In a market as competitive as St. John’s, Newfoundland & Labrador, it is mission critical that employers perform regular and rigorous compensation reviews. Compensation design and analysis is critical to attract and retain top talent. The demand for top talent exceeds the supply of the labour pool in the local market, so total compensation (base, performance bonus, health/dental/vision benefits, employee perks, stock options, RRSP matching, etc.) offered needs to be competitive for your industry and company size. Here are some suggestions for conducting a compensation review including what key compensable factors to consider.
How to Conduct a Compensation Review
- Establish a compensation strategy for your organization. Key considerations include whether you want to lead, lag, or match the external market. What is your turnover rate? Are there hot skills in your organization that are harder to secure than others? Do you have locations that are remote and demand a market premium? Do you offer annual cost of living increases; and/or performance bonuses based on staff achieving their objectives and annual performance metrics? It is important to considering your overall compensation mix, budget available, and difficulty attracting top talent for specific positions when setting your compensation strategy.
- Start off by asking why is your organization conducting a compensation review at this time. It is helpful to know if the purpose of your review is driven by:
- company restructuring
- pay equity compliance
- workforce planning for new functions or roles
- regular review to ensure market competitiveness
3. Start by collecting external compensation data for similar organizations in terms of size (e.g. number of employees and budget), geographical location, and industry. This can be gathered by looking on-line for free information and through sharing information with your professional network and association memberships. Sometimes professional associations perform their own compensation surveys and share this information with members at no cost. It is important that you start by identifying your relevant market comparators. Benchmarking yourself against other organizations in the same sector, industry, employee size, labour markets, and for the same position responsibilities are ideal. You then need to understand where your comparator organizations’ employees fall within their pay scales; and what the upper and lower limits are for those scales. For example, some organizations have a compensation strategy to lead the market on compensation. This may involve paying higher than the market average for certain positions.
4. Order salary benchmark reports from an external HR consultant or through your in-house compensation specialist. Often it is necessary to purchase salary data to get quality information needed to conduct a detailed compensation review. A compensation specialist can generate a reports that contain market relevant compensation mix data showing pay ranges by position type. Normally, inputs such as certifications required, number of years of experience, a job title, and relevant labour market(s) for comparison are used as inputs. It is important that compensation data by ordered from reliable sources. This often involves purchasing compensation data from benchmarking organizations. Pay Scale, World at Work, Salary.com, Salaryexperts.com, etc. The advantage of going through an external HR consultant to order these reports is that they can get volume discounts on pricing if they do significant work in this area.
5. Compare the salary benchmarks to your internal compensation mix. Once you receive your external market compensation data, you need to compare the external data to your in-house pay scales; and analyze what your average pay is for incumbent employees on your internal scales. If you fall significantly above or below what the external market pays on either base salary, performance bonus, or other health/dental/vision benefits, you may need to consider making some adjustments to your compensation mix to be market competitive.
If you have any questions or want external support to order a compensation report, perform compensation design and analysis, job evaluation, or update job descriptions, contact Higher Talent for support.
Author: Susan Power, MBA, CHRP, Owner & Principal Consultant of Higher Talent Inc.