The compensation function in an organization has a regular calendar of projects that are completed each year. The purpose of completing these cyclical projects is to guide management/boards of directors in making compensation, recognition and reward decisions that effectively attract and retain employees and maintain compliance with state and federal regulations.
The thirteen projects listed below make up a comprehensive list that some organizations may complete annually, every other year, or on an as-needed basis. The next time you are asked why your organization needs a dedicated compensation professional or manager, this list may be helpful.
- Administer the annual incentive process short- and long-term incentives: Collaborate with senior management and the compensation committee to understand the past fiscal year’s performance, goals, and objectives for the coming year. Collect and analyze individual performance results and goals. Calculate and analyze participant incentive awards to ensure consistency and alignment between functional and geographic areas. Meet with senior leaders/compensation committee to gain approval for payouts.
- Manage the performance review program including communications, collecting management input, the calibration process and leadership review: Using performance management software, communicate annual focal review timelines. Offer performance management training to new managers or refreshers to all. Some organizations may offer training to employees around how to participate with their managers in the self-evaluation and discussion process. Provide leadership on the outcomes of the process and collaborate with other HR colleagues in evaluating program effectiveness.
- Administer the annual salary review process including communications, collecting management input and obtaining leadership approval: This often is done at the same time or following the performance management process. As part of this process, it is important to review and ensure high performers/high potentials’ base pay are positioned in the target zone of the range. It is also the perfect time to do a pay equity analysis to understand the impact of the new salaries by demographics. Ensure managers have the tools they need to communicate the new compensation to each employee.
- Prepare and distribute total rewards statements: Total rewards statements are effective tools to show the value of an employee’s compensation and benefits. PayFactors recently added this solution to their system.
- Review and refresh job descriptions and ensure FLSA compliance: This is a collaborative process working with management to ensure job descriptions are current. There are a variety of systems available to help with this process and make it easier to write and keep them up to date.
- Subscribe and submit company salary data to survey companies: Your participation in salary surveys is required for proprietary surveys and significantly discounted for other surveys. In addition, compensation management systems such as PayFactors can make this process go smoothly.
- Analyze market data and compare annual survey results to your employee compensation and salary range midpoints, and provide leadership with a summary analysis: This analysis will help you identify jobs that have moved faster than others in the market and identify jobs that may have to be assigned to a higher range.
- Review external market for budgeted salary increases and salary range adjustments, combined with salary survey data: Many survey companies and WorldatWork collect and provide salary increase budget information to help determine adjustment of salary ranges, planned merit/annual increase budgets and bonus spending.
- Collaborate with Finance to determine merit, promotion and adjustment budgets and incentive forecasting: Use the market data to build a case for base salary spending.
- Update salary ranges based on the market analysis, including all geographic or function specific ranges: Prepare an impact analysis of employees compared to the new ranges. Identify employees whose salaries, performance and competencies are not aligned with pay. Meet with managers to discuss salary adjustments.
- Survey or obtain employee feedback on the effectiveness of compensation programs and their understanding: Meet with individual high performers, send out surveys or conduct focus groups to gauge their understanding of the organization’s compensation programs.
- Evaluate the effectiveness of recognition and related ancillary programs based on spending and employee and manager feedback: Analyze data and share with leadership to support continued use or changes to the programs.
- Develop and maintain effective communication materials to drive employee understanding of all compensation programs: Review and refresh your communications materials, videos and other forms of media to ensure that employees know what the organization is doing to provide fair and competitive compensation and ensure understanding.