Blair and I have noticed that some of our clients are not adjusting their salary ranges and this is creating some internal problems which could be avoided. When organizations don’t adjust their salary ranges or salary steps, then department managers start getting creative with modifying job descriptions and job values with the desire to obtain an increase in base salaries for their department positions. Once this starts to happen, then everyone gets on the bandwagon to do the same thing. By adjusting your salary ranges every one to two years, you keep your salary ranges or salary steps close to market as well as you avoid the need to mess with changing job descriptions and job values for the sake of increasing base salaries. Let’s keep the salary ranges near market whether you have the budget or not to adjust employees’ base salaries.
Recently, we had a discussion with a potential client via a GoToMeeting online session. We were visiting with three members of the human resources team about internal job valuing and job matching with a national external salary aggregator’s software system and market pay comparisons database. One of the human resources team members mentioned how internal job matching had become a burden with the national external salary aggregator’s market pay comparisons database system. For this human resources profession, it had become unmanageable to match unique jobs with the external market pay comparisons database system. Even though the external national market pay comparisons database had thousands of job title benchmarks, the human resources manager was spending too much time on matching her company jobs with the national database jobs.
It is our recommendation that human resources and compensation professionals utilize an objective and defensible internal job valuing, matching, slotting or ranking process/system prior to the use of a national external salary aggregator’s software system and market pay comparisons database. The internal job review and placement process/system provides the basis for job equity and pay structure placement analysis that can be validated with external market pay comparisons. We believe that the combination of an internal job analysis and an external job matching process/system offers two forms of review analysis and promotes a more accurate and fair job assessment and position pay placement for organizations that offer transparent, equitable and competitive compensation pay plans.
A few weeks ago Stephen Miller, CEBS, wrote an excellent SHRM article on projected health plan costs for 2021. Mr. Miller referenced a new survey conducted a few months ago by the nonprofit Business Group on Health (BGH). The survey garnered 122 large employers offering coverage to more than 9.2 million employees and dependents. Over two-thirds of the responding companies each have more than 10,000 employees.
The projected increase in health benefit costs is expected to increase by 5.3 percent for next year. This equates to a projected per employee cost of over $15,500 which includes premiums and employees’ out-of-pocket costs. The survey indicated that large employers paid 70 percent of these costs and the employees cover the remaining 30 percent. Thus, the large employers will be covering around $10,850 and the employees $4,650.
Given the significant health care cost outlay that large employers are providing, the survey also listed several priorities for 2021 to mitigate next year’s increase as well as overall health plan costs. The items below would be good for all employers to focus on in 2021.
- Offer more types of virtual care/telehealth services
- Expand access to mental health services
- Focus strategy on moderating high-cost claims
- Offer care through centers of excellence for additional conditions
- Adopt networks of high-performance health care providers
- Link health care with workforce strategy
- Focus on primary care
- Address high-cost drug therapies
We recently completed a classification and compensation study for a public organization where the last formal study was done over 20 years ago. With this much time between formal classification and compensation studies, the normal outlook would be that the organization’s classifications and compensation plans would be dated and needing a complete overhaul. We were pleased to find that the Human Resources Director and HR Administrator had worked diligently to keep the organization’s job classifications current with ongoing internal reviews and updates. In addition, the organization’s compensation plans were evaluated and updated with semi-annual external market pay studies.
We were able to affirm and align the organization’s classifications and compensation plans based on our internal and external assessments and address dated policies and slightly inconsistent grade and range structures. This organization did not suffer a classification and compensation plans earthquake or sticker shock from the new study because of the ongoing internal and external work performed by the Human Resources Director and HR Administrator. There are several benefits derived from maintaining a current classification and compensation plan. Some of those benefits are listed below.
- Ongoing alignment of job classifications and compensation pay grade placements
- Internal job and pay equity and external pay competitiveness
- Consistency with compensation planning and budgeting per fiscal year
- Earthquake and sticker shock prevention from new classification and compensation findings
- Linear classification and compensation plans and less pocketed or over-utilized pay grades
- Greater transparency and consistency with job assignment and pay expectations
- Ability to hire and retain competent and skilled talent for the organization
Over the past few years, we have seen several of our clients considering and/or implementing a living wage policy and structure. The “living wage” concept dates back to when the American Federation of Labor (AFL) was established in 1886. The organization pushed for paying all workers (union and non-union) at a level which would maintain an active family with an “American standard of living higher than the 19th century European urban working class.” (Quote from the University of Maryland University Libraries article on Living Wage)
A valuable resource that we have used with our clients that desired a living wage for its employees is the Living Wage Calculator which was first created in 2004 by Dr. Amy K. Glasmeier and the Massachusetts of Institute Technology (MIT). Her model is explained in the next paragraph which was taken from the Living Wage Calculator website.
The living wage model is an alternative measure of basic needs. It is a market-based approach that draws upon geographically specific expenditure data related to a family’s likely minimum food, childcare, health insurance, housing, transportation, and other basic necessities (e.g. clothing, personal care items, etc.) costs. The living wage draws on these cost elements and the rough effects of income and payroll taxes to determine the minimum employment earnings necessary to meet a family’s basic needs while also maintaining self-sufficiency.
There are 12 family compositions in the calculator from One Adult with No Children to Two Adults with Three Children and Both Adults working. The program allows you to select a state and county in the state to see the living wage, poverty wage and minimum wage for all 12 family compositions.
There are many groups around the country that are promoting higher minimum wages that align with the current living wage figures. One such organization is the Fight for $15 which was started in 2012.
We believe that it is important for organizations to set a plan in place to ensure its employees are making at least a living wage if they don’t have one in place already.
We hope that you and your associates are staying safe and well during the COVID-19 Virus pandemic social distancing period and now with the various staged re-opening plans for organizations and businesses across the U.S.
Both of our human resources software programs (DBDescriptions and DBCompensation) are internet hosted. We offer access to the DB Squared programs from remote and/or office locations. As employers are deciding which employees need to return to the office or work from home (WFH), our software programs are accessible and easy to use.
We hope that the remaining months in 2020 will be less stressful as we all work together for a new normal after experiencing the devastating and lasting impact of the World-wide COVD-19 Virus Pandemic.
We hope everyone that we have served over the past 35 years is safe and well and doing everything they can to protect themselves and others around them from the Covid-19 virus. We have been able to take care of our clients’ needs during this time but are looking forward to the day we can all be in closer contact with our business associates, clients, family, and friends.
It has been our honor and joy to provide our copyrighted 15-factor Job Evaluation and Salary Administration Program (1985) in an automated format known as DBCompensation since 2005. In addition, we have several clients using the DBDescriptions software program that was developed and offered starting in 2010.
In the coming weeks and months, many businesses that have been shut down or had to limit their business due to the pandemic will be returning to some level of operations in the coming weeks with the intent to be at full operation over the next few months. We believe this is a great time to assess your compensation and benefits plans with the intent to ensure fair, equitable and competitive total reward packages are in place.
If you aren’t sure or you desire a more formalized structure that we have implemented since 1985 and offered commercially in an automated format since 2005, please contact us. Management and owners love the consistency, detail, defensibility and a realistic road map to follow. Employees love the company’s commitment to create an equitable, competitive and growth potential structure.
An intersection is a point at which two or more things intersect, especially roads. (Merriam-Webster)
A roundabout (also called a traffic circle, road circle, rotary, rotunda or island) is a type of circular intersection or junction in which road traffic is permitted to flow in one direction around a central island, and priority is typically given to traffic already in the junction. (Wikipedia)
After the nation is able to heal from the Coronavirus crisis and the corresponding forced economic recession to save human lives, government officials and employers will be working to bring our nation’s workforce back to pre-recession productivity levels and employees will be pushing hard to reestablish their previous compensation and benefit packages.
Compensation and HR professionals are keeping their eyes on two and maybe more things that are intersecting or circling and will have an impact on future compensation levels for the lowest paid jobs in our country. Living wage discussions and new state minimum wage laws are raising compensation levels above the current Federal minimum wage rate of $7.25 for non-exempt positions.
Will Living Wage rates (Reference: M.I.T. Living Wage Rate Calculator) be given a right-of-way status at a four way intersection with state minimum wage laws, proposed Federal minimum wage rates from forthcoming legislation to gen up our post-recession economy and/or demand greater than supply job economic factors. Using a roundabout circular intersection, which of the four mentioned items will take a priority lead position on compensation minimum wage policy decisions?
In our compensation consulting work with municipalities, we are seeing more requests by city council members for higher minimum wages or living wages for the lowest paid positions and employees that fill these jobs.
The next time you roll-up to a four-way stop intersection or press the gas pedal to enter a circular roundabout, we want you to think about the lowest paid employees and how they make a living and cover basic shelter and food expenses with $7.25 to $13.00 minimum hourly wage rates.
As we have worked with our clients to assist them with establishing compensation structures over the past 47 years, job descriptions are where we start and the foundation of “getting it right” when it comes to employee pay. There are also several other job description benefits listed below that employers should take advantage of with their employees.
Recruitment – once a pool of qualified candidates has been identified, a job description can be sent ahead of the phone and/or in-person interview. Asking job related questions from the job description will assist the recruiter to determine who is best suited for the position.
Onboarding – a great way for the immediate supervisor and new employee to ensure both parties are on the same page together is to review the job description (especially job summary, duties, skills to be used/developed and goals to be accomplished) as a part of the onboarding process.
Job Valuing – since jobs can vary from organization to organization, it is important that job descriptions are created and maintained for what each employee is supposed to actually be doing. In addition, a job description can be internally valued by using a job rating/valuing system such as our Johanson Group copyrighted 15-factor job valuing program creating a job point value for each position. This process helps to create an internal value and is integrated with outside market data to establish a minimum, midpoint and maximum salary range. This approach is very valuable when you have a hybrid or unique position where no market data exists for it.
Exempt vs. Non-Exempt – Based on how the job description is written, the employer can make a solid determination on whether the positon is exempt from wage and hour laws. In addition, our job valuing system assists with determining the proper classification for each position within the organization.
Performance Appraisal – When it comes time to sit down with an employee to discuss how he or she is doing in the position, whether informally throughout the year and/or formally once a year, using the job description and the goals that were established for the review period can be beneficial for both parties.
Promotion Consideration – If a position is open and the organization desires to select the best internal employee, the job description can be provided to all potential candidates and used during the interviews to select the best individual for the position.
ADA – The Americans with Disabilities Act (ADA) doesn’t require job descriptions, but any organization with 15 or more employees is required to have a listing of job functions and job specifications that describe the position from a physical and environmental standpoint. Job descriptions with the ADA terminology will be beneficial for determining whether an appropriate accommodation can be made for someone with a disability.
Safety Sensitive – Several states have passed medical and/or recreational marijuana laws and some positions within an organization will have a requirement where marijuana can’t be used. Listing this requirement on the job description gives notice to potential and existing employees.
PayScale, a compensation and software firm, released a recent report titled, “Does Pay Transparency Close the Gender Wage Gap?” CEO Scott Torrey made the following statement based on the research findings related to their compensation study:
“This latest research shows just how powerful transparent pay practices can be for organizations. When employers use real market data and talk openly with employees about their pay, it serves to challenge the underlying bias that can impact decisions about compensation. Most employers want to ensure they’re paying fairly, so we encourage HR departments and senior leaders to adopt transparent pay practices as an important step toward achieving this goal.”
As compensation consultants with several decades of client experience, we affirm Mr. Torrey’s statement about pay transparency and its impact on paying employees fairly, but we also believe that internal job valuing and the use of external market pay data provides for a higher level of pay transparency and pay equity. Validating an internal job valuing process with external market pay data helps managers and employees to see more clearly how the base compensation process and structure and pay equity efforts are handled in their respective organizations and companies.