With best practices in mind, we endeavor for a new pay structure design that follows the market midpoint 100%. This means that the midpoint of the market rates for each job position will be the basis for structuring the pay ranges for each job grade. Market rates are data collected from the compensation study.

Elena Mason, CEO, Prudential Global Network

As part of our engagements involving market competitiveness review, we consider certain parameters from the information gathered in our due diligence stage to ensure that our recommended pay structure is sustainable, scalable, versatile, equitable, and above all labor regulations compliant. These parameters include: (1) The Strategic Business Issues & Hard-to-Fill Jobs (2) Base Pay Line Policy (3) Compensation Philosophy (4) Structural Design (5) Internal Equity

Strategic Business Issues & “Hard-to-Fill” Jobs

Strategic business issues go beyond the ability to financially sustain any compensation programs. Of course, budgetary concerns as driven by external forces such as voters, citizens, Board Members, and State Legislature are still paramount among everything else, still, issues like compensation philosophies that describe the organizational belief of how employees must be paid and internal equity are both strategic in nature that must be addressed when developing pay structures. 

In addition to the issues described above, “hard-to-fill jobs” is yet another concern that must be addressed when structuring pay and developing plans to manage the pay. Depending on the organization’s competitive pay practices, hard-to-fill positions are usually managed by matching salaries using “dollar-to-dollar” market equity approach. An employee who is about to resign can be encouraged to stay by offering salaries comparable to the other organization. Similarly, a candidate for hard-to-fill position can be offered competitive salaries slightly above or exactly at the market rate.  

Base Pay Line Policy

With best practices in mind, we endeavor for a new pay structure design that follows the market midpoint 100%. This means that the midpoint of the market rates for each job position will be the basis for structuring the pay ranges for each job grade. Market rates are data collected from the compensation study.

Midpoint Progression (Midpoint Differentials)

At PGN HR, we prepare our recommendations with the following midpoint progression between grades:

• 5% to 12%  = for clericals, maintenance, or production levels
• 8% to 15%  = for paraprofessionals, and professional managers
• 20% to 35% = midpoint differentials between grades for Executive Levels
• 15% to 25% = between supervisors and subordinates

It goes without saying that this midpoint progression plan is subject to the approval of the client’s compensation committee and must be aligned with the client’s policy on promotion, and performance based salary increases.

Structural Design Rules and Parameters

The structural review that we recommend look at salary ranges per grade, and will examine if the structure commensurate with classification levels and pay grades. Best practices dictate that lower grades, should have narrower ranges, and higher grades wider ranges.  The range spreads best practices consist of:

• 20% to 30% = Service, Production, and Maintenance Job Classification
• 30% to 40% = Clerical, Technical and Administrative Classification
• 40% to 50% = Professional and Supervisory Classification
• 50% to 100% = Managerial and Executive Classification

- Elena C. Mason, CCP, SPHR, Prudential Global Network