Ivan Trisnio

LF-21 / 2101660512

GSLC Human Resources Management

Please discuss how to establish a market-competitive pay plan

1) Get a Pulse on Your Market

After a series of wage declines in 2009 and 2010, a number of industries are now seeing
continual salary growth across multiple industries and locations. If your company’s
compensation plan is based on the trends in those leaner years immediately after the recession,
it’s probably time to revisit your pay strategy. Or you may be at risk of losing talent to
competitors who’ve more quickly adapted to shifts in the market. Keep an eye on the PayScale
Index to keep track of quarterly trends in pay by location, industry and job category.

2) Benchmark Your Job Positions

It’s great to have a pulse on the overarching pay trends in your industry and area, but it’s another
thing to have confidence that you’re actually paying top employees at the right rates for their job.
By engaging in at least once-per-year salary benchmarking, you’ll be able to identify employees
who are at a “high flight risk” of turnover, and be able to make smarter decisions about where
you allocate your labor budget..

3) Develop a Compensation Plan

Often times, businesses fear that having a compensation plan will limit their ability to make good
business decisions, so they skip building a compensation plan in favor of fewer rules and less
structure. But without a formalized compensation plan, companies often miss an opportunity to
structure their pay decisions in a way that support business goals. As companies grow, the costs
of compensation continue to rise, and without a formalized plan in place, companies often
experience problems with pay inequities, employee retention, and engagement. Simply put, it’s
easier, and more cost-effective to take small steps toward developing a smart compensation plan
now, than it is to alter your course later down the line.

4) Identify Pay Inequities

Some people live by the motto, “What you don’t know won’t hurt you.” That’s a motto your
organization cannot afford to live by when it comes to internal pay inequities. Without a
formalized comp plan, it’s often common for pay inequities to develop across organizations and
departments. Those pay inequities can most definitely hurt you and your organization in the form
of heightened turnover, over payment, and even litigation. Learn how to identify and resolve
these inequities with PayScale’s guide to pay inequities.
5) Communicate Your Compensation Strategy

If you go through the process of creating a compensation plan, don’t forget to let your employees
know about it. In theory, your compensation strategy should reiterate and support your business
goals. So, it’s important to communicate to employees how their work aligns with the goals of
the organization, and how their compensation reflects that. If you share with your employees,
and make your investments in talent clear to them, you’ll be surprised by the positive effect it has
on employee morale.