Making compensation fit

Market rates, hot skills modifiers and incentives can help
By Gail Evans and Ardin Dalik
|Canadian HR Reporter|Last Updated: 10/23/2012

Is your compensation plan fitting like an old suit? With the challenges of the current war for talent, an employer needs a customized plan that fits the organization and catches the eye of top prospects who will try it on for size.

As human capital strategies become more complex, so do the values of critical employees. What we once thought were strong retention tools may no longer stick. With pressure to work longer hours, be more productive, stay connected and be innovative, employee needs are evolving and organizations’ total reward strategies must change to accommodate.

A branded strategy incorporates a company’s brand into its reward design so it attracts candidates who will be a great fit from the start. But we’re now seeing some employers take this one step further through customized rewards.

There is great appeal in the one-size-fits-all approach — such as internal consistency, ease of administration and a consistent message. There are also downsides, especially with the mix of employees including baby boomers, who need to be enticed to continue working, as well as gen-Y employees, who are savvy job shoppers.

Added to this is the continued impact of increasingly sophisticated technology, which puts other factors into play, such as the increased specialization of jobs and skills required, as well as a faster pace of change in organization structures and job responsibilities.

Similarly, the custom-tailored approach has both upsides and downsides.

To strike a balance between uniformity and customization of the total reward offering, take the following steps:

Measure and assess:

Organization levels: Do you have several distinct levels of jobs at your organization, such as support, operational, professional, managerial and executive? Determine how important each of the program elements are — such as base, bonus, training, benefits and time off — to employees in those levels.

Job families: Do you have distinct job families that are groups of jobs in similar functions? Do they have any unique market rates (such as sales, engineering and IT)? Are they paid differently, such as commissions for sales positions?

Geography: Do you have any locations that have unique market, hardship or cost-of-living situations, such as a remote camp location or higher cost centre?

Unique jobs: Identify scarce or hot skills.

Examining the organization from these different angles will give a perspective on the degree of customization that should be considered and will also flag key areas or compensation elements.

Use the best material

Once you’ve identified the potential areas that could benefit from customization, high-quality information will make the difference between an iron-on patch versus a tailored fit.

Job information:

• up-to-date role descriptions, reporting relationships, scope

• skill or competency profiles for the roles

• career progression.

Competitive information:

• appropriate peer comparisons

• job composites for unique roles

• reliable, robust market data sources

• appropriate data cuts.

Reward element analysis:

• A consistent yet flexible total rewards structure.

• How do each of the pay elements stack up against competitive practice (such as base, incentive plans, benefits, training or modifiers)?

• How well does this structure align and support your brand (such as pay for performance)?

Employee preferences:

• What reward elements are most valued by your most valued?

• What are the emerging needs and values of target employees? For example, competitive pay, career development and work-life balance are frequently identified as critical issues to employee engagement.

Taking the findings from these steps and weaving them into custom-tailored programs is where the real magic happens. You’ve identified the who, what and where for potential customization. Now you can use your knowledge, talent and vision to develop the how. In order to determine this, you need to ask three questions:

• Where are the highest-priority changes?

• Which updates will address the immediate attraction and retention issues?

• What modifications signal your merging total reward strategy for the next three to five years?

Case study examples

Company A is having difficulty both attracting and retaining safety field advisors for field operations. The issue is there are significant increases in job openings for these skill sets, making for a market shortage of specific skills.

Potential solutions:

• Confirm current market rates (available through industry compensation surveys) to determine the competitive base salary range.

• Apply a temporary hot skills modifier until market pressure relieves.

• Develop a longer-term retention incentive plan that would provide payments on an annual or longer-term basis while the shortage lasts.

• Identify internal candidates for skills training in the area to develop a future skill pool for this role.

Company B has a major group of employees who will be working in a remote construction site in the Northwest Territories. The challenge is attracting and retaining employees who will have to live and work in an environment without the comforts of home.

Potential solutions:

• Use market-based allowances (available through industry compensation surveys) on top of regular base salaries to compensate for issues such as the remote location, nature of accommodation and travel time. These would be customized for each specific camp or location.

• Provide upgraded camp facilities to provide more of the comforts of a larger centre, such as a chef, fitness facilities and movies.

• Develop a project cash incentive plan to be paid out at the end of the project.

Company C has a unique position requirement — a senior programming specialist for virtualization with VCP certification, which is not commonly available. It’s a new, specialized skill set for which there is limited market-pricing information available.

Potential solutions:

• Develop a clearly defined job profile that includes core accountabilities, skills and competencies so it can be matched in the marketplace.

• Use job classification to identify jobs within the organization of a similar scope, responsibility and skill level and pay within that salary band.

• Add a temporary hot skills modifier to recognize the specialty skill until more specific market data can be obtained.

• Identify internal candidates for skills training in the area to develop a pool for this role.

By using customized total rewards appropriately, organizations can gain greater return on their investment by increasing commitment and retention among key employee groups and catching the eye of high-quality potential candidates.

Gail Evans is president and Arden Dalik is vice-resident of the Wynford Group in Calgary, which provides expertise in developing a broad range of total reward strategies and executive compensation. They can be reached at wynford@wynfordgroup.com.

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