Have you ever sat in a room and felt cold? You put your jacket or sweater on to warm up because you are uncomfortable. I’ve felt this in more hotel conference rooms than I can count!

If you are in a cubicle or office space that is cold, you may run a small space heater below the desk to warm up. (Shhh...don’t tell property management or facilities.) Or if you are too warm, you may have a fan that moves the air so you can cool off.

I often think of compensation like the temperature in a room. If it is just right, it’s not noticed. There isn’t too much or too little being delivered to employees. 

Imagine working hard to prove you can do higher-level work so you can be promoted.  You cover for your manager when they are on vacation. You write the guidelines and processes that the team uses to ensure consistency and effectiveness. You are the “go to” person for challenging issues and you train the new hires that join the department.

You have received “above expectations” performance ratings for the last three years.

Your manager leaves the company, and you apply for their job. After interviewing and waiting for weeks you learn you are promoted. (Yes!) But you learn that the promotion does not come with a base pay increase. (You realize this is a dry promotion.)

Have you heard of the term “liquid workforce”?

It is from an Accenture report describing the growing trend of freelance workers in the marketplace. The workforce is liquid, fluid, and adaptable so you can bring in the right people at the just the right time to get the work done.

I am bringing this up now because most employers are doing their planning for 2025 and are deciding on their goals and initiatives.

There are many decisions that need to be made when designing your pay grades and salary structures:

1.        What is your compensation philosophy? Do you target the 50th percentile for base pay and total cash compensation or something higher/lower?

2.        What is the range spread as you progress from lower-level jobs to executive level jobs?

3.        What are the midpoint progressions from the lowest grades to the highest?

4.        What do you use to assign pay grades? Market data only or a combination of market data and internal equity?

Employers: Have you conducted a pay equity audit within the last 12 months? 

If you did, I am assuming you found one or more of the following:

1.        Wage discrimination

2.        Below-market salary ranges

3.        Inconsistent  base salary ranges (and/or incentive targets) assigned to jobs

4.        Promotion disparities

I’ve witnessed firsthand how pay compression can erode employee morale and lead to regrettable turnover.

Examples of pay compression:

#1 - The pay of an employee is very close to or above the pay of more experienced and higher performing employees in the same job title.

#2 – The pay of an employee is very close to or above their first level supervisor.

Why does this happen? Rapid hiring, external labor market changes, or failing to regularly adjust compensation structures.

I’m watching the path of Hurricane Milton today and hoping that it doesn’t cause as much damage as predicted. It is scary how powerful this storm is and how much we don’t control in our lives.

Milton is arriving so fast after many lives were lost in Hurricane Helene. The images after that storm of the broken buildings, the changes in river paths, and destroyed roads and bridges are reminders of what can be lost quickly.

The storm that devastated major sections of the southeastern U.S. has also brought people together. Neighbors and strangers have helped each other with food and water.  The stories of rescues and generosity are plentiful. The linemen are working to restore power. First responders are working overtime. People are volunteering their time, talent, and resources to help remote communities recover.

Pay transparency laws in the U.S. continue to be passed.  The effective dates by state and jurisdiction vary

·        2019: Cincinnati Ohio

·        2020: Maryland, Toledo Ohio,

·        2021: Colorado, Connecticut, Nevada

·        2022: Jersey City N.J., Ithica, N.Y., New York City, Westchester County N.Y.

·        2023: Albany N.Y., California, New York, Rhode Island, Washington

·        2024: Hawaii, Washington D.C.

·        2025: Illinois, Massachusetts, Minnesota, Vermont

Designing jobs and aligning their responsibilities is something every employer does. 

Within the HR function, talent development and compensation can be combined to achieve synergies and provide a better employee experience.

These aspects of talent development cycle are better designed and delivered in collaboration with the compensation team. 

Job architecture projects are easier the smaller the employer. If you have 50 employees and 35 jobs, that is far easier to align than 500 employees and 360 jobs. 

Once the foundation is established, the employer follows the processes and uses the tools to make consistent decisions.

It helps build trust with employees. It positively impacts the attraction and retention of talent. And it gives leaders confidence that they are making decisions that are based on competitive market data, aligned to budget, equitable, and fair.

What should you include in your job architecture project?

When the temperatures start dropping, those eight-legged creatures start moving indoors. I don’t like them.

I envision them all over my house having babies and partying.

Today a spider was in the shower with me, and I happily washed it down the drain. As I was secretly celebrating, I remembered the story of Charlotte’s Web.

Charlotte, the spider, was so kind to Wilbur, the pig. When he found out he was going to be slaughtered in the winter, she spun words in her web. She was determined to save him and keep him safe.

What do you consider when designing compensation structures that attract and retain talent while also ensuring fairness and equity?

First determine what factors are most important to you as an employer. That list may look something like this.

1.        Alignment to Organization Strategy and Goals: Influences compensation philosophy and incentive metrics

2.        Affordability: Impacts budget for annual salary increases and market/equity adjustments

How do you balance the need to offer competitive compensation packages with budget constraints?

You prioritize and determine where the most value is created. The main justification for an employee’s salary and other rewards is the value they create. 

For example, if you are a SaaS company, then you may spend more on your software engineers and sales team than other roles.

·        Employers may choose to align the total compensation opportunity for these jobs at a higher percentile than the 50th percentile.

Many employees are now expected to be at the office during the workweek instead of having the flexibility to work from home as much as before.

Arguments for returning to the office include things like...employees are more productive and creative in the office. In-person collaboration is easier and more beneficial for team projects and problem solving. Returning to the office can result in a stronger workplace culture.

And yet others think employers have a hidden agenda with the mandatory return to office policies. They think employers want some employees to quit so they don’t have to lay them off.

The higher up in an organization you are the less you know about what is really going on. 

When your direct reports and their teams prepare an update for you, they make sure to portray progress on deliverables and hurdles to success in a way that is sanitized.

Sanitized means made more palatable by the removal of elements that are likely to be unacceptable or controversial. In other words, you aren’t getting the real story about what is going on.

Some senior leaders have skip-level meetings to get an understanding of reality.

When you are developing your compensation communications plan and resources, remember that:

·        The average human attention span is only 8.25 seconds.

·        54% of adults have literacy below the 6th-grade level in the U.S.

This means that your audience needs simple, short, and relevant key messages delivered just in time.

If you are planning a 2-hour compensation training session for managers as you get ready for the annual compensation planning cycle, stop. Rethink how you can deliver the key messages in a shorter more concise format 

Whenever I create a compensation training presentation, I start with sharing the purpose of the total compensation elements base pay, short-term incentives, and long-term incentives.

What is the purpose of base pay?

·        It is to provide security and address the short-term needs of employees.

What is the purpose of short-term incentives?

·        To reward individual employee goal achievement and short-term company success.

Today we have a long list of rewards that employers can provide to their employees. Things like base pay, bonuses, sales commissions, allowances, stipends, long-term incentives, paid time off, health insurance, retirement benefits, life insurance, flexible work schedules, wellness programs, dental and vision insurance, education assistance, medical leave, etc.

The next iteration of employee rewards will be intrinsic motivators.  Autonomy, mastery, and purpose will become more critical to the employer value proposition or EVP.

Some employers are already focusing on this under the heading of workplace culture and leadership development.

·        Autonomy is controlling what we do and how we do it.

Finance and HR should be collaborating on a regular basis on employee compensation programs and budget. 

The largest expense in most organizations is for their employees’ cash compensation, benefits, and other rewards.

HR/Compensation regularly benchmark jobs to salary survey data and update the pay grade structures and incentive targets. Then they analyze employee total compensation to determine what budget may be needed for the next fiscal year.

What’s the difference between a workload increase and significantly changed job responsibilities?

 Answer: The changes to the current job description are critical to HR’s analysis of this difference and so is the conversation they will have with the manager overseeing the work being performed and the employees doing the work. 

 ·        When a job’s responsibilities change, if the change is additional work that is substantially similar in complexity, knowledge, problem solving, accountability, and impact as the current work, then this is a workload increase.  A higher pay grade is not assigned, and a higher base salary range is not warranted.