Compensation 101

1. Consulting Inc. Compensation 101 Creating & Administering your base pay strategy

2. Our Agenda • Identifying your total rewards goals • Establishing your competitive philosophy • Defining your compensation policies • Identifying career paths and job worth • Matching to the market • Assigning jobs to grades • Creating your salary structure • Transitioning to the new structure • Managing salary administration • Evaluating your salary program

3. total rewards goals • To support the organization’s mission, vision, values and culture • To be fair, equitable, well understood and in support of lasting trusting relationships • To build depth, strength and sustainability • To be competitive and supportive of career progression • To promote smart business practices • To be economically responsible to employees and the organization • To inspire excellence and motivate results • Reward and motivate measurable performance

4. 3 Minutes Total rewards components

5. Competitive philosophy Competitive Position - How competitive do you want your “total compensation” program to be? • 50th percentile? • 75th percentile? • For all occupations? • For all levels? • Compared to what organizations in what marketplace? (industry, size, geography)

6. Compensation Policy How will base pay be managed? • Who decides the pay of a new employee? • Under what conditions does pay change? • Is progression based on seniority or performance? • What is the timing of progression adjustments? • What is the timing of scale adjustments? • Are scale adjustments guaranteed for everyone? • What is the timing of promotion adjustments? • Who is eligible for overtime?

7. Compensation philosophy How will base pay be managed? (cont’d) • Who is accountable for determining the distribution of compensation rewards? • How will consistency be managed? • What information will be communicated to managers? • What information will be communicated to employees? • What information will be kept confidential?

8. Career paths & job worth M5 • Skill • Education • Experience • Mental Effort • Problem Solving • Thinking Horizon • Responsibility • Autonomy • Authority • Impact • Working Conditions • Physical Effort • Sensory Attention • Mental Stress M4 P6 M3 P5 M2 P4 M1 P3 A5 P2 A4 P1 A3 A = Administrative P = Professional / Technical M = Managerial A2 A1

9. Matching to the market • Select sources of data • Identify benchmark positions • Match positions using market descriptors • Close matches • Blended matches • Partial matches • Collect data based on competitive criteria • Size of organization • Location of organization • Industry • Percentile match

10. Matching to the market

11. Assigning jobs to grades

12. Creating the salary structure

13. Creating the salary structure Developing Skilled Expert

14. Transitioning to the new structure

15. Managers recommend placement • HR conducts a gap and costing analysis while ensuring consistency • Red-circling and green-circling is considered for outliers • Pro-rating is necessary if transitioning from anniversary date to annual date

16. Managing salary admin • Will progression be fluid or based on steps? • Who is eligible to progress beyond the midpoint? • How will promotions be handled? • Where are new employees placed?

17. Managing salary admin • Annual budgeting • Based on organization affordability • Based on trends for region, occupation, industry • Considering CPI • Establish a structure adjustment budget • Establish a progression merit budget • Establish a promotion budget • Implement together based on performance

18. Evaluating your salary program Compa-ratio Analysis

19. Structure design is also impacted by variable pay • How does your variable pay design intersect with your base pay design for individuals and teams based on: • Market practices • Job level • Company performance • Individual and team performance • Compa-ratio ….…the saga continues