Strand, owner of consultancy HR Dynamics Inc., offered his seven steps to successful market pricing at a recent webinar hosted by BLR/HRhero.
[Go here for steps 1 to 4]
Let’s say that in analyzing market data, you come up with a market rate of $61,400 for an Office Manager position, and a 75th percentile of $70,900. Now you have another compensation philosophy decision:
Lagging more than 10% below the market is not recommended, says Strand. He also suggests being wary of bringing a new hire at the 75th percentile. However, he notes, you may a “mission critical” position or a position in which you have a lot of turnover, and maybe that suggests hiring at the 75th percentile.
If you do start a new employee at that high level, be sure you have good business reasons for doing it, he cautions.
Now say you decide to select the “meet-the-market” rate of $61,400 as the midpoint for the Office Manager position. Then you have to select the range; that is, determine how far the minimum and maximum will be from the midpoint.
There are conventions/practices regarding ranges. Typically the entry positions have a smaller range (35% to 40%). And executive positions have a larger range (65% to 75%) because of the learning curve. More specifically:
Following are the multiplication factors that will easily identify the range minimum and maximum from the midpoint and desired range:
35% = 0.8511/1.1489 40% = 0.8333/1.1667 45% = 0.8163/1.1837 50% = 0.8000/1.2000 55% = 0.7844/1.2156 60% = 0.7692/1.2308 65% = 0.7547/1.2453 70% = 0.7407/1.2593 75% = 0.7273/1.2727 80% = 0.7143/1.2857
For the Office Manager position, a range of 50% is selected, yielding the following range minimum and maximum:
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Finally, you consider the incumbent. Let’s say survey data indicate the average time in position for the Office Manager is 9.2 years. The 9.2 years is a benchmark that should align with the range midpoint.
Say the incumbent Mary Smith is making $59,800.
Note, says Strand, that this analysis doesn’t reflect job performance, which typically also has an effect on pay levels.
What’s the key element for all pricing? Job descriptions. Current descriptions that clearly specify the current and future requirements of the position. What’s the status of your job descriptions? Are they ready to help with planning? Are they ADA-compliant? Are essential skills delineated?
If not—or if you’ve never even written job descriptions—you’re not alone. Thousands of companies fall short in this area.
It’s easy to understand why. Job descriptions are not simple to do—what with updating and management and legal review, especially given the ADA requirement of a split-off of essential functions from other functions in the description. Wouldn’t it be great if your job descriptions were available and already written?
Actually, they are. We have more than 700, ready to go, covering every common position in any organization, from receptionist right up to president. They are in an extremely popular BLR program called the Job Descriptions Encyclopedia.
First created in the 1980s, the “JDE” has been continually refined and updated over time, with descriptions revised or added each time the law, technology—or the way we do business—changes.
700+ prewritten job descriptions in the Job Descriptions Encyclopedia now come with pay grades already attached. Click here to try the program at no cost and receive a limited time bonus.
There was a major revision, for example, following the passage of the ADA. In fact, BLR editors reviewed every one of those 700 descriptions to ensure they were ADA-compliant.
Another enhancement was the updating of pay grades for each job. According to our customers, this is an enormous time-saver, enabling them to make compensation decisions even as they define the position. You can see a sample job description from the program by clicking here. (Yes, it is the one for HR Manager—Pay grade: 37.)
The BLR Job Descriptions Encyclopedia also includes an extensive tutorial on setting up a complete job descriptions program, and how to encourage participation from all parts of the organization. That includes top management, the employees, and any union or other collective bargaining entity.
Very important these days, quarterly updates are included in the program as a standard feature—key at a time of constantly changing laws and emerging technologies. We’ll send you new or revised descriptions every 90 days. And the cost is extremely reasonable, averaging less than 43 cents per job description … already written, legally reviewed, and ready to adapt or use as is.
You can evaluate BLR’s Job Descriptions Encyclopedia at no cost in your office for up to 30 days. Get more information or order the Job Descriptions Encyclopedia.
Download product sampleDownload list of job descriptions included
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