Post on 18-Jul-2015
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5 Steps to a Smart Compensation Plan
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Rusty Lindquist
VP Strategic HR Insights
BambooHR
Mykkah Herner
Head of Professional Services
PayScale
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5 Steps to a Smart Compensation Plan
5 steps to set up your
compensation plan
Gain executive support.
Define your compensation strategy.
Develop a market-based pay structure.
Build pay ranges.
Implement a total rewards plan.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Step 1: Gain
Executive Support
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Payroll is, by far, a company’s
biggest expense; the cost of
getting it wrong is tremendous.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Pay is the number 3 reason people quit jobs
[BambooHR study]. If employees aren’t being paid
what they’re worth, they will find it somewhere else.
Executives must care about compensation
if they care about retention.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Top Compensation Mistakes
• Not updating compensation regularly
• Not empowering managers to fix
problems
• Not being transparent
• Giving across-the-board raises
• Not having a structured plan
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Compensation plans help
the bottom line.
1. They make good business sense.
2. They help attract and retain talent.
3. They support your company’s mission,
strategy and culture.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
“If you pick the right people and give them
the opportunity to spread their wings and
put compensation as a carrier behind it,
you almost don’t have to manage them.”
—Jack Welch
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5 Steps to a Smart Compensation Plan
Step 2: Define Your
Compensation Strategy
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5 Steps to a Smart Compensation Plan
Questions to ask:
• What is your market?
• What are your goals?
• How competitive do you need to be?
• What should you reward?
• Is your current strategy working?
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5 Steps to a Smart Compensation Plan
What is the right compensation
mix for your company?
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5 Steps to a Smart Compensation Plan
—Harvard Business Review
“Keep the plan simple. It should be
extraordinarily clear which
outcomes you are rewarding.”
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Step 3: Develop a Market-
Based Pay Structure
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5 Steps to a Smart Compensation Plan
Decide on the correct job evaluation method.
Market Pricing v. Point Factoring
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5 Steps to a Smart Compensation Plan
Aging is great…
for wine and cheese.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Step 4: Build Pay Ranges
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5 Steps to a Smart Compensation Plan
Identify Market Differentials
Schedules preserve both competitive pay to local
markets and internal equity.
Baltimore+5%
DallasMain
Minneapolis+5%
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5 Steps to a Smart Compensation Plan
Determine Your Pay Grades
The number of pay grades you use will influence your
midpoint differential and should sufficiently distinguish
difficulty levels of different jobs.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Some considerations include
• How wide should my ranges be?
• How much overlap between pay ranges is good?
Build Pay Ranges
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Evaluating employee placement in range.
Developing guidelines or policies for movement.
Using Pay Ranges
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5 Steps to a Smart Compensation Plan
Use market data
Verify internal alignment
Assign Jobs to Grades
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5 Steps to a Smart Compensation Plan
Basic Function & Key Differentiators
• Administrative Accounting Functions to support AP & AR
• Update General Ledger• AP / Vendor Relations• AR
• Maintain General Ledger
• Prepare financial reports
• Interpret financial reports and statements for management
• Analyze financial data• Prepare budgets
Degree & CertificationRequirements
None Bachelor’s DegreeNo certification required
Bachelor’s DegreeCPA required at proficiency
Bachelor’s DegreeCPA required at start
Critical Skills at proficiency
• Attention to Detail• Excel• Data Entry• Quickbooks
• Attention to Detail• Quickbooks
• GAAP • General Ledger• Monthly Reconciliation• Financial Reporting
• GAAP• Financial Reporting• Financial Analysis• Budgeting
Years of Experience
• 1-2 at proficiency • 3-5 at proficiency • 5-7 at proficiency • 8-10 at proficiency
Accounting Assistant
Senior Accountant
Accountant I
Accountant II
Grade C Grade E Grade 5 Grade 7
Build Career Path
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5 Steps to a Smart Compensation Plan
Step 5: Implement Total
Rewards Plan
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Compensation Plan Element
• Philosophy
• Strategy
• Structure
• Policy
• Process
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5 Steps to a Smart Compensation Plan
Budgeting for Increases
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5 Steps to a Smart Compensation Plan
Deal with Outliers
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5 Steps to a Smart Compensation Plan
Strategies: Equip Managers
• Educate them
• Give them the big picture
• Give them tools
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5 Steps to a Smart Compensation Plan
What can we do now?
1. Talk with executives about the need for an
updated compensation plan.
2. Research market data for your employees’ jobs.
3. Create a pay structure to ensure internal equity.
4. Review your current compensation policies and
decide where updates are needed.
bamboohr.com payscale.com
5 Steps to a Smart Compensation Plan
Follow BambooHR and PayScale on social media:
bamboohr.com/blog | payscale.com/compensation-today
Thank you!
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5 Steps to a Smart Compensation Plan
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