In yesterday’s Advisor we featured advice on variable performance pay from consultant Teri Morning, MBA, MS, SPHR, SPHR-CA. Today, her salary increase grid that is a little more complex than most, plus we offer the free downloadable white paper (FREE! thanks to sponsor PayScale)—the 2014 Compensation Best Practices Report.
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Morning says her grid takes into account three factors (market and business performance, individual performance, and position in range), plus there’s a lump sum option.
Pay increases are based on three main factors, says Morning, president of Teri Morning Enterprises in Carmel, Indiana, who made her suggestions during a recent webinar sponsored by BLR®.
In the table below, these three factors are expressed as follows:
- Base increase potential: 2.0% based on market movement of wages AND profitability (Adjust this part of the equation as needed to reflect your compensation philosophy. For example, make it 4% if you want to pay above the market.)
- Performance factor potential: 2.0%
- Position in range: plus or minus 2.0% as a catch-up or slowdown factor (for red/green circles)
So, employees have a potential of 2% for base, 2% for performance, and then an adjustment of plus or minus 2% for position in grade expressed as a comp-a-ratio (See top line of grid.).
The figures in parentheses are what a lump sum payment would be if given instead of a base raise. (You can give a higher lump sum payment because it is not in the base—and the salary won’t keep spiraling out of control year after year, Morning says.)
Free Download—2014 Compensation Best Practices Report. Thanks to sponsor PayScale, we can offer readers this important report at no charge. Stay a step ahead with 2014 Compensation Best Practices Report—The Year of the Great Balancing Act. Download now.
Morning’s Merit Increase Grid
|
Comp-a-Ratio► Performance▼ |
<92%
+2% |
92 to 96.9%
+1% |
97 to 103%
Mid-point (Market) |
103.1 to 109.9%
-1% |
110>
-2% |
| Far Exceeds
Expectations |
6.0 | 5.0 | 4.0 | 3.0 (4.0) | 2.0 (4.0) |
| Exceeds
Expectations |
5.0 | 4.0 | 3.0 | 2.0 (3.0) | 1.0 (3.0) |
| Meets
Expectations |
4.0 | 3.0 | 2.0
Base Average perfor-mance |
1.0 (2.0) | 0 (2.0) |
| Less Than
Expectations |
2.0 | 1.0 | 0 | 0 | 0 |
| Fails
Expectations |
0 | 0 | 0 | 0 | 0 |
How does your 2014 look—compensation-wise? Want to see what other companies—and your competitors—are doing? Download a free white paper (free because of the generosity of sponsor Payscale) 2014 Compensation Best Practices Report—The Year of the Great Balancing Act.
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With the more competitive economy of 2014, companies will be challenged to balance growth with smart decisions about how to compensate talent. Intelligence about best practices is critical. Fortunately, each year PayScale conducts a survey of compensation best practices to take a look at what transpired in the year just ended and predict trends for the upcoming year.
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Highlights from this year’s survey results:
- Companies are cautiously optimistic about 2014, with 72 percent expecting their financial situation to improve (up from 66 percent in 2013), and only 5 percent expecting it to weaken (down from 7 percent in 2013).
- Small companies are the most optimistic about their future financial performance (75 percent of respondents), beating out both large and medium companies, where 66 percent and 72 percent expect improvement in 2014.
- The Information, Media & Telecommunications Industry is planning to fly the highest in 2014, with 84 percent of companies in this industry anticipating improved financial performance.
- Hiring is up over recent years with 54 percent of companies reporting plans to continue expanding in 2014.
- Raises returned in 2012 and that trend continued with 83 percent awarding salary increases in 2013, and 88 percent planning to give raises in 2014.
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