AFOA HR CONFERENCE 2015
Compensation 101
The Jouta Performance Group
Agenda
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Introduction
Compensation 101 – Art or Science?
What is your compensation philosophy?
Next steps
Compensation
101
Overview of Compensation
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Philosophy
Policy
Base Pay
“Add On” Pay
Incentive Pay
Benefits and Perks
Administration
Philosophy
The “guiding principles” that drive decision making
about compensation. Spells out why the company
makes decisions it does about how to pay an
employee
One size does not fit all
Policy
Derived from the philosophy. Outlines specifics such as:
• Lead, lag or meet the market?
• Market based or classification based system?
• How is compensation comprised (base pay, incentive pay)
• Determining base pay – geographic location,
supply/demand of talent, internal equity (measuring job
differences and the value of positions to the organization)
• Determining increases – performance, tenure, COLA,
profitability, competition for talent etc.
Base Pay – Market Based
1. Start with good data (internal job descriptions,
external surveys – AFOA BC 2015)
2. Determine progression from lowest to highest job
3. Determine current place in the market
4. Compare to desired market position
5. Develop pay bands and salary ranges
Anatomy of a Salary Band
1st
Quartile
2nd
Quartile
3rd
Quartile
4th
Quartile
Min
Q2
Q3
Max
Mid
Midpoint is typically market “weighted average” or
“median” (50th Percentile)
“Add On” Pay
• Overtime, on call, shift differentials, working
stat holidays etc.,
• Understand the legislative environment and
how it applies to your organization
• Add-ons can potentially increase costs 30-50%
above base pay.
Incentive Pay
• Not new! Oldest form of compensation in the
world. Specific pay for specific output.
• Today incentive pay is usually based on reaching
performance targets tied to organizational goals.
• Other forms of incentive pay include profit
sharing, retention or sign-on bonuses.
Benefits and Perks
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Are benefits cost shared or employer paid?
Group benefits (medical, dental)
Income protection (Life, AD&D, STD, LTD, C/I)
Employee Assistance Programs
Paid time off (vacation, stats, other)
Retirement (pension plans, RRSP)
Perks – tool reimbursement, education, discounts
Administration
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Based on your philosophy and policy
Timing of employee compensation reviews
Timing of market reviews
How employees move through their salary ranges
Clarity, Transparency, Ease of Administration
Movement through a Salary Band
Min
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Q2
Inexperienced
New in job
Unskilled
Low
Performers
Mid
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Competent
Solid over time
Fully successful
Experienced
Meets requirements
Merit Pay
Q3
Max
• Very experienced
• Top performers
over time
• Exceptional
Philosophy
How to create one?
Your Total Compensation Today
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What is “compensation”
Why is it important?
What do you think your current
compensation “philosophy” is?
What is working right now? What is not?
Do staff understand your compensation
philosophy and plan?
HR Strategy + Compensation
Culture
+Protection
+ Productivity
_____________
= Organizational
Performance
Defining your Philosophy
• Link to business strategy
• Reward behaviors that drive results
• Measure return – define and track
Defining your Philosophy
Start with creating a mission statement
for Total Compensation
The WHY!
Considerations for Policy
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Base Pay
“Add On” Pay,
Incentive Pay,
Benefits and Perks
What is in play currently? Does the current state support the
new/revised philosophy statement? What needs to change?
Next Steps
Next Steps
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Develop the Policy to support your Total Compensation
Philosophy
Create the work plan for developing your compensation
structure. Work plan will include:
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Ensuring you have up to date position descriptions
Rank positions from lowest to highest in the organization
Obtain current and relevant market data
Compare and contrast positions to market and identify initial gaps in
internal equity and external equity
Develop salary bands/compensation grid and place positions within grid
Final “sore thumbing”
Next Steps
• Develop action plan to bring incumbents to desired place within
range, when and where possible.
• Document your administration process in order to operationalize
the policy
• Develop the communication strategy to staff. What will you
communicate? What can they expect in the future?
• Stick to it!
Presented By:
The Jouta Performance Group Inc.
www.jouta.com
Invest in your people today, and protect your investment tomorrow.
604.488.8885