8 Steps in a Compensation Project

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Compensation initiatives are often on many employers’ agendas, so we’ve summarized eight (8) steps in a basic compensation project.

1. Participate in or purchase salary and wage surveys.

It all starts with having pay data, which is the basis for all compensation systems and projects. Compensation surveys contain information on competitive wages and salaries for various jobs and report data regarding what other employers pay for given positions. Participating in these surveys (which generally requires reporting your employees’ salary and wage information) typically helps organizations save money on receiving the data.  A good rule of thumb is obtaining at least three survey or compensation data sources. Local resources are ideal, especially if your organization recruits locally. For example, ERC’s Salary & Wage Surveys are a common resource used by many Northeast Ohio employers to benchmark local pay rates.

2. Identify matches for your organization’s jobs.

Once you obtain salary survey information, the next step is identifying the positions in the surveys that match the jobs in your organization. This is generally not done by job title alone. Instead, employers look for jobs with position descriptions that match at least 70% of the duties summarized. For some unique positions, it may be difficult to find an exact match. In these cases, organizations typically blend or weight salary data from multiple jobs to create a salary figure that best represents the job.

3. Select and gather data.

After your organization has selected the positions that match, you’ll need to determine what percentile or metric from the survey you would like to use to compare your jobs. Organizations commonly select this based on their pay philosophy for different positions. Employers may wish to pay some positions above market rates (percentiles above the median) because talent is scarce or the job is critical to their organization’s strategy or mission. Other positions may be paid below market rates (percentiles below the median) if they lack importance or are easily recruited. The widespread majority of organizations aim to pay most of their employees at market (the median). You can also use the average; however, the median is less susceptible to higher or lower values, and therefore more reliable.

4. Analyze the data.

In order to analyze the salary information, organizations should age the data to a common point in time by an aging factor – such as an average yearly increase (obtained in a compensation survey).  After aging the data, the percentile information gathered from each of the survey sources can be weighted based on factors such as industry data, local or national information, quality of survey, and strength of job match. Typically, a weighted average is calculated based on these weightings of the survey sources and the percentile information. This weighted average is usually referred to as the “market average.” Although, there are certainly other metrics of market competitiveness your organization could use.

5. Calculate a market average.

For each job you are analyzing, it’s important to determine where the job stands relative to the market. This is easily done by dividing what your organization currently pays for the position (the current salary or wage) by the market average. Figures over 1.0 indicate that the job is paid more than the market average; while figures below 1.0 show that the job is paid less than the market average. While other metrics exist, this tends to be the easiest to calculate for employers.

6. Create a pay structure.

 

7. Address inconsistencies.

After your organization has collected and analyzed the market data and/or developed any pay structures it deems important to its compensation administration, the next step is to address differences or inconsistencies, particularly in terms of differences in market averages/midpoints and rates your organization is paying for positions and external market rates. These questions often involve considering organizational culture, structure, what it can afford to pay, and what it wants to pay for certain positions.

8. Make adjustment decisions.

After these questions are addressed, your organization will need to determine whether it wants to adjust salaries and wages to be more in line with the market (if differences exist). These are typically termed “market adjustments.” Other pay adjustments your organization may provide include cost-of-living or across the board adjustments (the same adjustment being provided to all employees), or merit increases, which are commonly based on performance achieved and varied in terms of amount received (typically a percentage of base salary).

There’s no question that compensation initiatives can be challenging projects and typically include more complexity and analysis than these eight steps suggest. Keep in mind that ERC has many resources, including valid local and national pay data and experienced guidance, available to help you in navigating these projects with ease and success.

Compensation & Benefits Consulting

Compensation & Benefits Consulting

ERC offers a variety of compensation and benefits consulting services including competitive market pay analysis, salary structure design, total rewards strategy, variable pay design, and more!

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What a Manager Needs to Know to Drive Project Success

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The challenge in project success rests in the ability to deliver to the desired business goal in the desired time frame and within the available budget. These three forces:  time, cost, and quality, are often in conflict with each other. The Project Management Institute (PMI) has defined nine body of knowledge areas that when followed, would increase probability of project success. However, if you are not a full-time project manager and still want to increase your project results, follow these three project management principles:

1. Establish a Project Plan.

The project plan will tell you, your team, and your customers the:

Goals: Define the business reason for the project and how you will know it was successful at the end.
Scope: Determine the boundaries of what your project will address, and just as important, what it won’t address. 
Milestones: Work backgrounds to identify important dates for deliverables, reviews, etc. This is a very easy way to do a reality check on what it will take to meet the due dates.

2. Build a Communication Plan.

The communication plan is not only how you will communicate at the end of the project, but who should be informed and engaged throughout the project. At the minimum you should be able to identify the:

Who: Identify the key stakeholders, the departments, customers, or processes that will be impacted by your project
What: Create the message, which could be different for each audience – some want to be updated while others require more detail.  
When and How: Identify the best time and format.  The rule of thumb is to communicate your message at least three times, and I would add, in at least two different formats (email, phone, in-person).  Leverage communication channels that are already in place like staff meetings, monthly newsletters, weekly email blasts, websites, etc.

3. Define Change Management Processes.

Change is a constant. On any project the scope will alter as more information is gathered.  Define a process and procedure for identifying project changes, approvals, and documentation requirements. The more complex the work, the more important this becomes. 

These are just a few principles to keep in mind to ensure success on your projects. The more you can learn about project management and the underlying principles, the better equipped you will be to lead your organization in the future.

Health Insurance Premiums Rise for Northeast Ohio Employers

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A 2010 survey released by ERC reports that on average, Northeast Ohio employers’ health insurance premiums rose 15.2% in 2010.  In terms of industry differences, local non-profit organizations saw the lowest average percent increase in health insurance premium, while manufacturing organizations reported the highest average percent increase.

The survey also shows that the average percent of health insurance premium that employers plan to contribute in 2011 is 75%, and the average percent of health insurance premium that employees will be required to contribute in 2011 is 26%. Several employers have raised co-pay amounts (19%), annual deductibles (31%), and employee contributions (32%) to cope with rising costs, but many respondents (43%) have also not increased these.

Average percent of employer and employee contributions to health insurance premiums and average percent increase in premium

To download the results of ERC’s Health Care & Wellness Practices Survey, which summarizes trends in health care and wellness practices among 90 local Northeast Ohio employers, please click here.

Health Care & Wellness Practices Survey

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This report summarizes the results of ERC’s survey of 90 organizations in Northeast Ohio, conducted in December of 2010, on practices related to health care and wellness.

This survey was co-sponsored by the ERC Health Academy. The survey reports trends in:

  • Health insurance premiums
  • Increases to co-pays, deductibles, and employee contributions
  • Eligibility for health insurance
  • Health insurance cost-control
  • Wellness programs
  • Wellness program administration

 

Creating a Wellness Initiative: 5 Steps

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Wellness programs and initiatives are often on many employers’ agendas. With wellness’ increasing popularity in the workplace and ability to successfully contain health insurance costs, we’ve summarized five important steps to creating an effective wellness program or initiative.

1. Obtain Management Buy-In

One of the most important, but perhaps challenging elements of building an effective wellness program is obtaining management buy-in.  Generally, obtaining management buy-in can be accomplished by making a business case for implementing the program (i.e. has it been effective in other organizations, what research supports the use of such programs, what are the expected gains/losses and budget, etc) and by showing positive results of the program, particularly on the bottom line and in reducing high costs such as health insurance or absenteeism. Your organization may consider running a pilot and measuring the results. Here are a few common metrics you may consider using to evaluate a pilot program or actual wellness program’s effectiveness:

  • Key performance indicators or program objectives or goals (such as reduced risk factors)
  • Health care claims costs
  • Health insurance usage
  • Employee participation or usage
  • Number of days absent as a result of illness or health conditions
  • Employee engagement or satisfaction
  • Number of policy or workplace changes
  • Return on investment (ROI)

2. Target the Right Needs

Wellness programs should be aligned with the right needs of your workforce.  There are three ways you can determine employees’ wellness needs. Health risk assessments, which are commonly conducted by employers, usually provide an aggregate and summary report for employers to determine what their staff’s health needs are and what preventable health risks are evident. Another way you can determine the wellness needs of your employees is by using an anonymous survey that measures employees’ perceived need for certain types of wellness activities or health-related interventions, or via other feedback methods such as interviews or focus groups. A final way your organization can determine the wellness needs of your employees is from observation of work behaviors such as:

  • Do employees appear to have generally healthy lifestyles?
  • Do employees tend to eat nutritiously?
  • Do employees make time to exercise or engage in fitness activities?
  • Are employees frequently ill or absent due to health-related issues?
  • Do employees have chronic diseases or conditions?
  • Do employees tend to smoke?
  • Do employees understand how to be healthy or are they lacking knowledge and education on wellness?
  • Do employees have issues with stress management?

Data provided in these assessments, modes of feedback, and/or observation can yield information that helps your organization develop a wellness program that meets the health risk areas and needs of your workforce and select the appropriate activities that target those needs. Additionally, gathering data related to the barriers to becoming healthier that employees perceive can be helpful as well in designing programs or initiative.

3. Choose Impactful Activities

Once your organization has determined the needs of its workforce, the next step is to choose activities aligned with those needs – as well as your budget for the program. It’s important to note that the issue(s) you select to target should be capable of being changed. Typically employers choose to focus on these areas, and implement both education and formal activities to help address needs:

  • Nutrition
  • Fitness/physical activity
  • Stress management
  • Disease management or prevention
  • Smoking cessation

Activities in these areas can be low-cost, medium-cost, or high-cost. Low-cost activities typically tend to be more “cultural” in nature, in that the organization makes accommodations to its workplace or policies to better enable healthy behaviors – such as allowing flexible schedules, posting motivational or health oriented tips in the office, allowing for breaks to pursue physical activity, offering healthy food alternatives, or implementing in-house staff-run activities (versus those involving an outside consultant, trainer, or vendor) such as walking or running programs. Activities with moderate costs may include providing educational seminars, coordinating activity clubs, providing subsidized discounts on fitness club memberships or classes, or using community facilities. Higher cost activities tend to provide maximal access opportunities and are higher-impact, such as offering massages, having an on-site fitness center or fitness classes, offering health screenings and vaccinations, providing opportunities for coaching with a wellness expert, and offering incentives.

If your organization does not have the internal staff expertise required to implement a wellness program, it will likely need quality vendors. When selecting vendors, consider the product or service quality and delivery, professionals’ training/education/experience, and the product or service value for the cost incurred.

4. Generate Employee Motivation and Participation

Another crucial component of an effective wellness program is significant employee participation. After all, employees need to actually use the program in order to generate results. If health and wellness aren’t necessarily core aspects of your culture, solid participation and employee motivation may be difficult to attain. Nonetheless, many organizations provide incentives that are attractive to employees and make participation seem worthwhile. Such incentives most commonly include discounts on health insurance premiums as well as cash and gift cards. Time off to pursue wellness opportunities is also a valuable incentive.

Other ways to increase participation is to keep in mind the common barriers that prevent employees from participating in wellness programs such as time, access, cost, and complexity. Offering programs before or after work may lead to less participation than programs occurring during work time or the lunch hour. Similarly, free and simple programs are best. While some more expensive programs may require cost-sharing between an employee and the organization and can facilitate greater commitment to the initiative, it’s important for this to not be too costly that it would be a significant barrier to participation. Access is another potential obstacle to participation; however, programs offered on-site and at convenient times and locations can help reduce access issues.

5. Stay Compliant

Compliance is an on-going hurdle employers face when creating and implementing wellness programs. Wellness programs need to be compliant with laws including ADA, HIPPA, GINA, and Title VII. In addition, there are limits placed on financial awards offered to employees who meet health-related goals. The health care reform bill has impact on wellness plan design, as well.

While legal and policy issues are outside the scope of this article, additional information on these topics can be obtained through ERC’s HR Help Desk (more information below).

Additional Resources

HR Help Desk (Members only)
For additional information related to any of the following content provided in this article or pertaining to creating and implementing wellness programs, please contact hrhelp@yourerc.com.

Preferred Partners (Members only)
ERC has many Preferred Partners and vendors that facilitate different aspects of wellness programs, such as executive physicals, employee assistance programs, health and safety training, and health screening. To view a list of Preferred Partners and the services and cost-savings they offer to ERC members, click here.

ERC Health
For more information about ERC’s health insurance program for small and mid-sized businesses, please click here.

2% Reduction in Social Security Withholding Taxes

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Courtesy of Oswald Companies

Thanks to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, there is going to be a 2% reduction in Social Security withholding taxes. We are encouraging Plan Sponsors to pass along this information to their employees and encourage them to take this and relocate it to their retirement savings in either an increase to their current contribution or new enrollment.

To view our Preferred Partner Network, click here.

Manufacturing Jobs: Local Pay vs. National Pay

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A 2010-2011 survey released by ERC shows how pay for common manufacturing and production jobs in Northeast Ohio compares to pay provided by employers across the U.S, based on data from the recently published 2010-2011 EAA National Wage & Salary Survey.

Comparison of National & Northeast Ohio Median Salaries for Select Manufacturing/Production Positions

*Reflects data from the 2010-2011 EAA National Wage & Salary Survey

 

Are Your Supervisors Prepared?

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The following is a complimentary audit and assessment consisting of key questions your organization should ask to determine if your supervisors and managers have the appropriate skills and competencies to combat the most common management pitfalls. Additionally, tips we frequently recommend to organizations in addressing these pitfalls are summarized.

Pitfall 1: Exposing the organization to liabilities

Organizations are exposed to liabilities when their supervisors and managers are not knowledgeable of employment law or understand how to apply legal guidelines. For example, supervisors and managers may make selection decisions based on non-job related criteria or subjective biases, ask inappropriate interview questions, not document performance, misapply wage and hour law (not recording overtime worked, not providing necessary breaks, etc.), or fail to handle employee issues with consistency. Key questions include:

  • Are supervisors and managers knowledgeable of employment laws and do they successfully apply these legal guidelines in the workplace?
  • Do supervisors and managers ask appropriate interview questions, if they are responsible for hiring duties?
  • Do supervisors and managers participate in making legal selection decisions, based on job-related factors and qualifications and not based on any protected criteria (such as gender, race, national origin, religion, etc.)?
  • Do supervisors and managers understand wage and hour law (FLSA) and how it affects the pay of their employees?
  • Do supervisors and managers discipline or handle issues of employee conduct with consistency?
  • Do supervisors and managers understand the basics of managing employee leave, particularly FMLA?

Pitfall 2: Failing to document and manage performance

Performance management is a common struggle for many supervisors and managers. Oftentimes, we find that the supervisors and managers are not doing enough to support the employee in achieving their performance expectations and standards and not providing regular feedback, counseling, and coaching. In addition, correctly documenting performance is commonly overlooked. Key questions include:

  • Do supervisors and managers generally have a high performance work team, or do their employees struggle in reaching certain performance standards or goals?
  • Are employees aware of what is expected of them in terms of performance?  Do supervisors and managers communicate these expectations to employees?
  • Do supervisors and managers take the performance review process seriously? Do they understand its importance and how to prepare for and deliver a performance review?
  • Do supervisors and managers document any and all incidents of poor performance? (note: this is also a potential liability)
  • Do supervisors and managers guide performance through regular feedback and coaching?
  • Do supervisors and managers support performance with development and training if needed?
  • Do supervisors and managers have conversations with employees about their career aspirations and developmental interests? Do they follow-up on insights obtained in these conversations?
  • Do supervisors and managers continually challenge and empower their employees?
  • Do supervisors and managers make themselves available to answer employee questions about projects, assignments, and tasks?
  • Do supervisors and managers recognize and thank employees for their contributions when they do a good job?
  • Do supervisors and managers criticize more than they praise? Is there an imbalance of negative and positive feedback, and is this justified?

Pitfall 3: Poorly communicating

Inadequate communication manifests itself in a number of problems including poor supervisor-employee work relationships, frequent misunderstandings of job tasks or policies/procedures, and unclear expectations. These issues often surface from poor listening, relationship building, clarifying, and feedback skills and lead to frequent supervisory problems. Key questions include:

  • Do supervisors and managers establish rapport and positive relationships with employees?
  • Do supervisors and managers engage in frequent methods of in-person communication?
  • Do supervisors and managers actively listen to employees’ concerns, problems, and questions?
  • Do supervisors and managers clarify points and issues, trying to better understand work problems employees have?
  • Do supervisors and managers ask for employees’ viewpoints and opinions?
  • Do supervisors and managers exhibit effective non-verbal communication with employees? Do their words match their body language?
  • Do employees often feel confused when completing work assignments, or do misunderstandings frequently occur?
  • Do employees receive enough performance feedback from supervisors and managers? Do they understand where they excel and where they need to improve?
  • Is the feedback provided by supervisors and managers constructive and well-targeted at behaviors needing changed?

Pitfall 4: Failing to resolve conflict

Many managers fail to resolve conflicts between employees and coworkers, or may perpetuate too much conflict in their groups. It’s common for supervisors and managers to avoid conflict altogether. In addition, they may not do enough to prevent conflict. Key questions include:

  • Do supervisors and managers work to accurately define and identify key workplace conflicts, or are problems frequently incorrectly identified? 
  • Do supervisors and managers recognize the causes of conflict?
  • Do supervisors and managers understand and costs of conflict on your business and recognize its effects on productivity?
  • Do conflicts generally go unresolved by supervisors and managers, or do supervisors and managers create different strategies to manage and resolve conflict, ensuring that it has a limited effect on performance?
  • Do supervisors and managers frequently collaborate and strive for “win-win” approaches to conflict?
  • Do supervisors and managers try to prevent conflict by encouraging positive coworker relationships, encouraging recognition of individual differences, and addressing work problems quickly before they escalate?
  • Do supervisors try to adapt to different personalities and styles in order to maximize their effectiveness?

Pitfall 5: Not understanding their role

Typically promoted from individual contributor roles, supervisors and managers find themselves not understanding the new requirements and expectations of their role, or encountering common challenges like micromanaging, distrusting employees, treating employees poorly, or not making time for them.  Key questions include:

  • Do supervisors and managers frequently encounter challenges on the job, in dealing with employee issues and problems?
  • Do supervisors and managers understand how their role is different than that of their previous role as an individual contributor? Do they understand its importance in driving results through others?
  • Do supervisors and managers understand the responsibilities of their role and how to carry them out?
  • Do supervisors and managers make time for employees, balancing task completion and building supportive relationships?
  • Do supervisors and managers show trust and confidence in employees?
  • Are employees excessively directed and micromanaged?
  • Are employees treated with respect and courtesy? 

Addressing Management Pitfalls

If your supervisors don’t have the right competencies in place, there are a number of ways to develop them. In our experience, these are the most common and effective ways to build supervisory and management skills:

  • Supervisory and managerial training
    Training is one of the best and most common ways to develop supervisors’ and managers’ abilities. Consider registering them to attend ERC’s Supervisory Series, an affordable training program that develops their skills in all of these critical managerial areas including communication, conflict resolution, performance management, and employment law. This program can also be delivered on-site and customized to your organization’s needs. 
  • Skills coaching and mentoring
    Sometimes a more personalized and customized approach is necessary to develop skills and solve specific managerial and supervisory issues, particularly when training has already been conducted. This can be facilitated either through mentorship of leaders internally or skills coaching with an external consultant. 
  • Management literature and educational materials
    Articles and learning aids are another great way for supervisors and managers to develop their capabilities, and can be great follow-up resources for after training to help transfer skills learned back to the workplace. Checklists and forms that guide behaviors learned in training can help them stay better organized on the job. These can be created in-house or training programs may have them available. ERC offers access to a website full of job aids, checklists, forms, and resources for attendees of supervisory training. 

Preview ERC Supervisory Training

Survey Reports National Pay Trends for HR Positions

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A 2011 analysis conducted by ERC reports how pay for various HR positions in Northeast Ohio compares to pay provided by employers across the U.S, based on data from the 2010-2011 EAA National Wage & Salary Survey. In general, a comparison of salaries for HR positions among employers across the U.S. and just Northeast Ohio employers shows that local employers pay higher-level HR positions (manager and above) near or above the median salary reported by employers across the U.S. Local employers, however, appear to be pay lower-level HR positions, such as generalists and assistants, lower than the median salary reported by employers across the U.S.

View ERC's Wage & Salary Adjustment Survey Results

The survey reports data from Northeast Ohio organizations regarding their actual and projected wage and salary adjustments.

View the Results