QUẢN TRỊ NHÂN LỰC Thiết kế một buổi dã ngoại

A thorough compensation analysis provides the data and insights for critical decisions as it relates to salaries and total benefits for employees.. A compensation analysis uses internal

GROUP 1 TOPIC: ANALYSIS THE COMPENSATION IN AN ORGANIZATION.

INTRODUCTION

Compensation analysis is vital to providing fair, equitable compensation Smart organizations know that providing the right compensation is one of the key pillars to attract and retain the best talent A thorough compensation analysis provides the data and insights for critical decisions as it relates to salaries and total benefits for

employees

Labor costs make up the majority of expenses for most organizations It can account for up to 70% of the business cost It is, therefore, critical to understand what this cost consists of Although compensation analysis can be a complex process, it is a necessary tool to ensure fair workplace practices and contribute to your employee engagement strategy

The purpose of this guide is to provide a basic understanding of compensation

analysis and its associated benefits It also offers practical steps on conducting a compensation analysis, which you should tailor to your organization’s needs

I THEORY.

1 A compensation analysis uses internal and external data to determine whether an employer rewards employees fairly or not for the work they are doing.

Here are a few key concepts in compensation analysis that you need to

understand:

External competitiveness – Employers compare their compensation data and practices to external companies For example, Salesforce found that their engineer salaries were comparable to engineers at Microsoft It was a fair comparison because of the size and geographical spread of both organizations On the other hand, engineers at Slack were paid much less, but they are a much smaller

organization

Internal equity – Employers compare employees’ salary and indirect

compensation data to ensure fair compensation for the level and type of work done

Region – Employers compare compensation data of people doing similar work within a particular region

Level – Employers compare employees’ levels and the level at which they are compensated

In all of the components mentioned above, it’s noteworthy to mention that even though salary data is important to look at, it is only one part of compensation There are other employee benefits such as medical care, discounts, car, share schemes, and housing allowances

A key characteristic of compensation is that it is dynamic This means that it continually changes and progresses based on the internal and external

environment

As an example, Slack traditionally compensated employees based on localized benchmarks in their New York and San Francisco offices Due to COVID-19, employees had to transition to working remotely As a result, employees relocated

to the cities where their homes are located Slack subsequently revised their salary bands based on employees’ location

2 Benefits of conducting a compensation analysis

A compensation analysis is a vital component of an organization’s talent

management strategy, as it helps attract and retain the best employees on the market Let’s take a look at other benefits of a compensation analysis:

Salary benchmarking gives an impartial idea of competitive salaries and allows organizations to make informed decisions Salary benchmarks provide data points, whether it is worth it or not to pay an employee above the average salary It also helps understand the holistic remuneration packages offered by employers

Evaluating pay equity allows organizations to compensate employees doing the same level of work in a fair way Conducting a comprehensive compensation analysis also enables you to correct historic pay gaps

Transparent compensation decisions leave the decision-making of salaries in the hands of accurate and impartial data This leaves employees with a higher level of trust in the organization and their managers

Compensation analysis is dynamic, as mentioned before, and thus, you’re able to make projections based on future needs or employees and how this may affect your compensation strategy

Identifying opportunities – Through a comprehensive compensation analysis, you can identify where you can improve your compensation strategy You may be able

to find different ways to remunerate employees, for example

It can be a part of your HR reporting

3 Benefits of conducting a compensation analysis

A compensation analysis is a vital component of an organization’s talent

management strategy, as it helps attract and retain the best employees on the market Let’s take a look at other benefits of a compensation analysis:

Salary benchmarking gives an impartial idea of competitive salaries and allows organizations to make informed decisions Salary benchmarks provide data points, whether it is worth it or not to pay an employee above the average salary It also helps understand the holistic remuneration packages offered by employers

Evaluating pay equity allows organizations to compensate employees doing the same level of work in a fair way Conducting a comprehensive compensation analysis also enables you to correct historic pay gaps

Transparent compensation decisions leave the decision-making of salaries in the hands of accurate and impartial data This leaves employees with a higher level of trust in the organization and their managers

Compensation analysis is dynamic, as mentioned before, and thus, you’re able to make projections based on future needs or employees and how this may affect your compensation strategy

Identifying opportunities – Through a comprehensive compensation analysis, you can identify where you can improve your compensation strategy You may be able

to find different ways to remunerate employees, for example

It can be a part of your HR reporting

Seven steps to a successful compensation analysis

Now that you understand what a compensation analysis is and its benefits, let’s take a look at the practical steps of how to do a compensation analysis

a Explore the current state of compensation

The first step is to gather and consolidate all compensation data in your

organization Some companies already have compensation analysis software that helps with this, or others use a spreadsheet with data from their HRIS Whatever your approach may be, make sure that the information you collect includes the following:

Job Descriptions: An up to date job description for every job in the organization

This should include job titles, roles and responsibilities, level, experience needed, and education This step could take up to six to eight weeks, depending on the size

of your organization

Organization compensation philosophy: This information is usually embedded

in the company handbook, and the deeper philosophy sits with the CEO or HR Heads A compensation philosophy discusses the organization’s compensation philosophy and how they reward employees

Salary benchmark: This is usually an annual survey that is completed, which

includes pay structures and salary information It compares internal pay data to the external market Depending on the time of the year, you may need to use the previous year’s data or wait until the new compensation market analysis data is published

Employee information: You need to have an accurate headcount of the number of

employees per department This information also needs to include the following information:

– Age

– Location

– Working hours

– Exit / Intake data

You also need to ensure you collect third party information that could be vital to your organization’s compensation analysis efforts Companies such as Korn Ferry, Deloitte, and PWC typically have large data sets that include global and local salary and compensation information on a mass scale

Check with the relevant HR bodies in your country as to the most reputable and reliable companies with these data sets, as they will act as a valuable comparative information source

b Determine the types of analyses you are going to conduct

You need to consult with key stakeholders to determine the purpose of your

compensation analysis This will guide you to determine the type of compensation analysis you will be conducting

For example, suppose a CEO was interested in why employees’ salaries were disproportionately increasing each year compared to the market In that case, you may want to conduct a salary analysis of employees who have entered and exited the organization

If you need a snapshot to understand the cost per employee, you may conduct a

“Headcount analysis” to provide an accurate picture of staffing levels and

compensation per employee

Another example is that you may want to understand why so many high-talented employees are leaving your organization A retention analysis looks at

compensation levels and performance data and compares it to internal and

external parity to make sense of this

To reiterate, your compensation analysis should always be based on purpose This will ultimately help you extract meaningful information and present it in a

palatable way

c Choose the right technology

To analyze compensation data, you can either use an Excel spreadsheet or

compensation analysis software Let’s explore these two options within a bit more detail:

Excel

Microsoft Excel has, for a long time, been the favored tool to analyze

compensation data For an organization that wants to keep its operating expenses down, this is a great solution It’s also suitable for small organizations as the calculations needed to be done will likely not be that complicated Even a novice

at Excel would be able to use it

On the other hand, however, Excel is prone to human error Multiple people can access a spreadsheet, and a misplaced comma can yield inaccurate and

consequential results It’s also not automated So, if an employee leaves the

organization, it requires someone to delete that employee off the spreadsheet Excel is also not the most ‘attractive format’ to present to stakeholders It requires manual copying and pasting of information into presentations, which can again lead to errors, and it’s also extra work

ONLINE CERTIFICATE PROGRAM

HR Business Partner

2.0 Certificate Program

Develop a full skillset that delivers strategic impact Learn everything from

consulting and data literacy skills to basic finance

DOWNLOAD SYLLABUS

This is what the base data for your compensation analysis in Excel can look like Compensation analysis software

Modern compensation analysis software makes managing salary information seamless and straightforward Most companies that offer compensation analysis software are cloud-based Therefore, salary surveys and market prices are already plugged into the system and regularly updated It makes it easier and more up-to-date as internal salaries are checked continuously against market rates It also has built-in visualizations and widgets that are customizable, reducing manual effort and allowing for faster decision-making

However, many organizations are currently budget-conscious, and compensation analysis software can be expensive It may be challenging to convince key

decision-makers to invest in compensation analysis software On the other hand, the cost of losing talent is far more consequential, so you can always justify the decision to invest in such software, especially if you’re a large company

d Run the calculations

Base your calculations on the type of insights that you need For example, if you want to understand the average salary per region, you might divide employees’ total salaries by the number of employees in that region

One of the most common calculations that is in most compensation analysis is the salary compa ratio, or comparative ration This ratio helps you determine if you are compensating employees fairly and in line with your organization’s

philosophy

Here is the formula to calculate the compa ratio:

Compa ratio = (Actual salary / mid point of pay range) x 100

The result will be a percentage A result of 100% means the employee is paid exactly at the midpoint of the current market rate for the given position as defined

by the organization Anything below means the employee is being paid below average, and anything above indicates an employee is being paid above average Another type of analysis can be a pay equity analysis to determine whether there are any differences in compensation when looking at gender or race/ethnicity Choose your variables carefully for this analysis

Examples of variables for pay equity analysis

e Address the challenges

Whether you have conducted your analysis on Excel or using compensation

analysis software, it would have turned your information into insight As a result

of this, work on converting insight into action to give validity to the analysis completed

The analysis, for example, may indicate that certain employees are underpaid In the next annual salary increase, you need to make sure that these employees get competitive pay in line with their peers You may not be able to reduce the salaries

of overpaid employees retroactively, but it will guide you in future salary

increases made on these employees

The insights from the analysis should also inform your future compensation and talent strategies For example, if you’re underpaying data scientists in your

company and data science is a future skill that is rare, you may want to increase the total compensation for your existing data scientists

f Communicate the results

Finally, once you have completed your compensation analysis, it’s time to

communicate the conclusions to your employees You need to develop a

communication strategy, which will determine how you communicate the insights

to employees, managers, and key stakeholders Here are a few tips on this:

Who needs to know? Not everyone needs to know about the results Determine this based on the purpose of the compensation analysis

What is the current climate? If employees are already feeling stressed, you may want to provide more context in your communication For example, companies such as Intel, Adobe, and Uber have found that employees are more stressed and less likely to talk about salaries to their managers during a pandemic If

employees expect a pay increase, but the compensation analysis indicates they are being overpaid, you may want to communicate the results with more empathy What is needed? It is unnecessary to share all the information You do not need to communicate the salary information of external companies or internal employees

to employees However, you do need to provide context and insights into the analysis (e.g., number of participants, general increases across the company, the extent of the study – e.g., using internal and external survey data)

It’s also important to discuss challenges that the organization has experienced and the external environment A Korn Ferry study, for example, showed that only 35%

of survey participants said that 100% of employees would be eligible for increases

in 2021 External environment and market trends can have a massive impact on salary increases or decreases

g Train your managers

In most organizations, managers are the ones that have compensation discussions with employees, and not HR or reward managers You need to train managers on: How to discuss an increase or flat salary change for employees

How to anticipate unhappiness from employees and how to deal with that

Things not to say and to never make promises that they cannot fulfill

Because managers are always busy, you may want to create a manager guide and

a communication plan

Your communication plan needs to include clear terms and phrases that are to be used in a compensation conversation Other components you may want to include

in your communication plan include

Develop a theme – You can create a caricature or catchphrase related to

compensation in your organization

Design – You can create a consistent brand and theme for all communications as it relates to compensation In this way, you’re able to create a consistent experience for employees, irrespective of their department, role, or location

Multiple channels – Even though employees mainly have remuneration and

compensation discussions with managers, it should not be the only channel

Employees should understand they can talk to HR on any platform and any

member of the leadership team through multiple channels (text, email, private meetings, etc.)

4 What are the responsibilities of someone in compensation, benefits and rewards?

Basically, people who work in compensation and benefits are responsible for devising policies for an organisation’s salary, bonus and incentive schemes These might include:

Salaries

Bonuses

Commission

Company cars

Pensions

Life assurance

Profit-sharing

Dental plans

Medical insurance

Vouchers

Capital bonds reward schemes

They are then in charge of administering, managing and evaluating the payroll, salary structures, and incentive schemes Basically, they make sure that the right people get the right amount of money, at the right time

Why is a good compensation, benefits and rewards scheme important?

The right compensation and benefits schemes ensure that hard-working

employees are rewarded fairly and in the most cost-effective way for the

company This in turn then motivates employees to sustain their performance

The compensation, benefits and reward schemes that these HR professionals manage are not only important for retaining and motivating employees, but also for attracting new people to the company Salary and incentive packages are one

of the main reasons why people apply for specific jobs The more attractive

compensation and benefits schemes tend to generate more interest in new

positions

What skills do HR employers in this sector look for?

Compensation, benefits and reward careers are all about money Consequently,

HR professionals who work in this area need to be numerate, commercially aware and have a detailed knowledge of financial laws and regulations

As well as monitoring their own company’s salary structures and benefits, these people may be required to research and analyse the salary rates of their

competitors

However, it’s not all about numbers, paycheques and payrolls These guys need excellent communication skills to make recommendations to employees on

pension and insurance schemes and to liaise with government departments and trade unions with regards to compensation and benefits issues

Indeed, these roles have a strategic element too, as the needs of the company and employees need to be balanced effectively Furthermore, compensation and

benefits are directly linked to market changes Consequently, difficult decisions regarding salary and benefits alterations may need to be made within this

department

Would I be in charge of all compensation, benefits and reward schemes?

The size of the organisation determines what kind of work you might be doing in your compensation and benefits career In smaller organisations, some people might deal with the whole range of responsibilities, whereas larger companies may offer careers which focus on one specific aspect of the compensation and benefits remit, such as payroll management

If you’re interested in an HR career that specialises in compensation, benefits and rewards, check out the occupational profile of a Compensation and Benefits

Manager If a career in HR sounds perfect for you, take a look at the various HR jobs listed on our jobs board!

If you aren’t looking for careers advice but rather how to apply for benefits you should visit the Gov website in the UK or you can visit Application-Gov if you are based in the US and want advice on how to apply for benefits