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WHY YOU NEED TO ASSESS THE SKILLS OF YOUR EMPLOYEES

Written by Kai Donesa on January 18, 2022. Posted in Resources.

Organizations typically provide a range of pay for each job. And what these pay ranges represent is the value an organization places on experience within a grade level. Traditionally, pay ranges are divided into steps or increments awarded on a fixed calendar schedule. When an employee moves up a step, this usually indicates satisfactory performance was achieved. But what often happens is that organizations move staff through the steps simply because another year has passed.

While the general belief is that over time, with experience, the value of work carried out by an employee should increase, we know this isn’t always the case. Organizations can have staff who have been in their roles for ten years but only show minimal progression or improvement in their quality of work. Other times, an employee can be in a job for less than two years, but they learn fast and deliver timely and quality outputs proving an increase in tenure does not always equal an increase in the value of work.

The question managers and supervisors should ask is, “How can we measure experience without relying on time or tenure as a proxy?” “And if we continue to award pay increases each year to staff, how can we determine that the knowledge of our staff also grows at the same pace?”

The lack of an approach to move staff through the pay range continues to be a challenge for many organizations. And while the alternative approach to steps applied by many organizations is to use merit increases as a basis to manage pay movement, we know that this approach is just as flawed.

In our article, Pay for Performance is HR’s Biggest Epic Fail, the problem with using performance as the basis for pay movement is that it rewards an employee’s one-time achievement through a salary increase even if we know that their performance may not be the same the following year. Further, the rubric designed to determine increase differentials among staff is often so minimal that it has no impact and does little for employee retention.

We all know performance management can be tedious and difficult. But we all also know that they are important. So, what’s the alternative? In Birches Group, we have a different approach, and it is simpler than you think!

WHY SHOULD YOU ASSESS YOUR EMPLOYEES’ SKILLS?

We believe that pay movement should be linked to skills growth and knowledge. It is known that as one learns and develops further into their roles, they acquire more experience and skills that allow them to deliver faster, better-quality work. And because skills are accumulated and cannot be unlearned, there is a sustained value to the organization making it a more reliable basis for salary increases.

But beyond pay management, assessing the skills of your staff will also greatly support your organization’s strategies around capacity building and career development. Knowing the skill level of your entire workforce enables managers to identify and create the necessary initiatives that will help close existing skills gaps and facilitate the movement of staff, either deeper into their grade or promotion to the next higher level.

In our next articles, we will go deeper into our approach to measuring skills and how it can support many of your talent management programs from pay movement, learning and development, and recruitment and career planning. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

BUILDING YOUR SCALE: IMPLENTING YOUR NEW SCALE

Written by Kai Donesa on December 21, 2021. Posted in Resources.

Now that your salary scale and benefits package is ready, the final step is implementing your new scale and communicating the changes to your teams. Equipped with your analysis and overall cost implications against your budget, you will now need to secure the necessary approval from management.

When seeking approval, begin by presenting any existing issues with the current salary scale and the challenges your salaries are facing against the external market. Take management through your process when you built your new salary scale, making sure to highlight:

The chosen salary survey you used as a basis
Your chosen set of target comparators that met your criteria
The difference of your existing salaries against your target market position
The steps you have taken to address the current issues and build future capacity
The overall cost

Finally, you also need to present to management your implementation plan and the timeframe that it will require, so they can assess the entire impact of the new scale.

Once approval has been granted, the next step is communicating the changes to staff. This is a crucial process because you will need to equip your managers with the right information for them to relay later to each of their teams or units. When discussing the changes with your staff, keep these in mind:

Discuss the work that went into building the salary scale and be clear on the company policy that supports the steps you have taken. This will ensure that your managers will be ready to answer any questions or reactions their staff may have.

Be clear about your implementation plan, what staff can expect, and when. This way, you can manage everyone’s expectations and hopefully have them feel excited about the changes that are soon to take place.

With the steps we have shared on implementing your new scale, we hope this has provided you with the insight you need to get started in designing your own pay structure. Birches Group is always ready to help organizations create a salary scale that will work for them. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: ADJUSTING YOUR SCALE

Written by Kai Donesa on December 9, 2021. Posted in Resources.

Now that you’ve created your salary scale and examined your benefits package; the next step is adjusting your scale. Refining your scale will be a trial and error process until you get as close to your target as possible. There are several factors that will affect the impact of your scale, both externally and internally, so it is crucial to keep these in mind every step of the way.

When we think about external factors that affect the impact of your salary scale, factors such as average market movement, your budget, the number of incumbents per grade level in your organization, as well as the overall cost all need to be considered. When you start allocating adjustments for each grade level in your scale, using the average market movement and your budget, you can start adjusting your scale’s minimums and maximums, while keeping the number of incumbents per grade level in mind. Once you have gotten as close to your target market position as possible, check if your adjustments are all within budget. If not, keep adjusting and tweak where necessary.

While adjusting your pay ranges, you also want to keep in mind the issues that your existing salary scale has and how your changes will best address them. Are your hiring rates competitive at the job levels where you need more capacity? Do any of your existing staff fall below your current hiring rates? Similarly, do you have staff that are currently paid beyond the maximum salaries of their grade level? Do you make use of your salary ranges per grade level or do you find many of your staff clustered in certain points in each grade? Remember, adjusting your salary scale is not simply about updating salaries following market movement. It is also about making corrections where you know there are inefficiencies in the current pay structure.

Just as important as reaching your target market position and being competitive externally, is your team’s internal cohesion. Once you have reached your desired salary scale results, give it another look to see if everything makes sense. Pay close attention to your internal parameters, such as the progression from one grade level to the next, and see if the overlaps are reasonable. Examine your spans – the difference between your minimum and maximum salaries – as well and see if they align with the nature of each job level within your organization. Also, you will need to see how each of the adjustments you made will affect staff at every grade level. Checking for fair internal cohesion will ensure strong staff engagement to which they can tailor their development and build their careers over time.

Designing and refining salary scales is both a technical exercise and a sensitive one. As managers in human resources, we must realize that without an efficient salary structure in place, along with a solid job structure, achieving a strong engaged workforce will always be a challenge. And while we know that the salaries we set will not always make everyone happy – someone will always want higher pay, someone will challenge your chosen set of target comparators, and perhaps ask why they cannot have more benefits – what is important is making sure that the policies that went behind designing the salary scale is clear and communicated to staff. To learn more about how Birches Group can help you design a salary scale fit for your organization’s needs, contact us today.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: ANALYZING BENEFITS

Written by Kai Donesa on November 18, 2021. Posted in Resources.

Analyzing your benefits package is a step that can’t be missed. In many labor markets around the world, benefits are an essential part of total compensation. Particularly in developing markets, some benefits are mandatory, others may be cultural, and some given to address certain realities on the ground. Whether you are a local organization or an international one, it is essential to have a policy that aligns with your market’s local conditions.

Additionally, benefits are also an important part of a company’s Employment Value Proposition (EVP). Determining which benefits your company provides, the frequency it is provided, and grade levels eligible to receive them can be used a strategy to attract and retain talent, showcase company culture, and be seen as an employer of choice.

Once you have aligned your total compensation against the market, designing your benefits package will begin by ‘backing out’ your benefits to arrive at just base salary. From there, you can assess which benefits to keep and maintain, and which ones to change.

When examining your benefits package, here are three things we suggest you keep in mind:

What benefits are considered mandatory in your market? – different countries have different mandatory benefits. Some countries have mandatory bonuses on top of base salary, others may have mandatory housing or transportation allowances, while others have government-mandated health and pension contributions. As an employer, you will need to follow what is prescribed by law, especially if you are an international organization.

What benefits are common practice in your market? – knowing which benefits are commonly provided by most employers in your market can also help when designing your benefits package. Of course, it is not necessary to follow every single benefit provided. But those that are given by majority of the companies could be considered and examined further against your budget and policy.

What benefits are considered tax-advantageous to your staff? – depending on your market, some benefits can be considered taxable and others non-taxable. When thinking about benefits, employers can provide contributions or cash benefits that do not trigger a tax deduction from staff or maximize its non-taxable portion as much as possible.

Further, when designing your benefits package, employers also need to think about the grade levels that each benefit will apply to. Unless it is mandatory, not all benefits need to be provided to all grade levels and in the same manner. There are some benefits that are given to certain grade levels due to the nature of their jobs. Incentive-based benefits and representational benefits are more common for roles in managerial levels, while cash allowances and transportation benefits are more commonly provided to general and process-based grade levels.

Benefits can also be used by employers to encourage desirable behaviors from their staff. A classic example is using performance bonuses to reward achievement and a job well done at the end of the performance year. Another is the use of loans, seniority allowances, or even company-sponsored savings plans to promote staff retention. Sometimes, companies also hold activities that foster workplace culture among their employees, from team lunches, happy hour, to corporate social responsibility events. In our many years of conducting salary surveys and collecting data from employers in over 150 countries, we have certainly seen a lot of creativity from employers when using benefits that highlight their unique company culture.

When analyzing your benefits, we must remember that, in the end, benefits are cheaper than salaries. Base salary, bonuses, and allowances all come from the same internal budget, so every dollar that goes into providing more benefits will take away from the budget for other components of your staff’s employment package, such as pension and salary increases.

Birches Group can help your organization design a benefits package that aligns with your policy while meeting local conditions. Contact us to get started.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: MEASURING YOUR MARKET POSITION

Written by Kai Donesa on October 25, 2021. Posted in Resources.

Measuring your market position is a critical step in building your salary scale. Once your target comparators have been narrowed down and the target percentile has been identified, analyzing your salaries against your chosen external market to arrive at recommendations that will frame your overall pay structure is when strategies around recruitment and retention begin.

There are several ways to go about measuring market position. Here are some steps that you can consider:

Focus on Salary Ranges – salary ranges provide a more stable and realistic view of the labor market, rather than using incumbent salaries as a reference. We know that incumbent salaries are person-based, and rates can vary significantly depending on who is sitting in those roles. When building a salary scale, salaries need to be based on the nature of the job and the value the organization is willing to pay for it with reference to similar job levels in the external market. Further, incumbent salaries are extremely volatile especially in developing markets. Using salary ranges provides context and is based on actual market movement, as well as serving as ‘bookends’ that can take away outliers in your analysis.

Assessing Your Market Position – when measuring market position, a common approach is to average all benchmark jobs in the same grade level in your organization, while also considering the number of incumbents associated with each data point as the weighted average. Using the recommended salary survey in your compensation policy, you can then begin to measure your market position for each grade level using your findings and assess them against the external market.

Less Emphasis on Occupational Variance – over the years, too much importance in terms of pay has been placed on certain occupations simply because they are considered ‘hot jobs.’ But the truth is, occupational variance, when measuring market position, is not as meaningful as you think. When assessing pay, adjustments are applied to the salary scale, which is generic, and not to specific occupations. Moreover, market data results would sometimes report higher pay for certain industries giving an illusion that those functions are paid higher than other jobs of similar levels in the market. But what that higher number simply means is that there are more data points reported for those specific roles, therefore pulling the overall average compared to other jobs with less data points reported.

Do Not Forget the Four Job Clusters – in our previous article, It Starts with Jobs, we discussed that the labor market does not move at the same pace for all grade levels. This is especially true in developing markets. In our Community approach, we believe that the labor market has four job clusters – General, Process, Design, and Leadership – each one moving at different paces depending on the availability of talent in each unique market. In highly dynamic markets, it is common for grade levels found under the Leadership cluster to move much quicker than grade levels under the General, Process, and Design clusters. Due to the specific skills required and level of contribution expected from the Leadership cluster, jobs at these grade levels are usually harder to recruit therefore resulting to significantly higher differences in pay. On the other hand, jobs under the General, Process, and Design clusters are more widely available which explains the more gradual pay movement. Since this is the reality in most labor markets, it follows that setting pay should not just be one number but instead, requires a more tailored approach depending on the organization’s needs and objectives.

With the steps that we have recommended when measuring your position against the market, we must not forget that internal cohesion between grade levels is just as important when building your salary scale. Being able to balance external competitiveness while maintaining fair pay relativities internally is what organizations need for an effective and well-designed pay structure. Birches Group is ready to help your organization design a salary scale that meets your needs. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

BUILDING YOUR SALARY SCALE: THE JOB STRUCTURE

Written by Kai Donesa on August 12, 2021. Posted in Resources.

An organization’s job structure is an illustration of its how specific jobs are grouped and classified based on the nature and purpose of work, different levels of contribution, and how each level relates and progresses to one another. More importantly, the job structure provides the framework to which organizations can apply policies on compensation management, as well as design strategies around learning and development, specifically on career opportunities and promotion, all aligning to the company’s overall business objectives.

There are different types of job structures available, each one designed to support specific needs an organization might have. When choosing which type of job structure to adapt, the focus of your existing jobs – whether career-based or project-based, any future expansion, and the possible addition of new roles or teams within your organization – should be kept in mind.

The most common types of job structures are the traditional salary structure, the broad-banded structure, and the project-based structure, each with its own advantages and disadvantages.

Types of Job Structures

Traditional job structure – provides a well-defined sequence or progression path from one job level to the next. Think of a typical career progression: Entry-level roles start as analysts, then progress to specialists, while MBA graduates (for example) start as specialists, then progress to managers, and finally to directors. The differences in levels of contribution, complexity, and pay ranges are explicit at each level, and movement within the grade or to the next higher-grade can be deliberate based on skills growth and experience. Traditional job structures are easier to manage and communicate to staff, but the pay ranges often have less flexibility than other approaches, particularly when staff reaches the maximum point of their job grade. Traditional structures are found most often in organizations with well-established career paths, where staff grow their careers by moving “up the ladder.”

Broad-banded structure – A broad-banded structure comprises fewer bands with multiple job levels grouped into each one. Some organizations prefer the broad bands because they provide wider pay ranges and more flexibility in pay management. As staff accumulate more skills and experience, pay increases and progression can be provided through lateral movement within each band without necessitating a promotion. Broad bands are not without their own challenges, however: They often cause confusion for managers and staff since less structure and guidance are provided for salary setting and the differences between job levels within each band are not as distinct as a traditional structure. Broad-banded structures are more popular with organizations that desire a flatter hierarchy and fewer levels.

Project-based Structure – The project-based structure also has grades or bands similar to the first two structure types above. What makes this structure different is that each grade or band is designed for roles that have short lifespans to reflect the project timing, without the possibility of promotion. A structure like this is only appropriate for project-based organizations with definite term contracts. Project-based structures often have higher minimums reflecting the need for employers to reach experienced talent that can “hit the ground running.” Employers utilizing such a structure should also consider project completion bonuses to improve retention.

In Birches Group, we believe that a simple, clear, and consistent approach to job evaluation is the key to a well-designed job structure. The type of structure and number of grades an organization chooses to go with is an easy one to adapt, but without a solid job evaluation methodology to readily provide the standard needed to classify your jobs into their appropriate levels, will only lead to bigger issues in capacity and pay management in the future.

Our Community™ Jobs solution uses only three factors – Purpose, Engagement, and Delivery – to evaluate any job across fourteen grade levels. These three factors are found in any job and together, provides a simple and transparent methodology that serves as the foundation for an exceptional job structure.

Organizations require structure to optimize and ensure the capacity it needs to achieve its goals and ultimately lead to business growth. Job structure, along with the pay structure, are one of the most important human resources management tools an organization will need to build and maintain an organized and efficient workforce. Through our integrated workforce management solution, Community™, Birches Group is ready to help your organization create a job structure that fits your needs. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

PERFORMANCE MANAGEMENT IS BROKEN. FIX OR GIVE UP?

Written by Kai Donesa on April 21, 2021. Posted in Resources.

Performance management is the Achilles Heel of HR. It remains a contentious process that many companies have now abandoned, or at least are thinking of abandoning. A tool initially intended to communicate management objectives and keep the work of staff aligned throughout the year has now evolved into a dreaded exercise that just further leads to a disengaged workforce. With its rigid design and lack of adaptability, the traditional performance management approach has left many questioning its effectiveness. But without it, organizations are deprived of the feedback system needed between management and staff. Sure, you can abandon performance reviews, but before you do that, check with your lawyers to see if it’s a good idea. They will probably suggest that it is not.

Clearly, performance management is broken. Let’s explore why it’s broken and look at some ways to fix it.

The Failure of Cascading Objectives

In classic performance management, the broader company objectives provide the framework which is cascaded into the different departments and then finally delivered as individual objectives to staff. While this may certainly sound like a logical approach, many find the entire process confusing, subjective, and frustrating.

One of the biggest issues with the cascading objectives approach is that it is a one-sided conversation. Many employees, especially at the lower levels, find it difficult to understand the goals set out for them by management with respect to their actual roles. Since the approach does not allow the goals of the staff to be centered around their jobs, there is often a disconnect between what the employee is hired to do in the first place versus what they are asked to accomplish by the end of the year.

Another issue with the cascading objectives approach is that the process does not allow for much flexibility. Strategic goals established by management at the beginning of the year can easily change after some time. But classic performance management tools can be difficult to use, and executives are often reluctant to update their goals and go through the entire process again.

Finally, because managing cascading objectives is so time-consuming, running the exercise always requires extensive monitoring by HR. The problem with this top-down approach is t takes too much time. By the time the process reaches lower-level staff, the allotted timeframe for the entire exercise has already passed.

With these challenges, it is easy to see why many organizations have chosen to give up on performance management entirely. But before you throw in the towel, shouldn’t you consider some alternatives?

What if we tell you that there is a better approach? One that brings the entire performance management exercise back to what it was originally meant to measure – results. Introducing Community™ Performance from Birches Group.

Why Do You Need Performance Management, Anyway?

Community™ Performance

In our article about pay for performance, we highlighted the key differences between recognizing employee growth in their job and rewarding employee achievement. The former is focused on measuring the accumulation of skills and knowledge in staff as they become more expert in their job roles. This growth should be recognized through pay movement. Employee achievements, on the other hand, should be measured and rewarded with one-time recognition through bonuses or other, similar tools.

Like the performance of the stock market, past achievement does not guarantee future achievement. Therefore, performance should not be the basis for salary movement. Instead, achievements attained during the performance year should be celebrated and rewarded relative to that year.

Linking Performance to Purpose

One of the most glaring flaws of classic performance management is that it sets goals for staff that are often irrelevant to their jobs. Birches Group’s Community approach to performance management centers its expectations on performance to the actual definition of the job level. While specific initiatives set for each job may change year after year, the purpose of the job level remains the same.

Going back to Community’s approach that jobs at every grade level can be evaluated using only three factors – Purpose, Engagement, and Delivery – the same can be used to measure performance by simply asking three questions:

Purpose – Does the employee have good ideas?
Engagement – Did they listen and adapt to customer feedback?
Delivery – Did they deliver on time with high levels of quality?

Using an approach that measures achievement by linking it back to the job evaluation factors, this provides organizations a performance management system that is standardized, simplified, and can easily align with objectives across different grade levels and teams.

When the focus of measuring achievement becomes purpose-driven, employees will better understand how their objectives contribute to the overall mission of the organization, resulting to a more engaged and motivated workforce. Equally, this can allow employees the responsibility for setting their own initiatives in a way that contributes to the organization’s strategic priorities giving them ownership of their own performance.

Focusing on the Good

In traditional performance management, only the achievements of high performers are celebrated often causing the rest of the staff to feel demotivated and ignored. Because it uses a five-level rating system, many see the Achieve rating as inadequate. But the fact is most staff in an organization are reliable and satisfactory performers – those that deliver what is expected of them in a performance year. If most of the staff were able to carry out their jobs effectively by the end of the year, why only reward the achievements of an exceptional few?

Through Community Performance, we believe that achievement should be connected to reliable and satisfactory performance – celebrating the many good performers that are able to Achieve their primary purpose. Instead of a five-level rating system, we have developed a four-level rating system where there is only one level above Achieving the primary purpose of the job. This way, outstanding accomplishments achieved by an exceptionally few high performers during the year can be rated accordingly, but still allowing majority of staff to be rewarded.

360° Performance

Classic performance management applies a top-down approach where only the direct supervisor provides feedback on an employee’s performance. While it is the supervisor that would be familiar with the work of their staff, allowing for only one perspective can create room for partiality.

Additionally, the standards used in classic performance management has not always been clearly defined, making it possible to have differing interpretations among supervisors leading to inconsistent ratings despite similar levels of performance among some of the employees.

Our Community performance management approach allows for multi-rater perspectives. By applying our 360° feedback from the supervisor, peers, and external clients, this gives depth to the assessment and allows for a more holistic and objective outlook of one’s performance.

Traditional performance management has left many organizations confused and frustrated. But measuring performance remains essential to good workforce management. It provides an opportunity to link everyone’s contribution to the success of the organization. Rather than giving up on performance management, Birches Group is here to help your organization provide structure and clarity. Contact us to learn more.

SALARY SCALE DESIGN eBOOK: STRATEGY, STRUCTURE, AND SYNTHESIS

Written by Bianca Valencia on April 9, 2021. Posted in Resources.

The salary scale is the single most important document in human resources. It tells you everything you need to know about an organization:

• How the organization positions itself in the market
• The value the organization places on its jobs
• How relationships across jobs are managed
• Possible career progressions
• Where the organization stands on equity and transparency

For an organization to work efficiently and achieve team cohesion, a well-balanced salary scale is crucial as it drives all other critical HR programs — everything from recruitment, staff retention, promotion, and ultimately career development.

Designing a salary scale requires skill and expertise, balancing the internal considerations and team dynamics with the external market. It’s an art form, not just math.

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SALARY SCALES: DEFINING YOUR ORGANIZATION’S REACH

Written by Bianca Valencia on March 18, 2021. Posted in Resources.

A company’s salary scale is a reflection of its pay philosophy. A salary scale illustrates an organization’s values in terms of how it positions itself in the market and a demonstration of its internal pay policies – whether career-based or project-based. But more importantly, salary scales can tell us everything we need to know about an organization – from its internal cohesion explicitly differentiating the value they are willing to pay at each job level, to how they approach the symmetry between experience and responsibility.

In addition, organizations use salary scales as a tool to manage staff. Its structure shows the relationships of work from one grade level to the next, variable, or predictable movement within the organization, and expectations around career can be identified.

Types of Salary Structures

The three most common salary structures applied by most organizations is the traditional, broadband, and step pay structure.

Traditional Structure – typically has multiple grades, each with established salary ranges providing for a well-defined progression path from one job level to the next. Because of its straightforward design, career progression is clearer and easier to communicate because differences between job levels are very distinct and pay and career movement can be done in a controlled manner.

Broadband Structure – has fewer bands with multiple job levels grouped into each band. Many organizations find this structure to be more flexible where career progression can be done through lateral movement within each band and salary increases can be provided without necessarily warranting a promotion. However, differences between job levels is not as distinct in the broadband design which could be a cause confusion among staff.

Step Pay Structure – is made up of multiple grades, and each grade has several steps representing scheduled pay increments every year. The step pay structure’s rigid design allows for clear and predictable pay movement within each grade, but is linked to staff tenure/time rather than skills growth.

Tailoring Your Salary Structure to Support Multiple Employment Scenarios

Once an organization has decided on their salary structure type, each grade should now be tailored to illustrate different employment scenarios that can be expected in that organization.

What many do not realize is that there is more to building a salary scale than just simply setting minimum and maximum salaries at each level. There are two other things to keep in mind when designing your salary scale, and that is your Span and your Inter-Grade Differential. To put it simply, the span of your salary scale is the difference between the minimum and the maximum salary of each grade level. This ultimately defines the range of pay for work at any position. Your inter-grade differential, on the other hand, refers to the overlap between one grade level to the next. This allows you to differentiate the level of responsibility between grades. Organizations need to keep in mind that the spans of certain grade levels would depend on the nature of the jobs in that grade. For some jobs, their nature is to progress deeper into their grade resulting to more complex and highly-skilled work, some are expected to advance to the next higher grade, while for others, the nature of their role does not change.

In the case of project-based jobs, it would be logical to apply narrow spans for their grade levels because their roles are not designed to be short-term depending on the project. Career-based jobs, on the other hand, would have wider salary ranges to support growth in skills, moving them deeper into the grade or advancement to the next higher grade over time. Lastly, there is also time-based jobs where their nature does not change justifying a wide salary range but does not allow for much discretion for pay increments or career advancement.

Below are three examples of salary scales showing different employment scenarios, number of grade levels and overlaps between salary ranges:

The salary scale above is an example of a traditional structure with multiple grade levels with each grade mapped to one job level. Salary ranges for each grade is defined showing the value the employer has established for each level of work, and movement from one grade level to the next is clear.

The salary scale above is an example of a broadband structure that has fewer grade levels/bands, but with multiple job levels present in each grade. As staff accumulate more skills and experience, pay increases and progression can be provided through lateral movement within each band without necessitating a promotion.

The salary scale above is an example of a project-based employment scenario which also has grades or bands like the first two structure types above. What makes this structure different is that each grade/band is designed for roles that have short lifespans to reflect the project timing, without the possibility of promotion. A structure like this is only appropriate for project-based organizations with definite term contracts. Project-based structures often have higher minimums reflecting the need for employers to reach experienced talent that can “hit the ground running.” Employers utilizing such a structure should also consider project completion bonuses to improve retention.

A salary scale is essential for any organization. It affects all other areas of HR – from recruitment, to pay management, career development, and promotion. But we recognize that not all organizations have the capacity to design a salary scale. Birches Group has extensive experience in designing salary scales to fit the needs of organizations from different sectors and markets. Contact us to learn more.

FIVE STEPS TO BENCHMARK YOUR COMPANY’S COMPENSATION AND BENEFITS

Written by Bianca Valencia on March 11, 2021. Posted in Resources.

In human resources, salary benchmarking serves many critical needs. It helps organizations assess the competitiveness of their total compensation versus the market, and is an important step in managing your human resources program. When organizations look to introduce new positions, salary benchmarking ensures a good understanding of the prevailing market conditions.

Here’s a short checklist – five steps – to follow for your next benchmarking exercise:

Start with a High-Quality Survey

To do any benchmarking, you need market data, and that market data comes in the form of a survey. The foundation to any market survey is its job matching approach. The job matching exercise ensures that jobs of similar levels of complexity are benchmarked against each other to establish common value across the market.

It’s important to understand the methodology for job matching used by the survey provider and how the process is managed. Are clients responsible for job matching, or does the consultant take the lead?

In Birches Group’s Community™ Market surveys, our survey specialists perform the job matching on behalf of every client, ensuring consistency and high-quality.

We use a job matching methodology that is simple, clear, and consistent, based on our Community™ Jobs evaluation approach. Community™ Jobs considers three factors – Purpose, Engagement, and Delivery.

Purpose enables us to examine each role within the organization and determine its primary objectives and how it supports the overall mission of the organization. Engagement identifies how each job interacts and collaborates with internal and external stakeholders to carry out its function. Delivery examines how each role plans, organizes and delivers work to fulfill the organization’s mission.

These three factors are present in any job, at any level. And together, they allow us to understand how an organization conducts business across all levels of work, starting with defining the purpose of its jobs, determining their level of engagement, and examining how each of its roles organizes and delivers service.

2. Focus on Grade Data

Many salary surveys take pride in the number of specific jobs captured in their surveys, but this is really a questionable practice. Most organizations use generic pay bands and set pay ranges for all jobs at a particular level across all occupations. Jobs with the same internal grade are paid in the same pay range, so the differences measured in the survey between different jobs are based not on job characteristics at all, but personal ones, like performance or tenure. Job data is also easily affected by the number of incumbents matched to a particular role, giving an illusion of precise differences based on volatile data of questionable value. The differences reported in the survey by job are misleading.

When benchmarking your salaries, we believe that organizations should focus on grade data. Grade data is based on the job level and the associated ranges, and not the actual people sitting in those jobs. It’s a more reliable analysis because grade data captures all jobs with the same contribution level to an organization. Grade data is a more stable representation of actual market movement versus incumbent salaries, which is highly variable.

3. Know Your Target Market

Before making your assessment, it is important that you select the survey comparators that are relevant to your organization. Out of the bigger survey sample, you will need to choose a smaller group of comparators relevant for your organization.

Market surveys can have twenty to over a hundred participants, or even more. But it does not necessarily mean that you compete with each one of them. If you are unsure where to begin with your selection, the criteria below are great places to start:

Organizations working in the same/similar sectors;
Those which you have lost staff to/hired staff from;
and Organizations in the same geographic area.

You should also consider comparator organizations which share a similar Employee Value Proposition (EVP). Each company’s EVP is different, but look for organizations that have similar mission, approaches to career development, or pay and benefits philosophies similar to your own organization.

4. Identify Your Market Position

Once you have narrowed down the selection to your chosen comparators, the next step is to identify which level or percentile of the sample you want to target. But before making that decision, you will need to go back to your company’s EVP. Your EVP for total rewards should state your organization’s objective for competitive market position.

Organizations typically state their target market position as a percentile of the targeted comparator group. A position versus the 50^th percentile or median of the market is common; going higher or lower is OK, too – it depends on what talent market you are trying to reach.

Being competitive is not always just about salaries. Allowances and benefits – monetary and non-monetary – can also be used to attract and retain talent. In our own experience, we have encountered companies that choose to position their salaries a bit lower in the market range but offer additional benefits on top of market practice. Again, depending on your company’s EVP, its all about striking that balance.

5. Always Use Fresh Data

If you are responsible for managing your company’s compensation and benefits, one concern that you might have is making sure that you are working with the most updated market information. Companies that have solid compensation policies will still struggle to maintain their competitiveness in the market if they are working with outdated information.

In Birches Group, we recognize that not all organizations update salaries at the same time every year or apply the same frequency between salary reviews. We know that organizations choose to participate in salary surveys when it makes sense for them. Our surveys are evergreen, with the opportunity to participate when it makes the most sense for you, and multiple publication dates.

Our Community™ Market salary surveys are updated three times a year, every April, July, and October. This ensures that we always have the freshest data in our surveys and that any change to your compensation and benefits can easily be captured anytime during the year. Our evergreen approach also allows us to grow our survey sample throughout the year, providing our participants with the most robust data possible.

Birches Group provides labor market information for over 150 countries around the world. Our compensation and benefits surveys cover a full range of professional and support levels, providing information that ensures a client’s pay practices are aligned with the market conditions of leading employers in each country. Contact us to learn more.

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

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WHY SHOULD YOU ASSESS YOUR EMPLOYEES’ SKILLS?

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Types of Job Structures

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!

Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz to know your score!