Broad-Based Pay Guidance

Broad-Based Pay Guidance
 

Job Grades & Salary Ranges
Job Families & Career Ladders
Annual Bonus Plan Design

In the world of broad-based compensation (as opposed to Sales or Executive Compensation), consultants often help companies create internally equitable and externally competitive compensation structures for their broad employee population.  There is often one structure for non-exempt employees and a different structure for exempt employees (referring to whether or not they receive overtime pay as mandated by the Fair Labor Standards Act (FLSA)). These compensation structures typically involve developing salary ranges, job grades, job families and career ladders, and may include developing or revising annual incentive plans for broad employee populations.  Let's look at each piece of work separately so you can understand what is and is not included and if Prosperio may be of help.

Job Grades and Salary Ranges

Many organizations use job grades and salary ranges to ensure that titles, responsibilities and pay are aligned throughout the organization. The chief benefit from job grades is an understanding of which jobs are "alike" in terms of skills, education required, responsibilities, and scope across different departments.  This ensures internal equity in pay and can help with career development, enabling employees to seek other opportunities that they are ready for in other departments.  Without job grades and salary structures, managers tend to devolve to just offering whatever pay is needed to attract and retain employees and pay levels can quickly get out of whack. At a minimum, this can lead to disgruntlement among employees when they realize there is extreme pay disparity based on nothing more than who one's boss is or one's ability to negotiate upon hire, and at worst it can lead to a discrimination law suit.  We worked with one organization that hired a brand new employee with no experience (male) into the same position as an existing employee with 20 years of experience in the role (female) and set his salary at more than $20k a year higher than her salary.  This was a lawsuit waiting to happen.  Management didn't do it to be discriminatory - the new male employee simply negotiated harder and the longer tenured female employee had never made much fuss about getting a raise. This doesn't make it right or safe from a legal perspective however. People in the same role should be paid the same (within a range to allow for variances in both experience and competence) as pay should be a function of the work performed, not the personality of the person hired.

Prosperio has worked with several trucking organizations to develop a streamlined method for analyzing jobs (called job leveling) and setting up grades and salary structures for the jobs.  Outside of trucking companies, however, we would recommend that you reach out to Madell Consulting (http://madellconsulting.com/) as Moira and her team are much more experienced with job leveling and salary structures in a variety of industries.

What about job grades for sales reps?  Sales reps present a unique challenge for HR professionals trying to "slot them into" an existing structure because they often have very small (or non-existent) salaries, which is one of the primary factors used to normalize jobs across departments.  For this reason, sales jobs are usually managed under a different structure entirely, with "S" code grades (vs "A", "P" or "M" grades).  This enables HR to account for using target total cash vs salary as the job value determinant. Whatever your industry, Prosperio can help you figure out the best approach to slotting sales jobs into an already defined job structure.

Job Families and Career Ladders

A side benefit of a well-defined job structure is that you now have a way to group roles into job families and provide career ladders for your employees. This will help you attract and retain highly motivated employees who want to stay with an organization for a long time as they will be able to "see" a future path where they can continue to be challenged, grow professionally, and see their pay increase.

This work can be as simple or as complex as needed based on what level of detail you would like in your career levels.  Often, Prosperio helps companies understand career paths within a closely knit group (e.g., operations in a trucking company, warehouse jobs, customer facing roles in banking, or sales and operations within freight brokers) and develops a quick and easy job structure (Sales Rep 1, Sales Rep 2, Sales Rep 3) along with qualifications for promotion from one level to another and what a lateral move to another group might look like.

Note that we rarely recommend just using production (or any other purely objective) metric for promotion from one level to another. The basic volume of work done for the job should be a minimum requirement to open the door to promotion, but not a guarantee that they will walk through the door. We often tell clients to consider this the "we don't promote jerks" clause in the employment agreement.  Just because someone is a top sales rep, if they are obnoxious, have poor attendance, don't complete their paperwork or any host of other common behaviors found among top producers, they SHOULD NOT be promoted.  If your incentive plan is done properly, and aligned with job levels, then this lack of promotion will actually have a detrimental financial impact on the individual.  It should HURT for them not to be promoted, and more than just from a lack of increase in salary - their commission or incentive earnings should be hampered as well.

Annual Bonus Plans

Many organizations use annual bonus plans to provide additional pay, usually phrased as a percentage of base salary, for their non-executive, non-sales, exempt employees. These plans are usually quite structured, but organizations sometimes need help taking a decentralized historical approach and putting more structure around it, to ensure consistency in approach and sensible budget management throughout the organization.

Common Project Types

Express Design Project

When your needs span several roles but you have only a few people and will not have much of an issue with change management, our Express Design Project is for you. We’ll spend time with you and your senior leaders in a one-day on-site meeting and complete the rest of the meetings virtually. We’ve successfully executed a number of engagements for small to medium-sized organizations (5 to 20 people) just like yours.

An Express Incentive Design Project includes:
• Compensation plan design for up to 5 roles (salary bands and incentives)
• Market benchmarking of pay levels for the 5 roles
• Plan documentation
• Pro-forma economic modeling (no historical testing)
• Roll-out training
• Strategy and structure review/refinement
• 6 months of post-project support
• Turnaround is approximately 4-6 weeks

1P1P Project: One plan, one role

A 1P1P Project is great for start-ups and small companies, and those with an immediate need for a compensation plan for one person in one role. The 1P1P Project is a virtually delivered program that’s a fast, affordable alternative to big consulting firm fees.

The 1P1P Project includes:
• All plan design details
• Basic market pricing
• Economic testing
• Incentive plan documentation
• Outlining of goals and expectations
• Review of business goals and impact of this role on those goals
• Role clarification
• 3 months of post-project support
• Turnaround is approximately 2-3 weeks

Full Service Sales Compensation Plan Design Project

When you need more in-depth assistance in clarifying business objectives, streamlining your organization structure, improving accountabilities and role definition, and are developing incentive plans for several interconnected roles for a large staff, we recommend a Full Service Incentive Plan Design Project. This solution features on-site meetings with our consultant and your design team, and is often selected by medium-sized to larger companies, or small companies undergoing significant transition.

Full Service Sales Compensation Plan Design Project includes:
• Business goal clarification
• Business strengths assessment
• Compensation plan design for all roles in scope (salary bands and incentives)
• Development of career levels for highly populated roles
• Employee change management
• Extensive pro-forma and historical economic modeling
• Goal-setting guidance
• Sales compensation plan documentation
• Market benchmarking of pay levels for all roles in scope
• More detailed Excel template for use by your staff for doing plan calculations (variable based on your needs)
• On-site roll-out support
• Organization redesign and role change/definition
• 12 months post-project support
• Four+ on-site days
• Turnaround time is at least 90 days, but may take longer depending on size of organization and magnitude of change