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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.
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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
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 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.
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 Implementations
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.
Compensation Essentials
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Compensation Essentials
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Course Information
- Title: Compensation Essentials
- 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).
1 CPD hour per course.
Each course is valid for 1 PDC for the SHRM-CP℠ or SHRM-SCP℠.
The use of this seal confirms that this activity has met HR Certification Institute’s® (HRCI®) criteria for recertification credit pre-approval.
Course Modules
Introduction
Module 1
Module 2
Module 3
Module 4
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 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 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
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
Determine the number of base pay structures.
Group jobs into grades and develop preliminary pay bands.
- Preliminary base pay structure(s) and pay bands
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
Review and adjust the range spread, range overlap, and midpoints of preliminary pay bands.
Compare against organizational data and adjust preliminary pay bands.
- Develop finalized pay band structure by overlaying organizational base pay data.
Model base pay structure alternatives.
- Explored pay structure alternatives
Select the best-fit base pay structure.
- Best-fit base pay structure(s)
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.
- Assessed pay transparency current state
Determine desired future state of pay transparency.
- Outlined pay transparency future state
Develop a pay transparency strategy.
- Pay transparency strategy
Craft a communications plan.
- Communications plan
