The importance of salary philosophies.

A philosophy of payment is the commitment of a company with the way it values \u200b\u200bemployees. A coherent payment philosophy gives the company and employee a frame of reference by discussing salary in a negotiation.

The objective of a salary philosophy is to attract, retain and motivate employees. For companies in the private sector, this generally requires a competitive salary philosophy. For companies in the public sector, this means a well-rounded philosophy, With a focus on benefits and working life.

Companies attract, motivate and conserve through total compensation

The purpose of a good compensation philosophy is to attract, retain and motivate good people. To achieve these objectives, the Companies use a mix of the three main components of compensation: base payment, also called salary; payment of incentives, either in the form of cash or award not in cash, such as the stock;and benefits, or non-financial rewards. A payment philosophy is a mixture of the three, since the company must pay whatever it is that you agree.

For example, the salary philosophy of a company could be offering salaries that are competitive in the market, or could favor the pay that is structured to attract employees instead of paying helping to retain them. But few Companies can afford to attract, motivate and conserve a generous compensation. The challenge is to create a payment program that recognizes the three objectives without exhaustion of resources.

As an example, suppose that a small company with moderate cash resources is establishing a salary philosophy. Philosophy could seem something like this:

Pay a competitive base salary, not an aggressive, but a comparable salary To which an employee could get elsewhere. On equity in the company to all employees, so they can harvestR Elrecompetes of the company. Aggressive In total general compensation through the use of incentives. If, for example, an employee is below the market at $ 20,000 in the payment of the base, provides the market parity through a signature bonus of $ 5,000 ; a $ 5,000 retention bonus; and an incentive of $ 10,000. Incentive programs should be designed for high-performance people to obtain high compensation.

LARVE-LAB, LEG-LEAD establishes the time of adjustments

Most companies review salaries once or twice a year, but the market moves continuously. Therefore, it is likely that the payment of a company is in the market value only once or twice a year, similar to the hands on a broken clock, which only says the right time twice a day.

As a consequence, companies must decide which time of the year offer increases, and if they must lead the market at the beginning of the year and delay in lateof year; or to delay at the beginning of the year and lead at the end. These two approaches are called Leadership Pen and Lagno Lagnos.

The domain of employees ties the skills for market value

Some payment philosophies carry out a monitoring of skills development that lead to competition in a work. The more competent an employee, closer to the market value He or she is put. This is a way to pay according to a market based on the value of skills.

The payment of employee competition is in contrast to paying longevity, which has abandoned the favor in many industries, but prevails. Formula for employee domain involves calculating a comparison, salary of the Employee on the market, defined as the median or some other control point. For example, if an employee earns $ 45,000 and the median for that work is $ 50,000, the employee has a comparation90 percent ion.

An employee who has been lost to a 90 percent comparison is at risk of leaving work. If the Company is interested in retaining the employee, it will not cost much that it brings to the market. If There is a reason why the company does not want to pay 100 percent of the market of this work, for example, if the employee is not yet completely competent at work, it could make sense to pay the employee98 percent of the market. In the example. Previous, the company would pay $ 4,000 more to your current employee, which could well meant $ 50,000 complete anyway, to ensure against the cost of hiring a new employee.

There are several advantages of the payment method by domain. Because the payment is linked to the market value of a job, employees are not stuck with merits increases of only a few percentage points per year. Because the market value of a job is linked toSkills, the conversation about the compensation can start from a level game field: an assessment of how the employee compares with each of the competition and skill measures.

It is not the same as performance. Someone that is not yet competent in a job may be learning some of the basic skills, especially after a promotion. However, the employee’s performance may exceed expectations. Poor artists do not meet work expectations, and companies usually do not keep these employees for a long time.

As employees become competent in their Jo.BS, it is important to keep them moving to the next level. Otherwise, your payment will stagnate and can become unmotivated or search elsewhere by a new challenge .

The program must be carried out in a consistent manner

By law, payment practices must be coherent, they should not discRIminar, YNO must be arbitrary. However, a salary philosophy can include different approaches for different types of employees.

For example, a company could decide to pay a competitive rate for most jobs and an aggressive rate for jobs that are especially difficult to fill and import itchy. Company can pay its executives and their Sales personnel in the 75th percentile and the rest of their employees in the 50th percentile.

A philosophy applied inconsistently can devalue employees and bring to problems. For example, suppose a company established a fee Flat of $ 9.90 per hour for employees not exempt in a role of customer service. The department had a 200 percent billing. In spite of published flat latarifa, some employees with university degrees negotiated successfully for $ 10 per hour or more, while employees with 20 years of experience assumed fiThe flat rate was not negotiable. Print, three women over 40, a protected class under the laws of age discrimination, earned less than three men who had just graduated from the University. The disparity was that women never requested more.

Legal cases involving such discrepancies are often focused on the principle that it is more ripped to violate and be inconsistent with their own payment practice that they follow the law. In this example, correction Discrepancy could cost the company tens of thousands of dollars. If the money is not on the budget, the department could be forced to lay people to bed or freeze salaries.

Communication is part of the retention

Employers benefit from communicating their salary philosophies to employees, because a philosophy of soundsistantly applied creates a sense of impArciality Some companies announce their salary structure as a recruitment and retention strategy. If a company publishes its salary philosophy anywhere, you should also tell any employee to request it.

Labor candidates should also be aware of a company’s wage philosophy. If a company does not have a salary philosophy, it will be easy to know during salary negotiation. Some companies even publish philosophy in an employee manual, and show employees where they are in relation to the market. It makes more sense, during a salary negotiation, so that an employer says: \”My final offer is $ 67,000, which is 100 percent of the market,\” what he does to say \”, my final offer is $ 67,000, And I can not pay a penny anymore. \” Usually, it can not mean not.

It may be the benefit of a company even to communicate a two-pointed wage philosophy where oneS works are compensated for more than the market rate. For example, a company with a high billing in its service to the Department Customer Service, a critical department for the success of the company, decided to compensate customer service representatives above the market.The customer service people got better workspaces , incentive plans and base payment higher than the market. At communicating this change in philosophy to all employees, the CEO spoke frankly about the commercial reasons for philosophy and the value to the company. Some employees thought that the Change was unfair, and abandoned the company. But others respected the CEO for their honesty and justice, and stayed. It made it easier to hire and keep the staff of customer service work, and the plan was successful.

Start dialogue, involves senior management

If you have questions about the philosophy behind your compensation, ask SudepartaMOUNT OF HUMAN RESOURCES FOR A COPY OF THE SCHOOL SALARY Philosophy. This should show you the link between your payment and the general compensation principles of the company.

If your company does not yet have a salary philosophy, it suggests Queel’s Department of Human Resources establishes one. Employees need to see the connection to understand their value. Payment philosophies are important for companies of all sizes and stages because without employers can end up underlying or paid to pay for employees. Both problems are at a cost for the company, whether on billing or high salaries. In most companies, a person of human resources assumes responsibility for compensation; In a small business, the CEO could be competent in the compensation principles.

When a new company is establishing a salary philosophy, the senior management must be involved, and the philosophy mustBe strongly aligned with the objectives of the company.The CEO and another higher management must understand the program, agree and support it constantly so that the effort is successful and worthwhile.Do you need a solution that helps you use real work data to determine the right to pay the philosophy for your organization?Companalist can help.Reserve today.