Building a compensation plan… easy. Making it work for the organization . . . . . not so easy. It’s true that the most difficult part of any major HR project is the implementation, and when building a compensation plan it’s no different. In this webinar, we’ll talk about how to develop an effective implementation plan, including: Get an implementation plan approved by senior leadership with appropriate budget allocation Think through one-time vs. multi-year rollout approaches Develop a communication strategy tailored to employee, managers and leaders.

1. Building a
Compensation Plan
Part 3: Implementing
the Total Rewards Plan
Stacey Carroll, SPHR, CCP
Principal Consultant
PayScale, Inc.

2. PayScale is a market leader in global online compensation data.
With the world's largest database of individual employee
compensation profiles, PayScale provides an immediate and
precise snapshot of the job market.
Our patent-pending, real-time profiling system indexes custom
employee attributes (such as industry-specific certifications) and
specific job titles for every industry.
Our secure, on-demand business solutions, PayScale MarketRate
and PayScale Insight, provide employers with accurate, reliable
compensation detail never before available.
13,000 Positions. 50 Major Industries. 11 Countries

3. Agenda
• Implementation Planning
• Strategies for
Implementation
• What will your reward
• Salary Targeting
• Increase budgeting
• How will you deal with
outliers
• Equipping Managers

4. Implementation Planning
1. Review benchmarking
conclusions with senior
leadership
2. Lead the discussion about
reward strategy
3. Show the reward strategy in
action
4. Educate management about
decisions
5. Educate employee about
decisions

5. Strategies: what will you reward?
 Once again, there is no “right” answer
 Rewards should be based on business
necessity/strategies
 Options include:
 Changes in market conditions
 Longevity
 Proficiency
 Performance
 Skill attainment
 Some combination

6. Strategies: Salary Targeting
 The idea behind salary targeting is it helps quantify
how far off the organization is from the desired
strategy
 It is NOT a budgeting or decision making exercise
 It brings to light your “weak spots”
 It helps your Exec team visual the
results/consequences
 It should be done at the highest levels of the
organization.

7. Sample Salary Targeting Exercise
 Proficiency + Performance
Salary Targeting Matrix
Performance & Proficiency
Employee Placement
3 - Exceeds 0.85 0.95 1.05 1.15 1.25
Performance
2 - Meets 0.80 0.90 1.00 1.10 1.20
1 - Does Not Meet 0.80 0.85 0.95 1.05 1.10
Learning the Experience above Ready for
New hire (no exp.) Fully proficient
position proficiency level promotion
Proficiency

8. Sample Salary Targeting Worksheet
Target Delta to
Compa- Range desired % behind Reccd
FIRST NAME LAST NAME DEPT # JOB TITLE Current Salary Ratio Midpoint Target Salary salary target increase Cost
Hidden Hidden 000140 MDRC $27,539 1.00 $15.25 $15.25 $2.01 15.18% 1.00% $275
Hidden Hidden 000015 RN $63,482 1.00 $35.25 $35.25 $4.73 15.50% 1.00% $635
Hidden Hidden 000015 RN $69,784 1.10 $35.25 $38.78 $5.23 15.57% 1.00% $698
Hidden Hidden 000106 PACC $34,528 1.10 $17.50 $19.25 $2.65 15.96% 1.00% $345
Hidden Hidden 000025 LABT $27,352 1.00 $15.25 $15.25 $2.10 15.97% 1.00% $274
Cardio/Pulmina
Hidden Hidden 000005 ry Mgr $65,000 1.00 $76,000.00 $76,000.00 $11,000.00 16.92% 2.00% $1,300
Supervisor,
Hidden Hidden 000145 Admissions $39,000 1.10 $20.25 $22.28 $3.53 18.80% 3.00% $1,170
Hidden Hidden 000015 RN $67,808 1.10 $35.25 $38.78 $6.18 18.94% 3.00% $2,034
Hidden Hidden 000090 COOK $25,376 1.10 $13.25 $14.58 $2.38 19.47% 4.00% $1,015
Hidden Hidden 000001 RN $67,475 1.10 $35.25 $38.78 $6.34 19.53% 4.00% $2,699
Hidden Hidden 000015 NRST $25,272 1.10 $13.25 $14.58 $2.43 19.96% 4.00% $1,011
Hidden Hidden 000145 AREP $26,416 1.00 $15.25 $15.25 $2.55 20.08% 5.00% $1,321
Hidden Hidden 000001 RN $60,320 1.00 $35.25 $35.25 $6.25 21.55% 6.00% $3,619
Hidden Hidden 000015 RN $69,264 1.15 $35.25 $40.54 $7.24 21.73% 6.00% $4,156
Hidden Hidden 000145 SCHE $29,952 1.15 $15.25 $17.54 $3.14 21.79% 6.00% $1,797
Hidden Hidden 000145 AREP $25,792 1.00 $15.25 $15.25 $2.85 22.98% 7.00% $1,805
Hidden Hidden 000115 Accountant $38,147 1.00 $47,000.00 $47,000.00 $8,853.00 23.21% 7.00% $2,670

9. Strategies: Increase budgeting
 This is the opportunity to actually plan a budget,
bringing into account all the decisions that have been
made
 It’s best to break out the pieces
 Budget different scenarios
 For more detail on how to budget, attend
Compensation Budgeting webinar

10. Sample Implementation Budget
1. Market
2. Market movers
3. Merit Matrix
(Performance +
Placement in range)
4. Consistency

11. Sample Merit Matrix

12. Strategies:
Green Outliers (below the minimum)
Option 1: Minimize Outliers – Bring all employees who are not at minimum to the minimum of the pay range. This method is favored when
your organization has a strong commitment to correcting outliers in your compensation plan. No discretion is given to managers. In the long
term, employees will get raises when the market shifts, thus creating outliers.
Option 2: Market-based Pay – Allocate increases based solely on where employees are in their range (which is alignment with the
market). For example if you are farther behind the market you may get a 6% increase, but if you are above the market rate you get a 2%
increase. This method is favored when your organization has a strong commitment to compensating staff based on the going market rate for
their positions. Little discretion is given to managers. In the long term, employees will get raises when the market shifts.
Option 3: Market & Performance-based Pay – Allocate increases
based on both employees’ placement within the range and
performance. For example, a star performer who is lower in the range
may get an 8% increase, while a star performer who is high in the range
may get a 6% increase. A matrix is used to show percent increases by
both range and performance. Some flexibility may be given to managers
by providing a range rather than an exact percentage. This method is
favored if your organization both has a commitment to paying relative to
the market and to rewarding top performers. In the long term, high
performers have higher salaries and moderate performers’ salaries will
shift as the market shifts. Note: this option can be used with market &
performance, market & tenure, or any number of variables you may wish
to reward.

13. Strategies:
Red Outliers (over the maximum)
Option A: Do nothing– Continue to give increases to employees, even if they fall over the top of the pay range. This method is favored if the
situations that call for individual outliers to fall above the range are acceptable to the organization, and if the need to avoid the possibility that
they will leave the organization outweighs the cost. In the long term, red outliers will become even more skewed and above the market.
Option B: Tier increases by position in range– Continue to allocate increases to outliers falling above the range, but give a smaller
percentage than to those in or below the range. For example, if you are farther behind the market you may get a 6% increase, but if you are
above the market rate you may get a 2% increase. This method is favored when your organization has a commitment to paying relative to the
market, and would like to decrease the amount over range, over a longer period of time. This option has less risk of turnover of red outliers
than the following options.
Option C: Freeze base pay and offer performance-based bonuses –
Discontinue base-pay increases for red outliers until the market catches up.
Offer clear incentives for a lump-sum performance-based bonus annually (or
semi-annually or quarterly). Only reward top performers among the red
outliers. This method is favored if your organization both has a commitment to
paying relative to the market and to rewarding top performers. This option has
some risk of turnover among red outliers, especially those who are
underperformers.
Option D: Freeze base pay – Discontinue base pay increases for red outliers
until the market catches up. This option has a moderate to high risk of
turnover among red outliers – including those who are top performers.
Option E: Decrease base pay – Decrease base pay for red outliers to the
maximum of the range. Increases will happen only when the market moves.
This option is for organizations with a strong commitment to internal equity and
market-based pay. There is a very high risk of turnover among red outliers,
especially top performers. This option is not recommended unless there is a
strong policy desire for it.

14. Equipping Managers
 Who: Managers first – then employees
 What: Educate Managers about compensation
 When: Before required action
 Why: Give the big picture
 Give Managers tools (FAQ’s, scripts, documents to
share)
 Verify understanding

15. Sample Budget Worksheet
Total Payroll $981,000
Increase Budget % 3
Increase Budget $39,240
Proposed $32,685
$6,555
Annualized Annualized Annualized Annualized Annualized Expected
Name Employee Dept Employee Job Title Base Pay Rating Grade Base Min Base Mid Base Max Compa-ratio comp-ratio Increase % Increase $
Jackson, Susan Marketing Director of Marketing $150,000 3 7 $72,200 $90,300 $108,400 1.661 1.00 1.00% $1,500
Johnson, Leonard Sales Director, Sales $140,000 3 8 $84,600 $105,800 $127,000 1.323 1.00 5.00% $7,000
Lawson, Madeline Administration Controller $102,000 2 5 $75,000 $85,000 $100,000 1.2 0.90 0.00% $0
Jones, Daniel Development Software Engineer $89,000 2 7 $72,200 $90,300 $108,400 0.986 0.90 1.50% $1,335
Edmonds, Tim Sales Account Executive $45,000 5 1 $28,000 $35,000 $42,000 1.286 1.20 2.00% $900
Jennings, Sean Development Program Manager $89,000 3 7 $72,200 $90,300 $108,400 0.986 1.00 3.50% $3,115
James, Bob Development Software Engineer $84,000 3 7 $72,200 $90,300 $108,400 0.93 1.00 4.00% $3,360
Vincent, Keven Sales Account Manager $38,000 2 4 $45,000 $55,000 $65,000 0.691 0.90 5.50% $2,090
Dillings, Jeff Development Software Engineer $87,000 4 7 $72,200 $90,300 $108,400 0.963 1.10 5.50% $4,785
Cowan, Leanne Marketing Product Manager $82,000 4 7 $72,200 $90,300 $108,400 0.908 1.10 5.00% $4,100
Smith, Jane Development Software Engineer $75,000 5 7 $72,200 $90,300 $108,400 0.831 1.20 6.00% $4,500
$981,000 $32,685

16. Questions?

17. Save Time and Money on Your
Compensation Initiatives
PayScale is your key to saving money, recruiting talent at the right price, and retaining top performers
with accurate, real-time compensation data matched to your workplace and workforce.
Visit our blog: http://blogs.payscale.com/compensation/
Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey