Environments of Compensation and Benefits Administration

Multi-Businesses

Although product markets drive maximum pay levels, organizations engaging in several businesses often have only one compensation program. Major reasons for this may be a desire for a consistent approach and more ease in transferring employees.

Yet, while an organization in a single business can have a single pay program regardless of location, a multiple-industry enterprise would be unwise to do so.

Different industries and diverse businesses are likely going to pay at different compensation levels. The needs of each industry and diverse businesses should be considered when determining the pay program, pay levels, pay structure, pay-system plans and pay forms. Attempting to use the pay system of a diverse business in a new business (especially when the industries are not the same) may cause serious equity and performance problems. Most assuredly, it will cause one group or another to be over or underpaid. Moving to separate compensation programs may be a better solution than trying to operate with one pay plan.

It should be noted, though, that major multinational companies of well over 100,000 employees are able to successfully manage a global compensation plan while ensuring all employees are managed to their applicable competitive marketplace (e.g., national, regional, local markets).

Pay by Industry

An organization can be placed into one of a few broad industry categories, or sectors, such as manufacturing or service. At this level, one can see broad trends in how people are paid from sector to sector. For example, the service sector represents over 79% of employment in the U.S., but many service jobs pay lower salaries.

An organization can also be described in a much more specific way, by using a generally accepted industry classification system. Such systems include the Standard Industrial Classification (SIC) system, Principal Business Activity (PBA) codes, and the North American Industry Classification System (NAICS). Regardless of the coding system employed, the specific industry group that an organization belongs to can have an impact on pay.

One useful resource for setting pay levels by industry is ERI's Salary Assessor® tool. This program gives market rates for over 16,000 positions in more than 9,000 locations in the U.S., Canada, U.K., and Europe when used with ERI's Geographic Assessor® tool and databases. Salary Assessor lets you adjust data by position, location, industry, organization size, years of experience and salary planning date. Base salary, incentive/variable pay and total direct compensation projections are provided. You may download a demo to see data examples.