Benefits and Compensation

Factors to Consider in Calculating Raises

Yesterday, we looked at the wage increases recently announced by behemoths Walmart and McDonald’s®. Today: How to prepare for compensation increases at your own organization.

Today’s tips are courtesy of David Wudyka, the founder and managing principal of Westminster Associates in Wrentham, Massachusetts.

Three Critical Steps

To prepare compensation budgets appropriately, Wudyka urges HR departments to consider these three critical steps:

  1. Know the compensation trends—across the country, within your region, and within your industry (as much as possible). In comp, you must be scanning the market and analyzing surveys. You must have the data to make good decisions. Ideally, you have a survey that gives information that is both local and in your industry.
  1. Decide up front how you’ll divide the available compensation dollars. Before you’re scheduled to allot and award any increases, make the broad decisions about compensation budgets. Some companies simply divide up the budget, but others allocate funds differently across departments depending on the value of the function to the organization.
  1. Prepare your managers and supervisors. Most of all, says Wudyka, prepare your supervisors and managers for dealing with tough pay conversations with their teams. You especially want to manage any unrealistic expectations your rank-and-file employees may already have.

Could pay grades be the best course of action for your comp plan? Get started on Thursday, May 28, 2015, with a new interactive webinar, Assembling a Pay Grade System: The Step-by-Step Process for Getting It Right. Learn More

In December 2014, the National Labor R

Factors to Consider in Calculating Raises

Most U.S. employers consider one or more of the following factors in calculating and awarding pay raises to their workforces, says Wudyka:

  • Performance/merit increases.
  • Cost-of-living (COL) increases. Beware of this terminology, he says. If you are just giving an across-the-board raise, don’t call it a COL raise; if you do, people will expect it every year.
  • Collective bargaining agreements (CBAs). Of course, you must observe the requirements of your CBAs. Also, take great care in negotiating 3 years out—it’s hard to tell what’s going to happen, Wudyka says.
  • Local pay rates. Know where you are hiring your employees, he says. Some positions you’ll hire local, some regional—but some, generally higher level, you’ll recruit on a national basis.

Beyond the “macro” factors above, also take into account the “micro” considerations of your individual employees. When they ask you, “How much will my raise be this year?” you will have to think about criteria like your organization’s overall financial situation, the employee’s qualifications and length of service, and how much other employers in your area are paying for similar jobs, Wudyka says.

Pay raises aside, you need to be sure that your basic compensation plan makes sense both for individual employee retention and also the well-being of the organization as a whole. There are many comp strategies out there, and a pay grade system may be just what your organization needs. How to get there? Fortunately, there’s timely help in the form of BLR’s new webinar—Assembling a Pay Grade System: The Step-by-Step Process for Getting It Right. In just 90 minutes, on Thursday, May 28, you’ll learn everything you need to know about pay grade systems and how to implement them effectively.

Register today for this interactive webinar.

Get your salary structure in order—the RIGHT way. Join us Thursday, May 28, 2015 for a new interactive webinar, Assembling a Pay Grade System: The Step-by-Step Process for Getting It Right. Earn 1.5 hours in HRCI Recertification Credit. Register Now

By participating in this interactive webinar, you’ll learn:

  • What pay grades are and the correct way to determine them, for either creating or revising a structure
  • How a salary structure is built, with examples of different methods of putting them together
  • When to pay above market—and when it makes sense to pay below
  • Key ways that pay grades influence your performance/merit pay programs
  • How pay grades interact with variable pay
  • When and how to conduct an internal equity review
  • How to address pay discrepancies and inequities without creating legal liability
  • What to do about pay discrepancies between men and women in similar positions
  • Laws to consider when putting a compensation policy in place
  • Complying with Executive Order 11246, and how to handle increased EEOC anti-pay-bias enforcement
  • And much more!

Register now for this event risk-free.

Thursday, May 28, 2015
1:30 p.m. to 3:00 p.m. (Eastern)
12:30 p.m. to 2:00 p.m. (Central)
11:30 a.m. to 1:00 p.m. (Mountain)
10:30 a.m. to 12:00 p.m. (Pacific)

Approved for Recertification Credit

This program has been approved for 1.5 credit hours toward recertification through the Human Resource Certification Institute (HRCI).

Join us on Thursday, May 28—you’ll get the in-depth Assembling a Pay Grade System: The Step-by-Step Process for Getting It Right webinar AND you’ll get all of your particular questions answered by our experts.

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Train Your Entire Staff

As with all BLR/HRhero webinars:

  • Train all the staff you can fit around a conference phone.
  • Get your (and their) specific phoned-in or emailed questions answered in Q&A sessions that follow the presentation.

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1 thought on “Factors to Consider in Calculating Raises”

  1. Re cost of living wages–what indicator should be used to determine those adjustments? BLS publishes numerous consumer price indexes.

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