Benefits and Compensation

Market Pricing—Comp Key in 2013

Daniels, Senior Consultant at Keating Advisors, LLC, offered her suggestions at a recent webinar sponsored by BLR and HR Hero.

Getting Market Pricing Right

Market Pricing is the process of analyzing external salary survey data to establish the worth of jobs as represented by market data, based upon the “scope” of the organization (geography, industry, budget/revenue size, employee size, etc.) and the job itself.

The important decision factors are:

  • Cost of market data surveys
  • Time invested in collecting and analyzing data
  • Reliability/accuracy of data
  • Availability of data relevant for your organization’s scopes and positions
  • Confidentiality of survey data

It’s also important to know the market for your types of jobs:

  • Industry
  • Profit, non-profit
  • Organizational size (both budget and/or revenue and employee size)
  • Geographic location (has a large impact)

Finally, be sure you select salary surveys that:

  • Adhere to antitrust safe harbor guidelines
  • Have adequate sample sizes, including 25th and 75 percentiles
  • Contain timely data (ideally no more than two years old)
  • Clearly communicate survey process and procedures

After you select your surveys, ask, what are your benchmarks?

  • Data:
    • Industry or Subsector
    • Size of budget
    • Number of employees
    • Location
    • Organization Type
  • Jobs:
  • Scope of work
  • Experience required (some surveys offer this by number of years)
  • Education required
  • Supervisory responsibility
  • Multi-function jobs (tricky, but it’s possible to blend data)

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Daniels offers the following steps for accurate benchmarking:

  • Analyze job content data (i.e., duties, responsibilities and work requirements) based on current, written position descriptions
  • Conduct market pay analysis for all positions, or at least a sample of positions that represent all levels and all departments in the organization
  • Identify competitive market base pay rates on all benchmark positions (25th, 50th & 75th percentiles). Generally try to have this cover at least 40 percent of all jobs
  • Collect data from at least 2-3 surveys, if possible
  • Compare your current employee’s base compensation against the market data for similar positions

Developing a Base Pay Structure

To develop a market-based base pay structure, conduct a regression analysis on the desired market data points (e.g., 25th, 50th, or 75th percentile data points) for all benchmarked positions.

Based on the pay line that process yields, develop a proposed structure that will look something like this:

Market pricing, regression analysis—just a few of every comp managers’ challenges.  And all that’s to say nothing of the most basic challenge—FLSA compliance. How about the regular rate for overtime? Prevailing wage? Mobile devices after hours—the list of ways you can get into trouble seems endless. How do you really know if your managers and supervisors are following your guidelines? There’s only one way to find out what sort of compensation shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based  program called FLSA Wage and Hour Self-Audit. Why are checklists so great? Because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

Experts say that it’s always better to do your own audit, and fix what needs fixing, before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making FLSA self-auditing relatively easy.

What our editors strongly recommend is BLR’s FLSA Wage & Hour Self-Audit Guide. It is both effective and easy to use, and even won an award for those features. Here’s what customers like about it:

  • Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated the FLSA’s endless legalese into understandable terms.
  • Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.

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  • Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.
  • Convenient. Our personal favorite feature: A list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.
  • Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR’s FLSA Wage & Hour Self-Audit Guide includes all the changes.

You can examine BLR’s FLSA Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it.

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