Design a Base Pay Structure
Integrate your internal job worth hierarchy with the market to build a base pay structure that is defensible, competitive, flexible, and practical.
- Traditional base pay structures are seen as bureaucratic red tape that hinders a manager’s hiring ability.
- Designing base pay structures can be complex, requiring accurate data collection and a significant time investment 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 that provides HR with the foundation needed to obtain buy-in from stakeholders.
- A shift to shared ownership of the organization’s base pay structure.
- An assessment of current and desired states of pay transparency and a strategy to achieve the desired state.
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 that benefits from the advantages of the traditional and broadband approaches.
- Empower managers by involving them in matching benchmarked jobs with market data and educating them on salary administration guidelines.
- 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.
Design a Base Pay Structure
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.
Compensation Essentials
1 to 1.5 CPD hours per course.
McLean & Company is recognized by SHRM and can award Professional Development Credits (PDCs) for the SHRM-CP® or SHRM-SCP®.
HR Certification Institute’s® official seal confirms that McLean & Company meets the criteria for pre-approved recertification credit(s) for any of HRCI’s eight credentials, including SPHR® and PHR®.
How to complete this course:
Use these videos, along with the Project Blueprint deck above, to gain an understanding of the subject. Start with the Introduction, then move through each of the Course Modules. At the end of each Module, you will be required to complete a short test to demonstrate your understanding. You will complete this course when you have completed all of the course tests.
- Number of Course Modules: 5
- Estimated Completion Time: 2 hours
Learning Outcome
Explain the rationale for developing foundational compensation programs (compensation philosophy, job evaluation, and base pay structure) and how they guide compensation decisions in alignment with organizational strategy.
Learning Objectives
By the end of this course, learners will be able to:
- Explain how a compensation philosophy guides the creation of other compensation programs.
- Articulate how an objective job worth hierarchy promotes internal equity and the value that brings to the organization.
- Describe the basic steps of creating a base pay structure while balancing internal equity (i.e. job worth hierarchy) with external equity (i.e. market data).
Course Modules
Introduction
Module 1
Module 2
Module 3
Module 4
Workshop: Design a Base Pay Structure
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 roadmap in place to complete your project successfully.
Module 1: Analyze Market Data
The Purpose
- Identify metrics that will be used to determine project success.
- Match benchmark jobs to market data and create preliminary pay bands.
- Determine how many base pay structures the organization needs.
Key Benefits Achieved
- Benchmark job descriptions matched to market data capsules.
- Preliminary pay bands created and number of pay structures determined.
Activities
Outputs
Set project metrics and take baseline measurements.
- Project metrics and baseline measurements
Review benchmark jobs and determine market matches.
- Benchmark jobs matched to appropriate market data
Weight and input market data.
- Market data weighed based on market comparator criteria and inputted based on target market positioning.
Group jobs into grades and develop preliminary pay bands.
- Preliminary pay bands developed.
Determine the number of base pay structures.
- Number of base pay structures determined.
Module 2: Create Base Pay Structure
The Purpose
- Overlay organizational base pay data for both benchmark and non-benchmark roles.
- Model alternative base pay structure options and select the best-fit option.
Key Benefits Achieved
- Finalized pay band structure determined.
Activities
Outputs
Review and adjust the range spread, range overlap, and midpoints of preliminary pay bands.
- Preliminary pay bands reviewed.
Compare against organizational data and adjust preliminary pay bands.
- Preliminary pay bands compared against organizational data and adjusted as appropriate.
Model base pay structure alternatives.
- Alternative base pay structures modeled.
Select the best-fit base pay structure.
- Best-fit base pay structure selected.
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
Develop salary administration guidelines.
- Salary Administration Guidelines
Evaluate current state of pay transparency.
- State of pay transparency assessed.
Determine desired future state of pay transparency.
- Future state of pay transparency outlined.
Develop a pay transparency strategy.
- Pay transparency strategy developed.
Craft a communications plan.
- Communications plan created.
About McLean & Company
McLean & Company is an HR research and advisory firm providing practical solutions to human resources challenges via executable research, tools, diagnostics, and advisory services that have a clear and measurable impact on your business.
What Is a Blueprint?
A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your HR problems.
Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.
Need Extra Help?
Try Our Guided Implementations
Get the help you need in this 4-phase advisory process. You'll receive 8 touchpoints with our researchers, all included in your membership.
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.
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