Conduct an Annual Salary Assessment
Optimize your salary structure by ensuring market positioning is competitive, internal equity issues are justifiable, and controls are effective.
RETIRED CONTENT
Please note that the content on this page is retired. This content is not maintained and may contain information or links that are out of date.Failure to conduct an annual salary assessment can result in the following issues:
- Increased turnover. The estimated cost of turnover is 2.5 times an employee’s annual salary.
- Decreased productivity. This results from reduced job satisfaction or engagement as a result of compensation or how compensation is administered.
- Allegations of discrimination or even lawsuits. This is based on differences in pay which are not related to objective job-related requirements or performance, particularly if the differences can be linked to legislatively prohibited grounds of discrimination. This can damage both your employer and organizational brand.
An annual salary assessment results in:
- Pay satisfaction, which leads to higher productivity and greater organizational commitment.
- Ensuring pay practices are equitable, thereby avoiding disengagement and potential legal issues.
- Competitive compensation will improve the ability to attract potential employees to the organization.
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Module 1: Identify Base Salary Pain Points
The Purpose
- Make the case for an annual salary assessment.
- Confirm organizational base salary goals.
- Identify base salary pain points.
Key Benefits Achieved
- Prioritized departments requiring a base salary assessment.
- Documented metrics related to base salary pain points.
- Determined if the salary pain points are organization-wide or related to specific departments.
| Activities: | Outputs: | |
|---|---|---|
| 1.1 | Prioritize departments that require a base salary assessment |
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| 1.2 | Discuss current metrics and pain points experienced in your prioritized department |
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Module 2: Use Market Data Wisely
The Purpose
- Review your selected jobs.
- Understand debates around market data.
Key Benefits Achieved
- Determined if market data is right for you.
- Reviewed and updated your benchmark jobs.
- Reviewed market sources, set guidelines, and assigned source weightings.
- Calculated salary range changes for all affected positions.
| Activities: | Outputs: | |
|---|---|---|
| 2.1 | Review your selected benchmark jobs |
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| 2.2 | Match your benchmark job to survey data |
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| 2.3 | Review market information sources and determine their weighting according to quality |
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Module 3: Identify Problematic Internal Equities
The Purpose
- Evaluate individual base salary data to determine equity issues.
Key Benefits Achieved
- Identified justifiable salary differences and gained an understanding of legally prohibited grounds for discrimination.
- Used comp-ratio (CR) and range penetration (RP) calculations to identify inequities.
- Segmented by protected class to identify any legally problematic areas.
| Activities: | Outputs: | |
|---|---|---|
| 3.1 | Identify any roles that have reported inequities |
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| 3.2 | Calculate CR and RP and determine if the difference is justifiable |
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Module 4: Optimize Salary Administration Controls
The Purpose
- Evaluated equity issues to identify root causes.
Key Benefits Achieved
- Reviewed current controls and identify areas for improvement.
- Trained employees with salary-setting authority on all salary guidelines.
| Activities: | Outputs: | |
|---|---|---|
| 4.1 | Drill down to the root cause of the inequities in your organization |
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| 4.2 | Update your salary administration guidelines to ensure consistency around salary decisions |
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Module 5: Develop a Remediation Plan
The Purpose
- Determine if the pain points are base salary related.
Key Benefits Achieved
- A remediation plan, with several options, for the CEO’s approval.
| Activities: | Outputs: | |
|---|---|---|
| 5.1 | Order the compensation issues you will address using a prioritization grid |
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| 5.2 | Create a prioritized list and remediation plan for the compensation issues you will focus on resolving |
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| 5.3 | Draft communication plan and key messages |
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