PAYING YOUR EMPLOYEES FAIRLY AND EQUITABLY

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PAYING YOUR EMPLOYEES FAIRLY AND EQUITABLY

• Presented to
• 2009 NATIONAL
• SMART START CONFERENCE
• by
• Mike Womble, SPHR
• Carolina Human Resources, Inc.
• 310 N. Horner Boulevard
• Sanford, NC 27330
• 919-708-7000 mike_at_carolinahr.com

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DEFINITIONS

• Compensation the act or action of making up,
  making good, or counterbalancing ....payment for
  value received or service rendered.

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PURPOSE OF COMP

• Satisfy legal requirements
• Recruiting
• Retaining
• Motivating
• Others reasons???

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In North Carolina(Reminder)

• Upon being hired, employees must receive
  written or oral notification of the pay rate,
  vacation time and sick leave provisions, and the
  day and place for wage payments. Employers also
  must provide employees with written or posted
  information concerning employment practices and
  policies on vacation pay, sick leave, and
  comparable matters, and provide advance
  notification of any changes. Employees also must
  be notified of any policy or practice that can
  result in the loss or forfeiture of vacation time
  or pay. Employees not so notified are exempt from
  such loss or forfeiture.
• 
  (NC Gen Stat 95-25.12 to
  95-25.13)

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KINDS OF COMPENSATION

• Base pay
• Bonuses
• Commissions
• Incentives
• Differentials
• Value of meals and lodging

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OTHER KINDS OF COMPENSATION

• Employee Benefits
• Insured Benefits
• Time Off Plans
• Meals and rest periods
• Other Benefits

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PURPOSE OF GOODCOMPENSATION PLAN

• To help attract and retaining good employees
• cost of turnover 35 of employee compensation

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DIRECT VS. INDIRECT COMP

• Direct
• Base Pay
• Differentials
• Incentives
• Bonuses
• Overtime Pay

• Indirect
• Time Off Plans
• Work Comp
• Insured Benefits
• Misc. Benefits

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PAID TIME OFF

• - Vacation - Holidays
• - Bereavement - Personal
• - Sick - Jury
• Military
• PTO Plans
• Can be minimum cost benefit

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RULES OF A GOOD COMPENSATION PLAN

• Easy to understand
• Use the KISS method (Keep it simply simple)
• As brief as possible
• Tailored to specific workforce

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RULES OF COMP

• Communicate clearly
• Must be perceived as fair
• Few exceptions be consistent
• And remember..perfection will not be found!!!

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COMP THEORIES

• Determine the value of the position then the
  person!!!
• Worth of position worth of
• person ability to pay
• compensation

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RULES OF COMP

• Internal Equity
• External Equity
• Must Balance

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INTERNAL EQUITY

• Internal comparisons Position evaluation method
  most popular
• Ranges grades

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POSITION EVALUATION PLANS

• Used to analyze and determine the relative value
  between positions in the same organization in
  terms of their relative requirements.

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POSITION EVALUATIONNational Position Evaluation
Plan(supervisory, professional, administrative
positions)

• TRAINING
• Knowledge
• Experience
• INITIATIVE
• Complexity of duties
• Supervision Received

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National Position Evaluation Plan

• RESPONSIBILITY
• Impact of errors
• Contacts with others
• Confidential data
• JOB CONDITIONS
• Mental/visual demand
• Working conditions
• SUPERVISION
• Character
• Scope

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EXTERNAL EQUITY

• Market-based comparisons
• Wage surveys
• Supply and demand based

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COMPENSATION DESIGN

• DOES COMPENSATION ALWAYS HAVE TO BE PROVIDED IN
  ?
• ____ YES ____ NO
• (check one)

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WHAT ARE SOME OTHER WAYS TO COMPENSATE EMPLOYEES?

• LETS DISCUSS

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PAY SYSTEM WEAKNESSES

• Poorly administered
• Human factors
• Prejudices, biases, favoritism...
• Inflexible one size doesnt fit all

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TOTAL COMP STRATEGY

• Cost management
• Flexible benefits
• Compensation and benefits communication program

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TYPICAL PAY PLAN MODEL

• Assign responsibility for design
• Develop compensation philosophy
• Conduct an analysis of all positions
• Evaluate positions

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TRADITIONAL DESIGN MODEL

• Determine pay grades
• Establish salary ranges
• Determine salary structure
• Determine salary administration policy

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RANGES/GRADES

• Range Min to Max (typically 50)
• Spread difference between
• grades (7-10)
• Broad banding (reducing the number
  of pay grades)

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JOB PRICING

• Base Pay Structures
• Lead vs. Lag Positioning
• Paying out of range

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BASE PAY PLAN OPTIONS

• Fixed rates
• Step rates
• Performance-based pay

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BASE PAY PLAN OPTIONS

• Merit pay
• Skill-based pay
• Differential pay
• Example shift differential, dirty work, special
  considerations, etc.

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INCENTIVE PAY

• Individual incentives
• Team incentives
• Bonuses
• Discretionary vs. non-discretionary

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INCENTIVE PLANS

• 10 is minimum
• Employee needs nearly 100 control
• Team based vs. individual based?

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PAY FOR TIME NOT WORKED

• Vacation
• Sick Leave
• STD LTD
• Personal Days
• Holidays
• Jury Duty
• Bereavement

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COMPENSATION PLANS

• IN SUMMARY. . . .
• BE CREATIVE ! ! !
• THINK OUTSIDE THE BOX ! ! !
• DARE TO BE DIFFERENT ! ! !

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• .for your attendance and participation !!!