Scenario Summary
The manager of Company X has requested that an HR associate perform a compensation analysis. This request stems from feedback gathered in recent exit interviews, which indicate that some employees feel underpaid or perceive that their total compensation packages are unequal compared to those of their peers. The HR’s task is to determine how to assess these concerns and provide actionable recommendations.
Selection of Compensation Metrics
Assessing wage differentials within a company is a crucial aspect that warrants special managerial attention. In the case of Company X, a compensation analysis is needed. Such an analysis examines whether employee pay aligns with the organization’s compensation philosophy. Compensation analysis is conducted in all businesses because compensation constitutes the most considerable single cost to a company. Investigating the proper range spread is one of the most effective strategies for determining wage differences.
Range spread means establishing the distance between the minimum and maximum of a salary range. To determine this range, it is necessary to subtract the minimum wage from the maximum and then divide the result by the minimum compensation. However, management usually determines the range and midpoint and then calculates the range minimum and maximum. This approach enables management to establish a compensation philosophy and then implement it.
Integration of External Data
Nevertheless, this philosophy is grounded in extensive research beforehand. First, it is crucial to be familiar with employees’ moods and opinions, as this knowledge will serve as a guide that at least partially indicates how employees will respond to change. Second, it would be beneficial to gather information about wage ranges among competitors. These insiders may serve as the template for the reforms inside Company X.
Recommendations to Management
Thus, the clear indication of range spread is essential to enforcing pay equity. This range, with the transparent mid-point, will indicate internal salary progressions. Such a structure should motivate employees who are paid less than the average point to improve in their profession. At the same time, this approach helps avoid anomalous situations in which some employees receive significantly higher compensation than others. Even if such employees are present in the company, the midpoint would rightly have to be raised to a higher level, which would instill confidence in the integrity of their management.