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Human resource service knowledge article

Setting Up Your Compensation Structure

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Total Rewards

As any employer knows, the amount spent on payroll is an extremely important consideration – both in terms of hiring/retention and your bottom line. Therefore, it is helpful to take a strategic and sequential approach to building your compensation structure – from there, you can narrow your focus, work out the details, and build each reward element with confidence.

Base Pay Plans

Once we have determined the total rewards philosophy, strategy and compensation model best suited to your organization, we can start working out pay ranges or pay levels for each position to create your Base Pay Plan. Depending upon the job evaluation method chosen, pay plans will be determined either by ranking, market pricing, or a more complex points system. Your Honiva HR Services Consultant will work closely with you to establish pay ranges or pay levels for each position in your company.

Pay Rates

Pay Rate refers to the actual salary or hourly rate an employee sees on their employment contract. For each individual employee, this rate will fall somewhere within the established pay ranges but can vary depending on a variety of factors including education, experience, and seniority. Your Honiva HR Services Consultant will provide guidance on how to go about determining the appropriate pay rate for each employee. That way, you can be sure your pay rates fall within the parameters of your Pay Plan.

Evaluating Your Compensation Structure

Your compensation structure is not merely a set-it-and-forget-it effort. To be truly effective it needs to be regularly monitored and analyzed. The following are some key areas that should be evaluated regularly:

• In the case of hourly employees, it is crucial that overtime hours are tracked and paid, as labour costs at overtime rates can add up quickly (be very very careful you understand which types of employees are overtime eligible based on the employment standards for your operating jurisdiction)

• It is useful to regularly monitor where your employees lie within their established pay ranges, and to understand whether your organization tends to pay closer to the bottom or the top of these pay ranges. By doing so, you can also see who is ready for a job change, whether it be a transfer, promotion, or demotion.

• Employers should also monitor how much of a gap/discrepancy exists between pay rates for different employees performing the same job function. This will help you become more consistent in your pay decisions.

• Depending on your industry and cultural values, it may be beneficial to build a merit-based compensation structure vs one that relies on seniority. Again, a pay system that is well-built and effectively administered will signal to management when their employee is ready for a promotion or transfer into another job, as an employee should ideally be paid based on their performance and capabilities

Now is the Time

With Alberta, Ontario, and other jurisdictions announcing changes to minimum wage and overtime legislation, now is the time to evaluate and clean-up your compensation structure. Your Honiva HR Services Consultant can look at your employee compensation program from all angles, helping to ensure your program is both efficient, effective, and fiscally responsible.

We can be reached for a free confidential consultation at +1-403-470-5350 or [email protected] For further details on additional HR service offerings, please visit our website at https://www.honiva.com or follow along for more informative tips by joining us on LinkedIn, Facebook, Twitter, or Instagram. We also run a complementary LinkedIn and Facebook group called “Insights by HonivaHR” where you can access free information on how to become an effective and legally compliant employer. Or you can sign-up for our quarterly newsletter to have help sent straight to your inbox from our company homepage.

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