The topic of compensation and raises can be a sensitive subject in the workplace. Oftentimes it is a point of discussion that many managers would rather avoid unless absolutely necessary. In spite of how some would like to avoid it, it is extremely important to have a well thought out compensation strategy.

What happens when a key player or productive member of your team asks for a raise, or brings up the issue of compensation inequity? Has an employee’s job developed beyond what he or she was originally hired for? If so, their compensation may be outdated when compared to the market standard.

So what do we do? If we give the individual a raise for fear of losing them, or because their job has developed to a greater scope, then the question of ‘what about everyone else?’ can arise. Giving raises to only those employees that vocalize the issue can lead to inequity and resentment amongst other employees.

What’s the Solution?

In these cases, it is best to execute a Compensation Analysis. A Compensation Analysis is a market comparison of salary rates that also reviews each position and the employee’s duties and compares those duties to similar market positions. This allows you see if that star Accountant on your team is actually a Controller, and whether their compensation needs to be adjusted to reflect their responsibilities.

The next step is to do a thorough Compensation Assessment, comparing your company’s compensation to other companies who are similar in size, revenue, and geographic location. Consistent data sources must be used to maintain the quality of data points. If necessary, the data can then be adjusted to account for the local economy and the relevancy of the position.

Once this has been compiled and verified, an informed compensation conversation can commence. Managers must now determine the equity of each position. For example, if data shows that your Customer Service Supervisor’s salary is equal to that of your IT Manager, a decision must be made as to the internal value of each position in relation to the other. Taking this into consideration, if your business is a call center, and your Customer Service Supervisor oversees 10 staff, whereas your IT Manager manages one direct report, it may be that the positions have the same internal equity.

Once internal equity structures are in place, each employee should be placed along a compensation band, according to their qualifiers:

• Performance

• Education

• Experience

• Designations

• Certifications

These compensation bands are then linked to a performance review process, such as the TPD Performance Review Program as well as an employee development plan.

Having a formal compensation review performed by a credible third party allows your company to be transparent in the Compensation Analysis process. This helps in gaining employee acceptance of your Compensation Analysis, and having a credible, data-driven report can make those difficult conversations with your employees easier.

To find out more about Compensation Analysis for your company, reach out to TPD's HR Services!

Inthran Jeyaratnam, HR Administrator

With his background in recruitment and dynamic experience in sales, small business operations, and client relations experience, Inthran delivers scalable HR Solutions for organizations ranging from small and medium-sized businesses to multi-million dollar companies across a variety of industries.