An employee’s journey with an employer starts when they apply for an open job. Ideally, the employer includes the base pay range, incentive information, and a benefits summary on that job posting.
The interview process doesn’t give the employer a tremendous amount of verifiable data on which to make a new hire pay decision.
The candidate is selling themselves to the employer. The employer is selling themselves to the candidate. Everyone is on their best behavior and realistically not everything that is shared is true.
Sometimes the new hire is paid more than they are worth and sometimes they are paid less than what they are worth. AND an employer doesn’t know this until the new hire has worked there for at least 6 – 12 months.
One way that I have seen employers try to fix this problem is by creating a “New Hire Pay Rate Calculator.” It is a spreadsheet that considers a factor or multiple factors and then it calculates what the new hire’s base salary should be.
1 factor example:
FORMULA = Pay Grade Midpoint x Relevant Experience = Base Salary
· 0.8 = less relevant experience than what is required in the job description
· 0.9 = equal to what is required in the job description
· 1.0 = 1 – 2 years more than what is required in the job description
· 1.1 = 3 – 4 years more than what is required in the job description
· 1.2 = 5 plus years more than what is required in the job description
2 factors example:
FORMULA = Pay Grade Midpoint x Seniority x Performance = Base Salary
Seniority
· 0.7 = less than 1 year with the employer
· 1.0 = 1 – 3 years with the employer
· 1.3 = 4 – 6 years with the employer
· 1.6 = 7 plus years with the employer
Performance
· 0.9 = Developing
· 1.0 = Demonstrating
· 1.2 = = Role Modeling
Have you ever created one of these tools?
Did you only use it for new hires, or did you use it for promotions too?
What challenges has this approach caused when you have used it? How did you solve those?
Do you think this will become more common with the pay equity and transparency laws being passed?
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