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No Science in your Salary?

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In a recent Wall Street Journal article titled “Why There Is No Science In Your Salary.”, Lauren Weber writes: “Only 38% of employers have a formal compensation structure or philosophy guiding their pay decisions, according to PayScale Inc., which examined data from some 7,600 firms, mainly from the U.S., Canada and United Kingdom. The issue is especially acute in salaried roles, say compensation experts, because managers have more leeway to put a figure on an employee’s skill, experience and performance than they do with hourly positions.

Yet as the labor market improves, and as fair-pay laws in California and elsewhere put a spotlight on corporate pay practices, firms are starting to rethink the way they set salaries. Among employers with no formal strategy in place, PayScale found that 34% are developing one.”

Pay equity has always been an important element in employee satisfaction, isn’t it surprising then that so few companies have a way to deal with it?  Yes, everyone is too busy and there are often seemingly more pressing matters to address, but once you have a salary structure that is all over the place, it’s even more painful to fix it and change it after the fact than to get it right early on.

Of course, you need data to know your facts first of all, and you need a system to implement it and enforce the scales that were agreed.  If every hire is going to be an exception on your new salary structure and the existing employees are also “of course” an exception too because “we cannot change their salaries now”, then you are not making much progress…

Not only do you need to have meaningful data to base your salary scales on, you also need a system to properly implement and enforce it.  In Interact HRMS, using the Position Budgeting and Control module, you can create any pay scale structure you need.  You can define your own grades and steps and either implement a model that applies to the entire company or create different pay structures depending on additional variables like education level, years of experience or the particular job.  Yes, you can have different pay scales for each job title if you want to push it to the extreme.

Pay structures are tightly integrated with the Job Classification system and this means you can define the appropriate salary not only based on a Grade/Step based system but also based on a point-based system like Hay.

Interact HRMS makes your life easier in managing the pay structures, ensuring that employees who are in a particular grade or step will get paid the right salary and benefits.  Because the pay scales defined by grade and step are also part of the wider Position Budgeting and Control module, you will have clear visibility as an employer into both your financial budget as well as your headcount/position budget.

So, with tools like this, there’s even less of an excuse to not have a proper pay structure in place.  If you’re one of those companies among the 34% quoted who are planning on developing a formal strategy that puts some science behind the salary.


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