Employers are benchmarking jobs right now and establishing their 2025 base pay ranges and incentive targets for bonuses and sales commissions.

The salary survey data for the bonuses and commissions need to be reviewed carefully. Is the reported number in the salary survey an Actual incentive payout or is it the Target? What is the difference?

·        The Target is the number that the employer will typically pay when the employee achieves the metrics at 100% in the incentive plan.

In the incumbent weighted pay data, each employee is treated with equal weight. All employees and their pay contribute to the calculation of the job’s median, average, and other percentiles.

·        The downside to these calculations is that employers with a large portion of the employees in the data set influence the job’s reported statistics. And this heavy influence of the large employers may inflate the final statistics. Smaller employers are also not going to pay as much as large employers so you can see how incumbent weight data can be “off.”

·        Also, individual employee pay rates are impacted by what each employee brings to the job. Some employees have more skills, experience, or education than others. Employees also have different performance levels and that influences their pay. And constraints like internal pay policies/guidelines and internal equity are factors in individual employee pay decisions.

The French Fry Theory is the idea that you always have room to eat one more fry. It is easy to say yes to one more thing at work or to delegate something more to a team member.

In a world that moves fast and in workplaces that expect a lot from us, we can sometimes forget to slow down and pause. How much is a serving of French fries? How much work is beyond my capacity? What is nice to have vs. absolutely necessary?

As we get closer to the end of the year, pause, and list out the things you and your team are working on. What is reasonable? What can you eliminate?

Geographic differentials are used by employers to recognize that there are differences in the cost of labor in different work locations.

Typically, the employer will establish a pay grade structure based on the national pay data for a country. Or they will use the headquarters location if that is where most employees are working.

Then they will compare the compensation data for all work locations in relation to that baseline (national or headquarters location). The baseline is labeled 100% and the other work locations are above, below, or near that 100%.

For instance, the list may look something like this:

An unfortunate reality of being human is being disappointed. 

·        Disappointed you didn’t get the pay raise you asked for so you could be paid more competitively.

·        Disappointed you didn’t get the promotion. An external candidate was selected to fill the job instead of you.

·        Disappointed you are a Director Analyst (see my previous post) and can’t have the strategic impact you expected to have in your role.

We have high moments and low moments in our days. The dog greets us with love when we wake up and when we come home. Your toddler tells you they love you. You find twenty dollars in your winter coat pocket.

Every time I go to a conference, I wear layers because the rooms are either too cold or too hot. I’m sure I am not the only one mentioning this on the feedback form that the organizer receives after the conference.

It is one of the reasons why I like working from home. I can make my office as warm or cool as I want without impacting anyone else except my dog. And Cody’s good at getting up and leaving the room if he’s not comfortable.

Pay should be “just right.” Not too much and not too little. Just like the temperature in a room.

Everyone makes mistakes.  We’re human and that is part of life. But we can learn from our mistakes and from each other. 

Common Compensation Mistakes:

1.      You choose the match from the salary survey with the compensation number you want instead of using the job description and choosing based on the job’s responsibilities.

2.      You choose the salary surveys to use based on the results (low/high numbers) and not on an assessment of whether the participating employers are your competition for talent.

The process used to market price a job should be written and consistently followed.  Here is an example. 

1.        Read, review, and compare job descriptions.

2.        Choose compensation survey data. Two to three salary survey data sources are typically used.

3.        Match jobs to survey data based on job responsibilities and not job title. Document decisions and determine market reference point for each benchmark job.

If you are thinking about what it takes to get promoted, don’t forget to focus on soft skills along with your technical skills.

Getting noticed and paid what you deserve is the goal. As I coach employees, we often spend time on potential career derailers like:

1 – effective communication: speaking, presenting, writing, and connecting with others

2 – emotional intelligence

3 – the quality of their ideas and thinking

Smaller companies need the compensation basics developed and implemented:

·        A compensation philosophy

·        Written job descriptions

·        Benchmarking jobs with market data

·        Pay grade structures with base pay ranges

·        Offering target incentives (STI and/or LTI) aligned to the external market

·        Written compensation processes and guidelines

When the company grows and is larger, then you need to add things like:

Job architecture projects are challenging and complex for any organization. They have the potential to improve employee attraction, engagement, and retention.

Employees don’t just want to be paid what they are worth. They also want a clear understanding of how they can grow and develop their career.

Pitfall #1 is governance. Without it, the decision-making process around jobs and their standard titling and categorization may be inconsistent. Governance also helps to ensure that what you pay is competitive, equitable, or fair.

Employers: Imagine having a job posted for more than 100 days. You finally find a great candidate named Randi. You make an offer because they have 35 plus years of experience and believe they will be a good fit within your organization. However, Randi is pushing for a base salary that is higher than the maximum of the range.

You are a small organization, and Randi compares your offer to other larger organizations and their pay ranges.  (The jobs across the employers are the same and at the same career level.)

You make the job offer at the top of your base salary range and communicate all the other non-cash things that you provide as an employer with the hope of getting Randi to say yes.

Then Randi sends a message to one of your employees, Carol.

HR/Compensation departments often find themselves with more work than employees to get it all done. There is the day-to-day transactional work, the peak times during the year where you must resource certain initiatives, and then there is the project work that will help you shift from reactive to proactive.

My team and I are available to you so you can resource the compensation work with the right skills at the right time.

Dedicated Support for Day-to-Day Transactional Compensation Work

·        Job Evaluations – Market pricing or point factor evaluation of new and changed jobs

·        Answer questions and partner with HRBPs on business leader driven compensation tasks

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.