It's time to start thinking about your 2017 compensation budget. Getting pay right is critical to keeping, attracting, and motivating your best people, but how can you make compensation a priority for next year’s budget? Join PayScale as we discuss: -Checking for market movement -Identifying and resolving pay inequities -Selling the need for a decent compensation budget

1. How to Set a Comp Budget
Mykkah Herner, MA, CCP
Modern Compensation Evangelist
Jenni Marquez, CCP
Senior Compensation Professional
A copy of the presentation and recertification credit will be sent out
within a couple of business days

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Jenni Marquez, CCP
Senior Compensation Professional
https://www.linkedin.com/in/jennimarquez
Mykkah Herner, MA, CCP
Modern Comp Evangelist
https://www.linkedin.com/in/mykkahherner

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Selling the need for a comp budget
Elements of a budget request
Identifying the right numbers
Getting started

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Selling the need for a decent
comp budget

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MANUFACTURINGwww.payscale.com/cbpr
65% of manufacturing orgs perceive a lack of
qualified candidates for their open positions
vs 55% of all
55.0%
45.0%
64.8%
35.2%
True
False
T/F: lack of qualified applicants for
open positions
Manufacturing All

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TECHNOLOGYwww.payscale.com/cbpr
54.0%
31.4%
67.1%
19.1%
Yes
No
Pay more for competitive roles
Technology All
67% of tech companies will pay more for
competitive roles
vs 54% of all

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HEALTHCAREwww.payscale.com/cbpr
42% of
Healthcare
organizations
cite leaving for
personal
reasons as the
#1 reason for
leaving
vs 29% of all 29.1%
25.1%
7.3%
20.0%
5.5%
8.5%
42.3%
23.3%
2.6%
14.3%
4.2%
10.1%
Personal reasons (family,
marriage, health, school,…
Compensation – higher pay
offer elsewhere
Retirement
Professional advancement-
more attractive title, role…
Company culture clash
Bad relationship with direct
supervisor/manager
#1 reason people left in 2015
Medical & Healthcare All

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Baby Boomers 1946 – 1964 Size: 74M
Communication
About Comp:
Private
Average Tenure:
15 Years
Career Mindset:
Loyal
Self-driven
High Work Ethic
Retirement
Generation X 1965 – 1979 Size: 66M
Communication
About Comp:
Semi-private
Average Tenure:
5 Years
Career Mindset:
Pessimistic
Self-reliant
Work/Life Balance
Management
Millennials 1980 – 1995 Size: 74M
Communication
About Comp:
Public
Average Tenure:
18-24 Months
Career Mindset:
Idealistic
Fairness, Flexibility Values
Work/Life Balance
Advancement
Generation Z 1996 – Present Size: TBD, 69M+
Communication
About Comp:
Semi-private
Average Tenure:
TBD
Career Mindset:
Realistic
Multicultural Fluency
Technology Native
Learning with a Purpose

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Elements of a comp budget

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What is the
Right
Compensation
Mix?

19. Sample
Budget
Request
2017 Compensation Budget
2016 Total Rewards Budget: $24,150,000
2016 Base Comp Budget: $15,000,000
BASE PAY Percent Dollar Amount
2017 Promotions 0.80% $120,000
2017 Projected New Headcount 10.00% $1,500,000
2017 Range Adjustments 0.06% $9,000
2017 Market Adjustments 0.14% $21,000
2017 Equity Adjustments 0.02% $3,000
2017 Pay Increase Adjustments 3% $450,000
Total Base Comp Increase 14% $2,103,000
2017 Base Comp Budget $17,103,000
VARIABLE PAY (% of 2017 Base) 24% $3,660,042
TOTAL REWARDS (PTO, Benefits, Perks) 25% $4,275,750
TAXES 12% $2,491,565
2017 Total Rewards Budget $27,530,357
Total Total Rewards Increase 14% $3,380,357

20. 2017 Compensation Budget
2016 Total Rewards Budget: $24,150,000
2016 Base Comp Budget: $15,000,000
BASE PAY Percent Dollar Amount
2017 Promotions 0.80% $120,000
2017 Projected New Headcount 10.00% $1,500,000
2017 Range Adjustments 0.06% $9,000
2017 Market Adjustments 0.14% $21,000
2017 Equity Adjustments 0.02% $3,000
2017 Pay Increase Adjustments 3% $450,000
Total Base Comp Increase 14% $2,103,000
2017 Base Comp Budget $17,103,000
VARIABLE PAY 24% $3,660,042
TOTAL REWARDS (PTO, Benefits, Perks) 25% $4,275,750
TAXES 12% $2,491,565
2017 Total Rewards Budget $27,530,357
Total Total Rewards Increase 14% $3,380,357

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Identifying the right numbers

22. Range Adjustments  Plan
Market Adjustments  Job
Equity Adjustments  Employee
Increases  Employee
What’s changed?

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Range Adjustments -
Plan

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What are you looking for?
Pay Fairly to Market
• Determine your target market percentile
Stay competitive relative to market
• Annually, keep ranges current

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Analyze Ranges to Market
Create a report and include, for each job:
• range midpoints, market values, delta between

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Options and Costs
Plan Level Options
 Do nothing
 Make incremental change
 Update comp strategy
 Adjust all ranges at once
Plan Level Costs
 Employee adjustments
 $ impact of green outliers
 Former red outlier
eligibility for increase

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Calculating adjustments Option 1
2 options for calculating costs of range movement
Option 1: Maintain range penetrations
Cost equals the % you are increasing your ranges
Example: starting base pay budget is $15,000,000.
Ranges increase by 2%. Total impact is $300,000.

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Calculating adjustments Option 2
Option 2: Ensure no green outliers
Cost is equal to the adjustment necessary to keep all EEs
at or above Min

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Market
Adjustments -
Job

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What are you looking for?
Market movement & critical positions
Employee morale and mobility

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Analyze market movement
by job

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Options and Costs
Position Level Options
 Keep position static
 Move position to new
grade
 Offer market premium
Position Level Costs
 Market premium
 Move to new grade

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Offer a market premium
• Calculate yearly market premium payment to all
incumbents in the role
• For example, Software Engineer = 21 * $1000 =
$21,000
Calculating adjustments Option 1
2 options for calculating costs of hot jobs

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Calculating adjustments Option 2
Move positions to a new grade
• What will be the cost of ensuring all incumbents are in
range
• For example, Driver I and CSR = 100 + 400 = $500

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Adjustments
for Employees
 Equity
 Increases

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What are you looking for?
Problems with employee pay
• Compliance
• Compression
Employee increases

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Analyze disparate pay
Create a Disparate Pay Report
• High disparity - flag for litigation
• Low disparity - following your comp plan?

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Analyze position in range
by employee
Pay according to comp plan
Compression issues

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Employee Level Options
 Identify critical issues
 Compression
 Disparate pay
 Green outliers
Employee Level Costs
 $ for critical issues
 $ for compression
 $ for market adjustments
Options and Costs

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Calculating adjustments
Compliance
Determine the amount to resolve critical issues
For example, if
Cathern has
demonstrated higher
experience, tenure,
and performance than
Cam, consider
increasing pay to $79k

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Calculating adjustments
Compression
Will bringing them in range solve?
Is it already resolved though another adjustment?
For example: Increase HR Manager to $74K and freeze HR
Generalist at $70K

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Merit Matrix
Allocates increases by performance and position in range
Increases - Employee
42

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Pay Increase Adjustments
Percentage of total
salary budget
Example:
Budget is $15M
3% increase is $450K

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Getting Started
• Identify options
• Determine cost to remedy
• Examine budget allowance
• Consider multi-year strategy
• How critical to resolve?
• Develop multiple scenarios
• Create communication plan

45. PayScale Delivers Where Other Compensation Providers Fall Short
PayScale leads the world in compensation knowledge with the freshest and
most detailed data from over 54 million salary profiles. More than 3500
organizations use PayScale’s software and intelligence to get the greatest
return on their talent. Smart businesses use PayScale Insight to recruit, retain
and motivate their people.
Visit our blog: www.payscale.com/compensation-today
Join our Group on LinkedIn: Compensation Today: HR Best Practices
Jenni Marquez, CCP
Senior Compensation Professional
Mykkah Herner, MA, CCP
Modern Compensation Evangelist
www.payscale.com