Looking to Benchmark Pay?
DESIGN AND ADMINISTRATION OF A GEOGRAPHIC SALARY STRUCTURE
The decision of who will design and administer the geographic salary structure is important and can affect the success of the program.
There are three situations that merit discussion:
- responsibility for salary structure pricing
- hiring difficulties
- employee transfers
Responsibility for Salary-Structure Pricing
To reduce conflict between branches and headquarters, clarify who will collect the data that determines the adjustment to be made to the ranch-office salary structure.
Let's take a look at the options…
| Who will design the plan? | |
|---|---|
| Headquarters staff | Local human resources or management |
| Works effectively when the headquarters or regional staff have company-wide responsibility for compensation program development. | Local human resources or management may not have the skill or training to properly develop a geographic salary structure. They also will not have knowledge of the compensation strategy or design of the headquarters' plan to maintain company-wide internal equity. |
Typically, these programs are managed by headquarters' human resources staff who have expertise in the design and administration of geographic pay programs.
Hiring Difficulties
Branch office locations may experience hiring difficulties and turnover that aren't experienced at headquarters. In these cases, branch offices may desire to raise salaries for those jobs that are affected, in order to attract and retain employees.
For example, a branch office in San Francisco, California, will need to pay at higher rates than a headquarter's office based in Dallas, Texas, to attract and retain employees.
There are two things that you must remember in this situation:
- Avoid grading branch office jobs at higher salary grades than the headquarters' jobs. Salary grades should be consistent for all global jobs and be managed to ensure internal equity within a business. Grades may also manage short- and long-term incentive eligibility as well as benefit and perquisite eligibility. The salary ranges vary based on market rates within a geographic location. If there is a temporary labor shortage that is causing the compensation issue, it is important to provide a temporary fix to the issue rather than a permanent solution. (See signing bonus and variable pay below).
- The geographic salary structure should help to resolve the pay differences between the branch office and headquarters' locations.
Other methods to reward new recruits and retain current employees should also be considered. Let's take a look at some possibilities…
Signing bonus. A signing bonus may be a one-time payment made up front, or it can be spread out over a period of time (for example, three years).
Variable pay. If variable pay is managed at a branch office location, the plan can be designed based on the output from the job in question. This can be a bonus plan that doesn't change the base pay but allows the employee to earn a competitive compensation package based on individual/team/unit achievements.
Here's an example:
Mortgage processors were in short supply when interest rates fell. Companies responded differently to the problem:
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Some chose to move the job up into a higher-level grade, but this can be problematic if the market shifts downward again.
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Others established a variable pay plan that rewarded mortgage processors for the number of mortgages they processed. When demand for mortgages declined, these employees still had their base compensation.
Memory Jogger
If your branch office is having trouble hiring for clerical positions, while your higher labor cost headquarters is not, a possible solution is to: