FreshView
 

OCTOBER 2010    

  In This Issue:

• Survey Tip: Choose Pay Data
  That Won't Let You Down
• Pay Is Not Enough
• Compensation Basics:
  Pay Administration Systems
• Did You Know?
   

Survey Tip

By Jerry E. Bumgarner, CCP, Director, Research & Compensation Services
Cascade Employers Association
jbumgarner@cascadeemployers.com

Choose Pay Data That Won't Let You Down

Pay surveys are meant to provide reliable benchmarking data so that you can accurately and competitively price your jobs against the market. And there are lots of surveys to choose from out there, so you may ask yourself, “How can I tell a good survey from a bad one?” Our answer is -- always look for survey data and reports which meet survey industry "best practices" tests, as follows:

Data

• Data is collected on a number of job incumbents from a sufficient sample size of a random mix of employers in the relevant region. Sample size for each job is important to ensure data validity.
• Data is NOT collected from employees.
• Data is collected using job descriptions (duties, education, experience, etc.) with specific job matching criteria.
• Data is collected for individual jobs in the full range of the job "family" – data is provided for Accountant I, Accountant II, and Accountant III rather than just Accountant.
• Data is screened and "cleaned" through participant contacts to assure accuracy and validity of the results.
• If survey data is aged, it is aged based on pay adjustment trends and not cost of living for the geographic area surveyed.

Reports

• Confidentiality of individual participant data is maintained by reporting aggregate data only.
• All pertinent pay data elements are reported such as wages, salaries, ranges, incentives/bonuses, etc.
• Report summaries are based on actual wages/salaries/incentives paid (range structure data may be reported separately).
• Report includes measures of central tendency and extremes (e.g., averages, medians, percentiles etc.).
• Includes industry types, employer size, geographic, and other data cuts for jobs where pay levels are influenced by these considerations.

SalaryTrends® meets these best practice standards so you can rely on it to make confident pay decisions. See for yourself!

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Pay Is Not Enough

By Michelle Toney, Social Communications Manager
and Human Resource Consultant
Cascade Employers Association
mtoney@cascadeemployers.com

A brief moment of conversation was all it took to convince me.

Having just completed my bi-weekly ritual of handing out paychecks at a small manufacturing facility, I headed back into my office. An employee called my name. I turned, expecting to hear about an error on his paycheck. Sure enough, Jim thought there was a mistake — "You paid me too much. I don't make that much money." Relieved, I smiled and explained to Jim that he actually did make that much now. He had passed his 18-month anniversary date, and a small, timed increase had been added to his hourly wage.

Jim was pleased with his raise, but he wanted to tell me something more. He explained that he appreciated his job, as well as the paychecks and medical insurance that came with it. But most of all, Jim felt that when he spoke, someone listened to him. Jim felt that he could fix things and improve processes that were keeping him from doing his job as best he could. Jim said he had never had a job like this one, that he was pretty sure this had been the best 18 months of his life, and that he was "really proud to work here."

It was at that moment I was convinced that pay is not enough. Employees want to like their jobs, to feel important, and be proud of their work.

Most of us agree that working at the job we have every day isn't a volunteer experience, and that pay must reflect the value of our work. But most employees need something more than just a paycheck to be fulfilled in the day-to-day work environment, for the long-term. But what? What are some of the essential needs that employees have in the workplace? And how can these needs be met by employers so employees are proud to have their jobs?

Four workplace needs, loosely based upon Maslow's Hierarchy of Needs, provide some clues as to what employees might be looking for, beyond pay:

1. Security
   
   • Do your employees get regular feedback that they are doing the right thing in the right way?
2. Feeling Important
   
   • How confident are your employees that their job matters to the success of the organization?
3. Caring & Belonging
   
   • Do employees know that someone at work cares about them personally? Do they believe that if they have a suggestion or problem it will be heard?
4. Variety & Flexibility
   
   • How open is the organization's culture to change and flexibility? Do employees collaborate and communicate with those outside their regular routine? Are creative solutions encouraged?

Having moved on to different jobs, I know that employee needs vary from workplace to workplace. Wouldn't it be helpful to know what your employees really "need" from their jobs? Inviting employees to share their thoughts and ideas is important. Not only can it lead to higher engagement by employees, it can also benefit employers through process improvements, increased morale, better productivity, greater profitability, lower turnover and overall improved organizational performance.

Contact Cascade to learn about alternative, meaningful reward programs that help lead to higher employee engagement. 

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Compensation Basics

By Jerry E. Bumgarner, CCP, Director, Research & Compensation Services
Cascade Employers Association
jbumgarner@cascadeemployers.com

Pay Administration Systems – Choices, Choices, Choices

Let's take a look at a few of the most common approaches to administering wages and salaries within organizations.

Single or Flat Rate System —

• The same pay rate applies to all employees in a job classification, regardless of performance or seniority.
• In some instances, there may be a lower training wage for the job.
• These systems are typically used for hourly union jobs and for elected jobs in the public sector.
• Pay rates are either based on market data or are the result of labor/management negotiations.

Time-Based Step Progression —

• Individual pay rates are based on longevity in a job with no consideration to individual performance.
• Pay increases are in fixed amounts and are awarded on a predetermined schedule.
• When the top step is reached, any future increases are generally based on cost-of-living changes.
• This type of system is generally used for government jobs (federal, state and local).

Performance-Based Step Progression —

• Individual pay rates are based on a combination of longevity and individual performance.
• Pay increases are in fixed amounts and awarded on a predetermined schedule if performance is acceptable.
• When the top step is reached, any future increases are generally based on market wage movement.
• This type of system is generally used for non-union manufacturing jobs.

Productivity-Based System —

• Individual pay rates are determined based on individual employee productivity/performance.
• A straight piece-rate system is an approach that includes a base wage rate plus additional pay for output.
• With a differential piece-rate system, one rate applies up to a standard and a higher rate after the standard is exceeded.
• These systems are generally found in non-union assembly and manufacturing organizations.

Person-Based System —

• Pay rates are based on each employee's characteristics (knowledge, skill, and competency).
• Increases are awarded based on the acquisition of greater knowledge, skill or competency.
• Knowledge-based pay systems typically apply to scientists with specialized knowledge.
• Skill-based pay systems generally apply to operators trained on a variety of production machines.
• Competency-based pay systems are typically used for professionals with specified competencies.

Merit/Performance Based —

• Pay rates are determined based on individual employee performance regardless of seniority.
• Individual increase amounts vary based on employee performance in relation to others.
• Position in salary range and the salary increase budget are also factors in determining increases.
• Employers must be able to defend performance appraisal methods in arriving at individual increases.

There are many choices. Select the best system by considering your organization’s culture, its readiness to link pay to performance, its ability to train employees and track their development, the sophistication of its administrative support systems, as well as whether employees are represented by a union. If you're not sure which system is right for you, feel free to contact me and we can brainstorm together.

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Did You Know?

For organizations with under 500 employees, the average number of paid holidays given per year (including floating holidays) is 7.5. How does your organization compare?

Look here each month for a specific policy or benefit practice and see how your practices compare to other employers just like you.

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