Use Job Documentation And Data to Create Salary Administration Structure

by on June 26, 2009 · 0 Comment POSTED IN: HR Info Center

Salary Administration Is Focused around Structure

Generally speaking the purpose of salary structures is to balance flexibility, because we want people to be able to make good business decisions, but to balance that with parameters that make sense to ensure that we don’t pay too much or pay too little for different jobs. Each salary administration grade typically is made up of a minimum, a midpoint and a maximum. The minimum would be designed to represent attractive entry-level pay or a hiring rate. The midpoint represents our salary administration philosophy. The midpoint will approximate the median of the market and a maximum represents the maximum value of the job.

A receptionist who’s been with your organization for 30 years is the best receptionist going, high performer, very loyal employee, all well and good but it’s never going to be a six figure job. There’s a maximum value to each job and so that’s what the maximum is designed to accommodate. Now it’s important you design salary structures regularly for your clients. They work very effectively but they fall apart very quickly if you don’t adjust them on at least an annual basis to ensure that they remain market-competitive. In other words what is attractive entry level pay today, a year from now that may or may not be attractive, so you need to make sure that you adjust them on a regular basis.

The process for determining the salary administration for a job is quite simple. For example, you have job XYZ that may be an accountant, a receptionist or a CEO. You go through our quality survey data, you use multiple survey sources. You consider the geographic impact, the industry impact because it’s senior level job, you consider the size of our organization. In this case you come up with a market pricing median of $35,455. In other words it’s your assessment that half of the market pay above that number and half pay below that number for this job, job XYZ. You confirm that, going back to the very first step, with job documentation to ensure that we have appropriate duties and responsibilities identified for the job.

You take your benchmark number, a market median of $35,455 and when you look at your salary administration structure at each grade you would say, “Which grade had a midpoint closest to our market median?” In this case, in this generic example that would be grade number two. So, job XYZ would be slotted into grade two with entry-level pay of $27,398 and a maximum value for this job that you wouldn’t pay above of $43,837.

Edited Remarks from “How to Set Pay Ranges That are Fair and Effective” by Edward Rataj

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