08
Oct

Is Your Compensation in Line with the Market?

The importance of conducting a compensation analysis.

With help wanted signs popping up just about everywhere and Idaho’s jobless rate hovering around three percent, employers are incentivized to do whatever they can to retain their talent. First of mind for many (employees and employers, alike) is compensation and for many organizations, this is likely the largest operating expense. Ensuring the compensation structure is in line with company values and strategic vision is critical. If allocated poorly, it has the potential to create employee distrust, disengagement and ultimately, turnover.

To reward your employees fairly and consistently, a good best practice is to conduct an annual compensation analysis. This will help you use your budget strategically and ensure you are staying true to your organization’s pay philosophy. Compensation analysis often takes into account both internal and external equity, examining competitiveness, fair pay and compliance. The result of an analysis may help identify any employees that are deserving of a strategic compensation adjustment.

Where to start?

If it’s been a while since your organization has examined its compensation strategy, it can be tricky to figure out where to start. Should you focus on your company’s pay philosophy? What is the current market doing? How are my competitors paying? Is my organization competitive? Have we made the appropriate adjustments over time? How are my employees feeling about their current compensation? Identifying and addressing these issues on a regular basis can mean smaller and few adjustments over time.

A good place to start is to look at your salary ranges and how they align with your company’s pay philosophy. (Don’t have a pay philosophy? It might be time to get the executive team together for some strategic planning.) It’s possible to find inconsistencies within ranges and grades. Identifying these and making corrections is a good first step to alignment.

The competitiveness of your salary range is only as good as your market data. Using outdated or inaccurate data sources will only skew your information, and not likely in a good way. To make sure you have the most up-to-date and accurate data, you can either pay reliable salary survey data companies like Economic Research Institute directly, hire a compensation consulting firm (yes, Thompson Consulting Group provides this service), or look at self-reporting sources such as Payscale.

Once you feel confident that you have accurate market data, you can begin to create or update your salary range. Then look for outliers. What do you need to do to fix these individuals or positions? Is it time for a job description adjustment or a tenure raise? Regularly conducting a compensation analysis makes this process easier and more efficient. It also gives you confidence when communicating pay to employees.

After your updated compensation structure has been approved, it is essential to effectively communicate with your managers and employees about the revised package. A Total Compensation Summary Report is an excellent way to show how salary, benefits and retirement all work together to create a complete compensation package for each person (TCG can help with this). Armed with this knowledge, your employees can see exactly where they financially stand within your organization and the market, in general.

We can help!

If your organization is ready to embark on compensation analysis and is looking for assistance, Thompson Consulting Group is here to help. Whether you are starting from scratch, looking for market survey data, and/or want help communicating total compensation we have the expertise to help you make sound strategic decisions to keep your organization competitive.