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Approval of the Annual Compensation Plan
Job evaluation is an attempt to substitute rationality for a variety of non-rational influences on salaries by appraising jobs in terms of their contribution to the organization. The process presumably produces a hierarchy of jobs that aligns with both organizational requirements and employee values, including customary relationships. This internally developed job structure is unique to each organization.
IMPLEMENTING THE SALARY STRUCTURE
The salary structure is designed to take the organization one step closer to managing each employee’s pay to the defined market value of each job. The implementation of a salary structure requires a detailed plan that includes effective communication consistent with the change management approach for your organization.
Salary Range Listing
A salary range listing is a tool used in the implementation and management of the company’s approved salary structure. It should be entered into the Human Resource Information System (HRIS) on the appropriate effective date.
A salary range listing will typically look similar to the example below:
| Salary Grade | Job Code | Job Title | Minimum | Midpoint | Maximum |
|---|---|---|---|---|---|
| 1 | 12405 | Job A | $36,000 | $45,000 | $54,000 |
| 1 | 12305 | Job B | $36,000 | $45,000 | $54,000 |
| 2 | 10800 | Job C | $40,000 | $50,000 | $60,000 |
| 2 | 13420 | Job D | $40,000 | $50,000 | $60,000 |
| 3 | 13650 | Job E | $44,400 | $55,500 | $66,600 |
| 3 | 15420 | Job F | $44,400 | $55,500 | $66,600 |
Adjustments to Minimum
Employees whose compensation falls below the new salary range minimum should be brought to minimum as of the effective date of the new salary structure. In order to avoid compression issues, it is important that the adjustments to minimum be managed before the implementation of the merit increases.
Salary Increase Administration
A salary structure is commonly implemented close to the time of the salary increase administration process. Typically, a HRIS will be used by an organization to roll out the salary increase administration process, but it can also be effectively managed using Microsoft Excel or a software platform such as ERI's Salary Assessor.
Merit increases are used by almost all organizations. A smaller percentage of companies will use across-the-board increases, cost-of-living increases, or even longevity increases.
Focal versus anniversary review cycles
When merit increases are used, a company may follow a focal review cycle or an anniversary review cycle.
A focal review cycle is also known as a common date review cycle. This is also the most prevalent approach used in the marketplace. Typically, salary increases are administered at one fixed date each year for all employees within a group. Different employee groups can be administered on different dates such as executives on February 1 and all other employees on April 1. It provides for an excellent snapshot of the organization at a certain point in time and there's administrative simplicity in the process. Also, managers and Human Resources can effectively plan for this type of process.
Under an anniversary review cycle, salary increases are typically managed at the one-year anniversary for each employee from their date of hire or date in the job. Managers do have more time to dedicate to each employee during this type of process. An anniversary review date can be difficult to administer, though, as the process runs throughout the entire year. Late reviews can become an issue as well.
Memory Jogger
A focal review cycle: