“I think what we’re going to see is that where there were takeaways or freezes, the money is going to be given back, but not across the board,” says Dorf, who is Managing Director of Compensation Resources, Inc. “Companies are doing it on a much more discrete basis, targeted to those employees who have really shown that they are contributors to the company overall.”
Some companies believe that their low turnover indicates employees are happy with the company and with their jobs. Dorf sees that as a mistake.
“There have been a number of studies that asked people if they were happy in their jobs. People said ‘No, and when the market improves I plan to look for another job.’ That is fairly widespread. What that tells me is the companies which are telling me they have done things right and that’s why their turnover is low are just totally off-base.”
4 Steps to a Sensible Compensation System
If you recognize that employees may be impatient as they wait for the Big Thaw, there are some things you can do to encourage them to stick with you.
Step 1 in moving from a ‘duck and cover’ position back to a normal, ongoing mode, is to develop your corporate compensation philosophy, says Dorf. “Have a heart-to-heart talk with senior managers and owners of the company. Decide what your philosophy is on how you are going to pay your people. Ask, ‘Are we willing to put in a pay-for-performance program that will allow our people to make the same or more money, with part of it based on performance?’
“There are very few industries now that are not paying some sort of variable compensation. It serves a couple of purposes. One is that you only pay if the results are there. If the employee doesn’t get the results, he makes less money.”
The second purpose of variable compensation is to encourage employees to strive for better results.
Don’t trust national salary data when you can have data specifically for your state and region. Find state data on hundreds of jobs in BLR‘s famed Employee Compensation in [Your State] program.
Step 2 is creating a compensation strategy. Dorf explains: “Determine a strategy from an organizational standpoint. Who are you going to compete against in the marketplace? Remember that you’re competing for bodies, not necessarily for customers.”
Banking institutions and credit unions, for example, often don’t realize that they are competing for the same employees, because they view their niches in the financial services market as different. “That may be true for some positions,” says Dorf, “but the reality is that the majority of their employees are tellers, platform personnel, clerical folks, and they each need those people.”
Step 3 is determining the elements of the compensation program. “You need to determine if you have anomalies or shortfalls. Are there people who are overpaid or underpaid? Now you need a strategy on how you want to implement whatever changes you plan to make.
Step 4 is to make sure you have a good performance evaluation system in place, a way you can compare employees against the job’s requirements and skill sets and accomplishments, and see whether or not they should get more money.”
He cautions, though, that you have to be consistent in how you do that to ensure you’re treating everybody fairly. “The justification for pay increases can’t be subjective.” Dorf cautions companies that employers must make the increases in a strategic manner, based on real data.
“If the money you’re giving out is going disproportionately to younger people, you may open yourself up to a discrimination case,” he says.
No doubt, managing comp in today’s environment is challenging. If you don’t pay enough, you’ll never get the people and productivity you need, but on the other hand, if you pay too much, it’s bye-bye profits.
The challenge is complicated further by factoring in other variables–where you’re located, what the law says, what your competitors are paying– not to mention internal equity issues. How do you figure it all out? Where do you get good data?
A Program to Avoid Compensation Miscues
Our editors recommend a classic BLR program, used by thousands of companies for more than 20 years: Employee Compensation in [Your State]. The [Your State] refers to the fact that a separate edition is published for each of 43 U.S. states, plus the District of Columbia. So if you work in Illinois, Employee Compensation in Illinois is the reference you will receive.
Each edition of the Employee Compensation in [Your State] service contains these key elements:
–Recommended rate ranges localized for your state and region for hundreds of jobs, based on surveys and official data. You shouldn’t pay the same in Manhattan, Kansas, as you do on Manhattan Island in New York. This program makes sure you don’t.
What are your competitors offering workers these days? Check your state’s edition of BLR‘s exclusive Employee Compensation in [Your State] program to find out. Try it at no cost or risk.
–A to Z state and federal law comparisons. Comp and benefits are regulated by a tangle of laws. Employee Compensation offers an alphabetically arranged set of practical analyses on how to comply. Look up “ERISA” or “Overtime” or “Workers’ Compensation” and you instantly have a plain-English explanation of how the controlling laws—state and federal—apply to you.
–A full job descriptions program. Employee Compensation offers a complete tutorial for setting up a job descriptions program. Many ADA-compliant sample descriptions are provided, ready to copy and use.
–Employee compensation and benefits surveys. BLR‘s exclusive survey data come from thousands of organizations just like yours. You get exempt compensation, nonexempt compensation, and pay budget and employee benefits survey results.
–Free newsletter and updates. The Employee Compensation newsletter helps keep you on top of new state and federal compensation and benefits laws. Six updates throughout the year keep your book current with all new compensation laws.
–Complete wage and salary administration guidance. Walks you through the entire compensation process with step-by-step instructions for analyzing and pricing jobs, writing job descriptions, employee compensation policies, and more.
Use the links below to see samples of the program and newsletter, as well as a full table of contents of what’s included.
The program is priced affordably for small companies as well as large, at about $1.50 a working day. That’s coffee money for just about every form of information most managers need to run a competitive and efficient comp/benefits program.
You can check out the entire program in your own office for up to 30 days, with no need to buy. (We even pay return postage.) Just click the link below, and we’ll be happy to set things up.