Compensation Planning


This is a busy time of year for compensation and human resources professionals charged with making recommendations for compensation budgeting as part of the overall budgeting process. Most of the national, state and regional surveys indicated an average 3% overall adjustment for pay inflation in 2014. The past two years along with the projected increase for 2014 supported a trending 3% pay increase average post the gradual climb from the 2008-09 recession. For companies and organizations that utilize merit pay evaluations, the budgeting range average is from 3.5% to 4%.

With our compensation client consulting plans, we’re supporting the 3% overall adjustment to maintain market pay competitiveness unless the client’s pay averages are behind the market mean. Recommendations for 4% to 5% increases in compensation budgets for 2014 were not uncommon for organizations that were 2% to 5% behind the market mean. The economy is improving and we are receiving more calls from existing clients and potential new clients about how they are losing “key/top performing” employees to competitors or other organizations who are willing to attract them with higher compensation. It is important to minimize turnover for higher compensation by keeping an eye on pay means/medians in the market and maintaining a compensation structure that is competitive with organizations within the recruitment market area.

We have updated several pay structures with employee pay quartile analyses during the past several months. For existing and new clients, we have appreciated hearing how the pay structure and employee pay within the range quartiles analysis is helpful with compensation budget planning, employee pay increase/promotion movement and pay equity analysis. The following table exhibit is produced by the DBCompensation system to help with compensation planning and budgeting. The names have been changed and table blurred to protect the innocent.