Do you need a pay strategy?

Have you ever wandered through dense, unfamiliar woods? You weave around trees, hop over streams, and climb over other obstacles until you no longer know where you are or how you got there. Confused, maybe even a bit afraid, your palms sweat, your heart pounds, and you wonder, “Which way do I go?”

At this point, you may be thinking that a compass would be a valuable tool to have. While a compass won’t provide a clear path out of the woods (you will have to use your judgement, and you may not be able to travel in a straight line), it will point you in the direction you need to go.

Talent compass and pay strategy go hand in hand

Being an employer sometimes feels like being lost in the woods. There are so many unknown paths to navigate and obstacles to avoid. Two of the biggest obstacles, finding and keeping talent, are becoming increasingly tough challenges to manage.

So wouldn’t it be nice to have a “talent” compass? Just a simple tool that could help employers in their struggle to attract and retain talent in a competitive job market?

Good news, there is a tool any employer can use: it’s called a pay strategy.

A well thought out pay strategy is designed to attract and retain key talent. For most employers, this means having an understanding of what other organizations are paying and defining ranges of compensation by position so that managers can make informed business decisions on pay.

If you are like many employers, you want to pay all of your employees at or above market pay levels, but you simply can’t afford it.

There are two ways you can combat this situation:

  1. You can reduce headcount by laying off your less productive employees, thus allowing you to allocate some of their pay to others and hope your remaining employees are satisfied. (Caution: there are many factors to consider prior to using this option.)
  2. You can develop a pay strategy (your compass) using market pay data to make business decisions when administering pay.

The second option, developing an effective pay strategy, provides a forum for management to think about how the organization will retain its best talent and recruit other great talent. In short, your pay strategy will point your organization in the direction it needs to move. Keep in mind, however, that like the path through the woods, even the best pay strategy may need to be change course as needs (and markets) change. Significant market adjustments occur most often when positions are in high demand. A high demand position may be the result of fewer qualified candidates or changes to the business environment.

How should an organization administer its pay using a market based pay approach when the budget doesn’t allow it to pay at “a competitive level?”

It’s not easy, as there are many factors to consider. To stay on track, start with a written document that centers on your best strategy for managing pay issues and addresses the following decision points:

  • Will you provide a general cost of living adjustment, and if so, how will that amount be determined?
  • How will you differentiate pay for top performers compared to others? How are you going to determine your top performers?
  • How will promotional adjustments be authorized? Will managers have free reign to provide promotions to employees, or will there be a system of checks and balances? What will be expected from an employee before he or she can be promoted?
  • How will you budget for the different adjustments in order to provide the most value?
  • How often will you perform a market study on your employees? How will the results be put into action?

Once you’ve documented your strategy, you can define your pay administration guidelines. These guidelines will help your organization manage its pay plans within its strategy. Effective administration is essential for your organization to execute its strategy to its full advantage.

Creating an effective compensation strategy with pay administration guidelines is a useful tool for any organization navigating the competitive landscape for talent. Yes, you may occasionally need to stray from the data to retain or attract certain individuals, but the important thing is that your organization’s compass keeps you moving toward your strategic pay goals.


Questions? Contact the Findley consultant you normally work with, or contact Brad Smith at brad.smith@findley.com, 419.327.4414.

Published on May 8, 2019

© 2019 Findley. All Rights Reserved.

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EEOC Changes: Employer Actions to Consider

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This is an update of a previous Findley article on the Equal Employment Opportunity Commission’s (EEOC) proposal to add W-2 income data and hours worked data to the EEO-1 Employer Information Report (EEO-1).

In early March 2019, a federal judge restored the required collection of employee pay data on the EEO-1. In April 2019, the EEOC stated Component 1 data for 2018 would still be due May 31, 2019. Component 2 data would be due September 30, 2019 and the portal to accept data should be ready in mid-July. The expectation is that Component 2 will be appealed.

The EEOC is responsible for enforcing federal laws that make it illegal to discriminate against a job candidate or an employee based on race, color, religion, sex, national origin, age, disability, or genetics. Companies with 100 or more employees and federal government contractors with 50 or more employees are required to file an EEO-1 each year. Previously, the EEOC revealed proposed changes to the EEO-1 to include W-2 earnings and hours worked data.

The current (Component 1) EEO-1 requires employers to note and report the number of workers by job category and then by ethnicity, race, and sex. The proposal (Component 2) requires companies to disclose the number of employees and total hours worked by job class and annual salary bands. The data assists the EEOC in finding possible pay bias and assists employers in promoting equal pay.

Completing the new form may uncover questions about current pay practices. Employers should consider getting out ahead of issues before company leaders begin to ask questions.

A best practices approach to consider includes:

  • Pay Strategy – Document how the company wants to pay employees. The strategy is the compass used to guide disciplined pay design, delivery and governance. For many companies, the goal is to deliver competitive pay that aligns with the market and rewards employees for company performance linked to employee contributions.
  • Job Classes and Pay Bands – The proposed EEO-1 requires disclosing pay data by annual salary bands. Many companies establish a “market rate” (or target pay) for a position and use it to create a range. Review your current job classes and look at the pay ranges for each position. Do the differences between pay ranges make sense given the roles and duties? Understand the impact each position has on the company.
  • Market Benchmarking – Consider benchmarking your positions to published surveys. Over time, the pay ranges may differ from the market. Decide if certain positions are over market, which hurts the profits of the company. Determine if some positions are paying too little, which puts the company at risk of losing talent.
  • Systems – Take a look at the systems you are using to track and manage pay. If gathering the data needed to conduct a review as outlined above would be difficult, a new system may be needed. There are many pay software platforms that are affordable and should save time and help avoid reporting errors.

The EEOC proposal is one of many factors creating the need to revisit pay strategies. Companies have been challenged by competitive markets, health care costs, and increased investor and government oversight, which have led to employee pay discussions. Taking a proactive approach to assessing pay programs can help companies avoid penalties and assist in attracting and retaining talented employees.

Questions? Contact the Findley consultant you normally work with or Tom Hurley at Tom.Hurley@findley.com or 419.327.4143.

Posted on April 10, 2019

© 2019 Findley. All Rights Reserved.

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