Design a Base Pay Structure

Build a base pay structure that is defensible, competitive, flexible, and practical.

Unlock

This content requires an active subscription.

Access this content by logging in with your McLean & Company membership or contacting one of our representatives for assistance.

Speak With A Representative Sign In
or Call: 1-877-281-0480 (US) or 1-877-281-0480 (CAN)

Your Challenge

  • Traditional base pay structures are seen as bureaucratic red tape that hinders a manager’s hiring ability.
  • Designing base pay structures can be a difficult undertaking, requiring accurate collection of data and an investment of time from HR and managers.
  • Pay transparency is difficult given the sensitive and highly confidential nature of pay information.

Our Advice

Critical Insight

  • A flexible, data-driven base pay structure will provide HR with the foundation needed to obtain buy-in from stakeholders and achieve the desired state of pay transparency, shifting to shared ownership of the organization’s salary structure.
  • Designing base pay structures with built-in flexibility and planned transparency increases effectiveness, competitiveness, and employee understanding.

Impact and Result

  • Design a base pay structure that is internally and externally equitable by balancing the internal job worth hierarchy with external market competitiveness.
  • Leverage McLean & Company’s hybrid structure, which benefits from the advantages of traditional and broadband approaches while mitigating their pitfalls for today’s increasingly complicated environment.
  • Involve managers in matching benchmarked jobs with market data and educate them on salary administration guidelines to empower them to better engage their employees in pay discussions.
  • Aim to move toward greater pay transparency – at the very least, employees should be aware of the number of pay bands within the organization, and the minimum and maximum pay ranges for each pay band.

Contributors

  • Bessie Mok, Manager, Compensation and Benefits, The Corporation of the City of Markham
  • Cal Barber, Independent Compensation Consultant; Professor, Seneca College of Applied Arts and Technology
  • Chuck Csizmar, Principal, CMC Compensation Group
  • Dr. Howard Risher, Private Consultant
  • Jackson Tian, Senior Analyst, Compensation Advisory, OMERS
  • Karen Nordby-Wadel, Compensation Consultant
  • Kate Beckett, CCP, Senior Director of Total Rewards and HR Technology, Indigo
  • Paul Wong, HR Consultant, Consulting Firm
  • Rachel Wong, CCP, GRP, CHRL, Senior Manager of Global Compensation, Kinross Gold Corporation
  • Steven Osiel, Vice President of Compensation & Incentives, Accompass; Lecturer at the University of Toronto
  • Syma Khan, CCP, CHRL, CSA, Senior Compensation Manager, Loblaw Companies Limited
  • Terra Aartsen, CCP, GRP, Practice Lead - Learning & Development Solutions, Info-Tech Research Group
  • Tia Wang, HR Consultant, Consulting Firm

Get the Complete Storyboard

See how all the steps you need to take come together, with tools and advice to help with each task on your list.

Download Now

Get to Action

  1. Collect and analyze market data

    Collect, analyze, and examine market data using the organization’s compensation philosophy as a filter.

  2. Create base pay structure

    Create and finalize base pay structure.

  3. Determine salary administration guidelines

    Identify and develop salary administration guidelines tailored to the organization.

  4. Prepare to roll out the transparency strategy

    Develop a pay transparency strategy suited to the organization and draft a communication plan.

Guided Implementation icon Guided Implementation

This guided implementation is an eight call advisory process.

    Guided Implementation #1 - Collect and analyze data

  • Call #1: Determine the market comparator criteria that are relevant for your organization.

  • Call #2: Review benchmark jobs and their market data.

  • Guided Implementation #2 - Create base pay structure

  • Call #1: Identify the number of base pay structures that your organization needs and understand the main components of a hybrid base pay structure.

  • Call #2: Walk through determining appropriate job grades and pay bands for a sample data set.

  • Guided Implementation #3 - Determine salary administration guidelines

  • Call #1: Establish guidelines for moving between pay bands and between pay structures.

  • Call #2: Determine criteria for hot skills and set parameters for hot skills premiums.

  • Guided Implementation #4 - Prepare to roll out the transparency strategy

  • Call #1: Define desired and current states of pay transparency and develop a strategy to close the gap.

  • Call #2: Create a communications plan for the first year of the pay transparency strategy.

Onsite Workshop

Module 1: Analyze Market Data

The Purpose

  • Identify metrics that will be used to determine project success.
  • Match benchmark job descriptions to market data capsules.
  • Match benchmark job salary data to market salary data.

Key Benefits Achieved

  • Key metrics identified.
  • Benchmark job descriptions matched to market data capsules.
  • Benchmark job salary data matched to market salary data.

Activities: Outputs:
1.1 Set project metrics and take baseline measurements.
  • Project metrics and baseline measurements
1.2 Review benchmark jobs and determine market matches.
  • Benchmark jobs and market matches
1.3 Identify market salary data and apply weighting, using your compensation philosophy as a filter.
  • Market salary data and weightings based on your organization

Module 2: Create Base Pay Structure

The Purpose

  • Determine how many base pay structures the organization needs.
  • Identify benchmark job groupings to create preliminary pay grades.
  • Overlay organizational base pay data for both benchmark and non-benchmark roles.

Key Benefits Achieved

  • Number of pay structures determined.
  • Benchmark job groupings identified.
  • Finalized pay band structure determined.

Activities: Outputs:
2.1 Determine how many base pay structures your organization needs.
  • Number of base pay structures
2.2 Develop preliminary pay bands using the market data for your benchmark jobs.
  • Preliminary pay bands
2.3 Develop finalized pay band structure by overlaying organizational base pay data.
  • Finalized pay band structure

Module 3: Set Salary Administration Guidelines and Transparency Strategy

The Purpose

  • Review existing salary administration guidelines and update accordingly to better suit new base pay structure(s).
  • Create a pay transparency plan.
  • Draft a communication plan that is well aligned with goals from the transparency strategy.

Key Benefits Achieved

  • Salary administration guidelines updated according to new base pay structure(s).
  • Pay transparency plan created.
  • Communications plan aligned to the transparency strategy drafted.

Activities: Outputs:
3.1 Update your salary administration guidelines to suit your new base pay structure.
  • Updated Salary Administration Guidelines
3.2 Develop your pay transparency plan.
  • Pay Transparency Plan
3.3 Complete your pay transparency communication plan.
  • Pay Transparency Communications Plan

Workshop Icon Book Your Workshop

Onsite Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn’t enough, we offer low-cost onsite delivery of our Project Workshops. We take you through every phase of your project and ensure that you have a road map in place to complete your project successfully.

Book Now
GET HELP Contact Us
×
VL Methodology