PayScale Insight Summer Edition 2013: New Employee Pay Report Makes Compensation Transparency Simple

Laleh Hassibi, PayScale

How well do your employees understand your compensation plan and philosophy? Though talking about pay with employees is akin to talking about the birds and the bees with your kids, often uncomfortable for everyone involved, clearly communicating compensation to employees is worth the effort. When decisions about comp levels are systematic and communicated with employees, the organization’s expectations of its employees become clear. They will know how they will be rewarded and how to reach their personal career and financial goals. By sharing your expectations, you’re also giving your employees more control over their destiny, thereby raising satisfaction and retention.

With Insight Summer ’13, PayScale subscribers can use the new Employee Report to make communicating compensation to employees simple. In its most basic form, compensation addresses what are known as “extrinsic rewards,” which are rewards that are provided by the organization in the form of financial, material, or social rewards. The reason compensation plans are so difficult to define is because there are so many factors that go into developing compensation. The world of compensation has unique definitions, designs and functions. How do you make them easy for a non-HR savvy employee to understand? The following takes you step-by-step on how to use PayScale Insight’s new Employee Report to communicate your compensation plan to employees.

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1. Compensation Philosophy –Explaining How Your Company Decides What to Pay
Developing a clear strategy is an important first step many organizations undergo in deciding how to compensate employees. The first step to a compensation philosophy is agreeing internally on a clear strategy of what your company will reward. Next, communicating those values in the form of a compensation philosophy, is a crucial step towards transparency with your employees.

PayScale’s new Employee Report includes a section with sample text for you to share your compensation philosophy with your employees. How you’re rewarding longevity and performance, and your strategies around market competitiveness and internal equity can all be spelled out in this section.

Here’s an example of a sample Compensation Philosophy statement included in the Employee Report:

The philosophy behind this company’s compensation program is to create a compensation program that supports the company’s strategy, competitive markets, mission and values. We believe our compensation program is a management tool that when aligned with an effective communication plan, is designed to support, reinforce, and align our values, business strategy, operational & financial needs with a goal of growth and profitability.

Our compensation program is designed to attract, motivate, and retain talented employees who drive the company’s success. We strive to provide base salary that meets the market (50^th percentile) when employees are fully proficient and meeting expectations. We believe that an employee consistently performing above expectations and are proficient in the role should be rewarded with a higher base pay. Employees who are new to their role and/or not meeting expectations would be paid below the target (50th percentile). In addition to base salary, the company will utilize incentive or variable pay as a way to meet the strategic goals of the company.

Incentive pay will be available to some employees with consideration for a number of factors and will be based on individual goals that relate to the company objectives as well as overall company performance.

2. Compensating Differences – Seeing the Glass Ceiling
Employees can be motivated by knowing there is a lot of room to grow in their industry or job position. The pay they start out at can be influenced by how much their base salary can grow. For example, their pay may start low but have a lot of room to expand with experience. Or, if more years of work won’t make them better at their job, they may get their highest pay right from the start. PayScale’s new Employee report makes it easy for you and their managers to show them not only their personal salary trends since they started working with you, but also their current placement in the salary range for their position.

3. Identifying Wage Differentials – What Is the Theory of Compensating Wage Differentials?
Wage differentials are those differences in wages between various workers, groups of workers, or even differences between workers within a career field. For example, a worker with many more years of experience than another worker, although both of their jobs require the identical tasks, might make significantly more than a worker who is just beginning in the same field. Although not always confined to experience, there are certain qualities in a worker – experience, education, certifications – that might create wage differentials within the same job field. Several graphs on the Employee Report show exactly where the employee stacks up within the company and in their department.

The new Employee Report is useful for communicating compensation to employees, and sometimes eye opening for the employee, especially when they see how far they’ve come and how they stack up against other employees in their departments and organizations. HR professionals and managers alike should make themselves readily available to explain compensation to employees. This transparency not only increases the employee’s insight into what their company provides them, but also provides an easier way for managers to be confident during those tough conversations about compensation.

Existing PayScale Insight and Insight Expert subscribers will have access to this new report starting on June 27^th. If you’re not using PayScale’s cloud compensation software yet, or are a MarketRate customer, now is a great time to get a demo to see why companies use PayScale Insight to nail compensation.