HAPPY POST 4TH of JULY

HAPPY POST 4TH of JULY

Now that we’re on the backside of the celebratory 4th of July – Independence Day fireworks and picnics, it is time to get back to work with attracting and retaining employees through competitive pay and strategic total rewards benefits. During the recent 4th of July holiday, it was amazing to see how small compacted fireworks create such spectacular nighttime displays of colorful sparks. When lit, these small containers in relative size compared to the resulting expansive firework displays are a profound mystery of awe and yet a technological mastery of increasing proportion. The chemistry of fireworks is based on the theory of combustion, but a simple observation could be made based on the theory of compression.

Speaking of compression, many of our compensation clients are experiencing pay compression issues. With tighter labor markets and increasing starting wages for new hires, the pay levels between newly hired employees and employees with one to three years of tenure are getting tighter. The compression of the air-fuel mixture in an internal-combustion engine just before ignition creates powerful energy. The employee energy associated from pay compression issues can be significant until the employer resolves these issues. Identification of pay compression starts the process towards releasing the valve on negative pay comments and the potential of losing tenure employees. Employers without internal pay structures/plans will use a “time in position” percentage of market pay means to determine pay adjustments for employees expressing pay compression concerns with newly hired employees. Employers with internal pay structures/plans that are competitive with market pay means by position will use a “time in position” percentage of the internal job grade pay range midpoint for pay movement decisions that lessen pay compression problems.

The average timeframe for an employee to reach their respective position pay range midpoint is a key factor when addressing pay compression in an organization. The private sector employees on the average tend to reach their pay range midpoints within 4 to 5 years. The public sector employees on the average will reach their pay range midpoints in 8 to 10 years depending on the average annual pay percentage increases of 3 to 4% of base pay. Also, the pay range spread will be another key component in determining how quickly employees will reach position pay range midpoints.

Let’s hope that your internal pay compression situation can be resolved with firework “Sparklers” instead of huge sky-filling firework displays with M-80 sonic booms!

Happy Post 4th of July Boom!

 

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