What Is Written?
Start with the written documents, says Kleinman. What written documents relate to compensation? Who has them? Who wrote what and when? What do they say? For example:
- Plan documents
- Structures
- Policies
- Pay parameters
- Hiring/Bonus boundaries (approval levels, etc.)
How’s Turnover?
What turnover levels is the organization experiencing?
Functional turnover is created “intentionally,” says Kleinman. For example, when there is a 40 percent pay gap between one job and the one above, you are unlikely to hire from inside, so that person on the bottom is basically encouraged to leave.
Dysfunctional, undesirable turnover may be related to compensation, Kleinman says. Exit trails may help you determine if turnover is based on pay or lack of advancement opportunity, or another factor, such as a bad boss.
Examining Base Pay
- Is there parity, internally and externally?
- How is the company positioned relative to the market and relative to desired positioning?
- Are exceptions logical and explainable?
- Are criteria consistently applied?
Example 1—All Over the Place
Here, where the horizontal axis is time in grade and the vertical axis is pay level, you have recent hires paid high and long-term workers paid low. Equity is nonexistent even with performance differentiation accounted for, says Kleinman.
Example 2—Better
Here’s one with more reasonable distribution. Differentiations are likely based on performance, but for sure, take a look at the outliers, Kleinman says.
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Are FLSA regulations appropriately applied?
- Exemptions
- Overtime
- Other pay practices
Variable Pay
What is the message, the purpose of the variable pay program? Check the plan structure:
- Eligibility criteria clear.
- Distribution—some at top, some at bottom.
- Funded from incremental gains.
- Relevant to target audience.
- Rewards commensurate with results.
- Goals are:
- Measurable.
- Focused.
- Achievable but challenging.
- Straightforward line of sight.
- Commissions:
- Are rewards for REAL selling—not ticket taking.
- Company keeps ownership of the book (the client is linked to company, not person).
- Exceptional situations are accounted for (windfalls, etc.).
- Net result is reasonably equitable.
Look for situations that are not true variable plans, says Kleinman:
- Entitlements wrapped in language.
- Goals are always met.
- Expenses accrued regardless of actuals.
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Register today for this interactive webinar.
Incentive plan doing its job? Join us March 13 for an interactive webcast The Essentials of Incentive Pay Plans: Selecting and Designing Plans That Work. Earn 1.5 hours in HRCI Recertification Credit. Register Now.
By participating in this interactive webcast, you’ll learn:
- When it’s right to use incentives, and a realistic list of incentive plans to consider
- Alternatives to using incentive compensation
- Why incentive plans can fail — and their success rate
- Why companies seem to avoid using skill-based pay
- What makes gainsharing plans work
- Whether goals and measures are possible to identify for every group incentive plan
- Mistakes to avoid in team-based plan designs
- And much more!
In just 90 minutes, you’ll learn the essentials of incentive pay plans and whether or not they are the right choice for
Register now for this event risk-free.
Thursday, March 13, 2014
1:30 p.m. to 3:00 p.m. (Eastern)
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Approved for Recertification Credit
This program has been approved for 1.5 recertification credit hours toward recertification through the Human Resource Certification Institute (HRCI).
Join us on March 13—you’ll get the in-depth The Essentials of Incentive Pay Plans: Selecting and Designing Plans That Work webcast AND you’ll get all of your particular questions answered by our experts.
Train Your Entire Staff
As with all BLR/HRhero webcasts:
- Train all the staff you can fit around a conference phone.
- You can get your (and their) specific phoned-in or emailed questions answered in Q&A sessions that follow each segment of the presentation.