies and procedures in a compensation management plan
We live on a litigious society. All to – far too often, HR people are put not in a strategic position on how we drive the organization forward but more of in a position of risk management. And really the key is to treat everyone equally.

And it doesn’t matter what we do as long as we do it the same to everybody. It’s not quite true but pretty close. But we can also ensure that the compensation management system remains competitive overtime.

Pay for promotions and demotions in your compensation management system
One I would point out is pay for promotions, pay for demotions. This is something that can often go overlooked as I said at the beginning. Oftentimes, policies and procedures aren’t really a big deal until our lawyers call and we kind of say, “Oops, we have an issue here.”

Having just a very simple one-page compensation management policy that says when an employee is promoted; they’ll receive a 10% salary increase or be brought up to the minimum of the new salary range, whichever is higher. That can avoid all kinds of issues. Otherwise, we could inadvertently end up increasing pay for white males who are promoted by an average of 15% and our black females by an average of 10% and we can have legal issues associated with that.

By having a documented policy, we can ensure that people are treated in a similar fashion. And a similar issue would be demotions. And I have noted there employee requested or employer requested.

In that case, it’s an employee requested demotion and the policy should handle that differently. Now, for whatever reason, they’re going through a reorganization and you say to a nurse, “Hey, we need you to be a painter. We’re short on painters, we can’t hire them.”

In that case, sure, maybe you try to keep their pay whole. But when it’s employee requested as opposed to employer requested, the policy should be handled differently.

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