- Blog post
Comparatio: The second most important thing in salary administration
Comparatio allows you to compare your internal salary administration to the competition
What does Comparatio mean?
Comparatio is a term in salary administration that means what are you paying for somebody compared to the market. Think of it like replacement cost. The market will dominate.
Think of every job like having a grade associated with it. Many of you have this already. Typically, we talk about these things in quartiles, where there’s a first quartile, there’s a second quartile, third quartile and fourth quartile with a mid point, a minimum and a maximum associated with it.
Comparatio sets salary administration ranges
This is what makes compa ratio so important to salary administration., It’s possible, because these ranges are set in a hierarchy in such a way that you could be a senior member of a lower grade and get paid more than a junior member of a higher grade. What does that mean? That means that somebody who’s young and moving up fast and taking on more responsibility could find themselves in a position where they actually have somebody working for them, being paid more than they are.
Now, in all likelihood, that person working for them, making more than they are has been in that position a long time makes sense due to their seniority.
Senior employees, small increases: A major problem in salary administration
What if, however, you’ve got somebody in that senior position, You sit down with that senior person, here they are, they start with – they start right here at almost the edge of the fourth and final quartile of your salary administration scale with a salary way up at the end. By definition they can’t get a big increase.
What does that individual look like after you sit down with them and tell them that their performance is dictating a situation where they get 1.5%? That person is not going to be very happy.
Here they are, senior contributor, best year yet, 1.5%, they look happy or very unhappy now. Some of these senior folks get wind of that, they got a junior person in the same salary grade got a 5% raise and they’re outraged.
“How could you be giving these young people this big percent and me, this – I’m contributing twice as much as they are. I know so much more than them. I resent this. I see you’re taking advantage of me because I have grey hair.”
And here they are, senior employee, very unhappy. Junior employee, big increase, my goodness. Wow, doesn’t that make him smile?
What’s wrong with this picture? Senior employee goes home and here’s a conversation I’ve actually heard “If you want somebody to work the weekend, get that 5% employee in there to help You know, he’ll take care of you, I’m going home. This is ridiculous.”
Answer to the salary administration questions
Let’s talk about why this doesn’t make any sense and why we’ve really messed up with this whole thing.
Answer this question for me. Will the senior employee leave? The senior person here that you just gave the 1.5% to, is that person going to leave?
There are several reasons why the senior person will not quit and leave.
Number one, they like the company. Number two, you know, it would be difficult to find another job. It would be painful to learn another job. But most importantly, number one with the bullet, the reason the senior employee does not quit and leave is because nobody’s going to pay him anymore than what they’re getting here.
Look at this, this employee is paid near the maximum of what this job allows. So, is anybody in the market going to pay them more to go to work for them? Not if they’re mixing apples with apples. It’s possible they could be hired for a higher level position but they’re not going to leave you for a company of the same size doing the same thing. They’re not going to come to you and say, I’ve got a 15% increase to go to a stranger for – because nobody pays at the top of the market for somebody coming in.
There’s a lot of pressure on this system. When I say that because the assumption is, you’ve calibrated this correctly. If you haven’t calibrated this correctly and that person is not really there, they’re really down here, and they got all that seniority, bringing all that value, well, whoops, you made a little mistake.
But if this salary administration calibration is accurate, if that’s really what people get paid to do the work that this person is doing, that senior employee is not going to quit and leave. The senior employee here is going to quit and stay.