ALTERNATIVE 1 - Black & White:

I’ve worked with a few employers who have pay decision tools (Excel spreadsheets) that tell the user what the employee or new hire should be paid based on a few factors.

The factors are usually one or more of the following:

· Years of relevant experience

· Performance rating

· Education and training

· Seniority

The spreadsheet has fields that are filled in based on these factors. Then there is a calculation that says here is where the employee should be paid within the base salary range assigned to the job.

This is a very black and white way of making pay decisions. And it doesn’t include the review of other employees and their pay (internal equity) at that point in time.

ALTERNATIVE 2 - Shades of Gray:

The alternative to this is using those same factors but determining where to pay using discretion and judgement. For example, the image associated with this post divides the base salary range into three zones.

· Bottom third of the range = Learning

· Middle third of the range = Role Modeling

· Top third of the range = Demonstrating

The description of each zone is compared to the factors associated with each employee or new hire. And other employees doing comparable work and their pay are also reviewed. In other words, internal equity is considered.

What is your preference?

1) Calculate the employee’s or new hire’s base pay (black and white)

2) Use discretion and judgment to determine the base pay (shades of gray)

And given the pay equity and transparency focus we have today, do you think 1 or 2 will be what employers move towards in the future?

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