7 Common Compensation Questions

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Types of sources to use, frequency of market studies, handling employee questions about fairness, etc. -  these are just a few of many compensation issues and questions that you face every day. We've compiled answers to some of the most frequently asked questions we receive related to compensation.

What sources do most employers use to benchmark compensation?

Most employers use more than one salary data source to make compensation decisions. Common choices of salary data sources include Mercer, Willis Towers Watson, Kenexa, CompAnalyst, ERI, and Aon Hewitt. Local, state, and industry-specific surveys are also used, particularly in organizations with fewer than 200 employees.

How frequently should we be formally reviewing compensation?

The best practice is at least every two years; however, if your organization has made a number of changes to jobs, has fallen behind on benchmarking pay in the past few years, is competing for hard-to-find talent, or is focused on retaining above average talent, then it may consider benchmarking compensation more frequently. In these cases, we suggest an annual review. Although you may only formally review compensation every other year, it's important to at least stay abreast of the latest compensation trends each year and review key positions. You need to make sure that your key players' pay is in line with the market at all times.

What's the future outlook for compensation?

Salary increase budgets in the U.S. are expected to remain at about 3%, consistent with many past years.  However, the rate of pay acceleration has in the market has increased dramatically which makes the need to watch for market related changes in pay that much more important. 

How do the rising costs of benefits play into compensation decisions?

Some employers have questions about how the rising costs of health care and other benefits play into decisions about compensation. Benefits and health care costs have become a larger component of the total compensation package offered to employees, so it's more important than ever before that employers are looking at total compensation in addition to base pay in order to make appropriate pay decisions. There's also no question that rising benefits costs and uncertainty about the Affordable Health Care Act will likely be a consideration in overall costs.  That's why it's important to review benefits and pay data annually to make sure you're in line with the market on both. This will provide you more insight on what changes you need to make in terms of cost-sharing, benefits contributions, and pay increases.

How should I evaluate compensation data?

There are a few key things to look for when evaluating compensation survey data. First, you will want to make certain you utilize credible, employer reported data from robust and reliable sources. Second, you'll want to research who participated in the survey and what geographic region the survey represents. Third, make sure you also know when the survey data is effective so that you make appropriate aging adjustments to ensure that you are comparing data according to consistent time periods. Fourth, look at participation in the survey, specifically the number of employers participating for each breakout reported. Breakouts which have statistically significant participation are more reliable than breakouts with limited reporting.  That's why you may see less reliable salary trends in positions that have less participation.

What should we do if we find that pay isn't in line with the market?

Nothing or something -- it all depends on your compensation philosophy, what the position is, which employee is in the position, and your ability to make the change. If the employee is a solid performer, your philosophy is to pay at or above market, and the position is valuable to your organization, you should consider a phased approach to adjusting an employee's pay to market-competitive levels. If the employee is a bottom performer and their position isn't valued, sometimes it's okay to do nothing. As an employer, you don't have to make pay adjustments unless you feel they are warranted and worthwhile.

One of my employees thinks their pay is unfair, what should I do?

Employees often question the competitiveness and fairness of their compensation and how they are paid relative to employees in similar roles at other organizations. Let's just say that pay is never a workplace issue with which employees are most satisfied. This often stems from lack of transparency with regard to compensation administration and the proliferation of unreliable, employee-reported pay data available online. Nonetheless, there are a number of things you can do to make sure employees are aware of the steps your organization takes to keep compensation competitive and to make sure the process is as transparent as possible.

  • Do your homework. Conduct market studies to see how employees' pay stacks up to other organizations.
  • Create and communicate a compensation philosophy or policy about how your organization intends to pay employees relative to the market. Most importantly, make sure employees understand it.
  • Explain the salary survey sources you use to benchmark compensation.
  • Show employees how you pay them relative to the market, such as actual market or survey data.
  • Communicate the process by which your organization makes compensation decisions as transparently as possible. It will make the process seem less mysterious and secretive.
  • Provide total compensation or rewards statements. Employees often don't realize how much they are earning in benefits and other perks your organization provides and these figures usually surprise them.

It's important to note that even despite your organization's best efforts to be transparent, there will always be a number of employees who aren't satisfied with their pay. This is natural and common and isn't anything to be concerned about provided your programs and administration are legally compliant and you are attracting and retaining top talent.

 

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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Your Plans for Hiring Military Personnel

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There's a growing movement to help our nations veterans find work. ERC Preferred Partner CareerCurve is interested in your organization’s plans related to attracting returning military personnel to employment opportunities. 

They are conducting a survey, as a precursor to offering support to those employers seeking to align their hiring process to meet the unique needs of veterans looking for civilian employment. Your response would be appreciated.

Please use the link below to participate in this survey:
https://www.surveymonkey.com/s/CareerCurveMilitaryHiringSurveyYT8JQKV

Employers Develop Younger Workers

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Cleveland– According to the 2011 ERC/NOCHE Intern & Recent Grad Pay Rates & Practices Survey, most Northeast Ohio employers invest resources in training, development, and performance management activities for younger workers, particularly new graduates.

The survey shows that over 70% of employers provide new graduates with an orientation during their first week (72%), conduct performance evaluations (71%), and provide regular feedback and coaching (71%). Additionally, more than half of employers provide formal training (56%) and access to a mentor (52%). Fewer (20%) offer management in training programs for new graduates, however.  All of these developmental activities were more commonly offered by non-manufacturers than manufacturers. Similarly, larger organizations tended to be most likely to provide these, although they were still commonly used by small and mid-sized organizations.

Specific training and development opportunities provided to their new graduates as cited by respondents included: on-the-job training, corporate culture training, product/industry/market training, mentoring, shadowing, and targeted leadership development programs.

The results of the survey show that organizations are making investments in training and development for their younger professionals and emerging leaders. These organizations understand the benefits of on-boarding and developing younger employees early in their careers for their businesses and in developing a pipeline of talent.

View the Intern & Recent Graduate Pay Rates & Practices Survey

This survey reports data from Northeast Ohio employers about their internship and recent graduate employment and pay practices.

View the Results

9 Best Practices for Employee Engagement Initiatives

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A successful employee engagement initiative can make lasting and effective changes in the workplace.

Here are nine (9) best practices for your employee engagement initiatives. 

Collect data.

Conduct a regular employee engagement survey either every year or every other year. Organizations that consistently measure and track how well they are engaging employees are better able to assess areas of strength and opportunity in their workplaces to impact engagement. Most organizations that evaluate employee engagement survey employees at least every other year. If your organization is smaller, it may consider conducting a more informal benchmark for employee engagement such as interviews or one-on-one meetings.

Seek an external comparison.

Benchmark how well your workplace practices compare to other organizations. An external comparison is as important as an internal benchmark. You’ll need to know how your organization’s practices relative to engaging employees stack up against other organizations, particularly with those you are competing for talent. Market surveys, great workplace programs, and other audits can all provide helpful external benchmark information. Some organizations that conduct employee engagement surveys also provide normative comparisons.

Identify overall drivers.

Know the drivers of employee engagement at your organization. Drivers are simply those aspects that are most commonly and significantly driving employee engagement either up or down at your organization. There are many different facets of the workplace experience that influence engagement to varying degrees, but your resources and time are limited so you need to know which aspects are most important. By identifying the true drivers of engagement for your organization, you can focus your efforts on the things that matter most to your workforce and top people. A good employee engagement strategy is all about targeting the right things – not everything.

Identify individual drivers.

Many engagement initiatives fall short of identifying individual drivers of employee engagement - largely because this responsibility should fall on managers and supervisors. Managers and supervisors need to find out what engages each of their employees, and particularly their top people, through observation and conversations. These insights can be gleaned through day to day interactions, performance management, and communication. However, most managers and supervisors just aren’t attuned or trained to recognize what engagement is and why it matters. Your responsibility is to ensure that they have the right skills and resources to positively impact engagement.

Keep it relatively simple.

Scoring which is difficult to understand or results that includes too many segments or breakouts of data can detract from obtaining value in the process. If you conduct engagement surveys, make sure the scoring can be easily understood by those interpreting the results. Also, keep data segments and breakouts to a minimum so that the initiative does not become about “fixing” certain people, departments, or areas of business, but rather improving the engagement of employees.

Meet and discuss engagement with your leaders.

Once a survey, feedback, and/or benchmarking initiative had been conducted to evaluate employee engagement and how you compare internally and externally, it’s important to meet and discuss the results with your leaders. This ensures that engagement is seen as part of the larger business strategy and receives support. Key tips for creating this dialogue include: create an executive summary to help them digest the information obtained, tie the results back to issues of importance to them (business strategy, etc.), back your points with data and numbers, and provide recommendations for how to improve engagement. Another way you can make the results meaningful to your leaders is by providing segments of information that are important to them – such as engagement scores by the business’ divisions. The most successful engagement projects we’ve seen are those that are conducted with leadership support and participation from initial communications and analysis of the results to action planning.

Set goals aligned with employee engagement.

Having an employee engagement-focused strategy can help you set goals for your department and organization. Common goals that impact employee engagement include increasing employee engagement scores by a certain percentage, reducing voluntary turnover, enhancing communications effectiveness, increasing development opportunities, or even impacting the bottom line. Whatever these goals may be, they should be in line with the drivers of engagement and the areas of need. In turn, you should be able to tie these goals back to the larger business strategy. Be able to address why each goal is important to the business’ direction to gain support.

Create action plans, on-going conversations, forums, and follow-up.

Once you’ve set goals to improve employee engagement, create action plans to impact those goals.  We find that there tends to be a great deal of momentum initially right after an engagement survey that can become lost over time. To ensure that your goals are met and receive the support they need to be successful, create action plans with specific timetables, roles, and accountabilities. Additionally, if employee engagement is truly an important organizational initiative, it should permeate your organization and drive the actions of HR, managers, and leaders. Many organizations have on-going conversations and forums to discuss employee engagement and keep going back to the survey data.

Implement changes.

Lastly, implementing changes in an employee engagement initiative is crucial. Your organization should follow-up on the areas needing improvement either through direct change or acknowledgement of employees’ feedback, especially prior to surveying them in the future. If you plan to ask employees for their feedback – be prepared to respond because not making changes can lead to negative effects. It’s always a good practice to make any small changes quickly and to save the larger changes for later.

Additional Resources

Employee Engagement Surveys
ERC’s services are used by many local employers to gauge their employees’ engagement, identify drivers of engagement, benchmark scores to other local organizations, and help you translate the data into real, actionable changes. Click here to learn more.

NorthCoast 99
Benchmark how your organization’s workplace practices surrounding the attraction, retention, and engagement of employees compare to other employers by applying for the NorthCoast 99 award. All applicants receive free benchmark reports just for applying. 

Supervisory/Managerial Training
Are your supervisors and managers equipped to engage employees? Give them the right skills and competencies to impact engagement. Click here to learn more.

Preliminary Findings - Hiring & Selection Practices Survey

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The preliminary findings of ERC’s 2011 Hiring & Selection Practices Survey, which explored practices including background and drug screening, references, testing, and other hiring practices (including local hiring metrics), showed several clear trends in local employers’ hiring and selection practices.

  • Over three-quarters of employers plan to hire in 2011.
  • Over half of employers say that a job candidate’s current or previous salary (as reported on application) influences their decision to not hire an applicant.
  • About a quarter of employers report that a job candidate’s indication or request to not call a past or current employer influences their decision to not hire an applicant.
  • Over 70% of employers conduct reference checks, typically in-house versus using a vendor.
  • Employers most commonly use employment tests to evaluate administrative/clerical and management positions.