1. Market Based
Pay-for-Performance
Compensation Systems
& Structures
Jim Baker, SPHR
Sr. Consultant Human resource Services
Manufacturer’s Association of South Central Pa
Mobile 717-781-4070
Office Phone 717-843-3891
Office Fax 717-854-9445
www.mascpa.org

2. Achieving Your
Compensation Goals
2

3. What We Will Cover
• Regulatory Concerns
• External Competitiveness & Pay Structures
• Objectives of Compensation
• Pay-for-Performance Systems, &
Structures
• Market-Based Compensation Practices
3

4. Lilly Ledbetter Fair Pay Act
President Obama signed bill into law
January 29, 2009.
This law overturns a U.S. Supreme Court decision
that said a woman (Lilly Ledbetter) could not sue
for pay discrimination she had endured for 20
years for one simple reason.
 She hadn't sued within 180 days of the original
discrimination.
Ledbetter had argued that the discrimination occurred—and
the clock restarted—every time she received a paycheck
less than her male peers, but the justices disagreed.
4

5. Lilly Ledbetter Fair Pay Act
 Retroactive to May 28, 2007 (the day before
the U.S. Supreme Court ruled against
Ledbetter in her lawsuit)
 Applies to all pay discrimination charges that
were pending on or after that date.
 Says that discrimination would be deemed to
occur every time a new paycheck is delivered
5

6. Other Laws & Regulations
 Equal Pay Act of 1963
Administered and enforced by the EEOC, prohibits sex-
based wage discrimination between men and women in
the same establishment who perform jobs that require
substantially equal skill, effort and responsibility under
similar working conditions.
• Pay differentials are permitted when they are based on
seniority, merit, quantity or quality of production, or a
factor other than sex. These are known as "affirmative
defenses" and it is the employer's burden to prove that
they apply.
• In correcting a pay differential, no employee's pay may
be reduced. Instead, the pay of the lower paid
employee(s) must be increased.
 OFCCP & Executive Order 11246
6

7. COMPENSATION POLICIES
1. Are Company compensation policies documented
and made available to managers and employees?
2. Is each individual’s compensation package
determined using a documented procedure that is
consistent with the organization’s compensation
policy and plan?
3. Are individuals responsible for administering
compensation policies (HR and managers) aware of
these policies and administering them
consistently?
7

8. Compensation Equity Relative to Skill,
Qualifications, and Performance
1. Is action taken to correct inequities in
compensation or other deviations from the
organization’s policy and plan
2. Are compensation adjustments made based, in
part, on each individual’s documented
accomplishments against their performance
objectives?
8

9. Objectives of Compensation
1. Attract & retain talent
2. Emphasize and reward high-quality performance
3. Allow personal growth
4. Challenging and rewarding work assignments
5. Formal (and informal) recognition of contributions.
9

10. What is Compensation?
Refers to all forms of financial returns and
tangible services and benefits employees
receive as part of an employment
relationship.
10

11. Total Compensation
• Base / Merit Pay
• Gain Sharing / Performance Sharing
• Special Bonuses
• Benefits
11

12. Benefits
Medical/Dental  Retirement Plan  Matching Gift
401K Thrift Plan  Educational Assistance
Reimbursement Account Plan 
 College Scholarships  Military LOA
Long Term Disability (LTD)  Vacation
(Dependents)
Life Insurance  Jury Duty  Special Events
Long Term Care  Witness Pay – Hershey Park
 Holidays (14) – Diversity Day
Legal Services
 Special Activities – Open House
– Holiday Gift
12

13. Individual
Job Salary
HR Input Performance
Descriptions Surveys
Reviews
Market Compensation
Related
Management Competitiveness
Organizational &
Performance Decisions Employee
Retention /
Turnover
Salary
Salary
Planning &
Structure
Merit Pool
13

14. Business Strategy Should Drive Compensation Philosophy
Relevant
Labor
Markets Internal
Competitive Equity
Positioning Vs
Of Market
Overall Pay Competitiveness
Business Typical
Strategy Compensation
& Philosophy
Elements
Objectives
Role of Responsibility
Different Pay & Authority
Elements for
Pay Decisions
Program
Objectives
14

15. Example of a
Compensation Philosophy
We will:
1. Pay competitive base salaries
2. Attract and retain competent
employees.
3. Provide each employee
opportunity to achieve financial
rewards directly related to level
of performance & achievement.
15

16. Not Paying for
Performance?
If half of the employees were doing more than you
should expect of them, your customer ratings and
financial performance would be off the charts …
You’d have no worries about the organization’s
future, no challenges unmet.
16

17. Using a Pie Chart Distribution?
A typical non-pay-for-performance Organization tells 99%
of employees that they were doing everything expected.
In fact many organizations tell almost half of employees
are that they were doing even more than expected.
Can this really occur?
1%
45% Exceeds
Meets
54% Does Not Meet
17

18. Typical Bell-Shaped Pattern
& the Law of Large Numbers
If you look at performance ratings in companies across the country, you would
see the typical distribution resembles a bell-shaped curve, as shown below.
Overall, you would find that the number of people with outstanding
performance is just about balanced by the number of people requiring
improvement in their performance. You should fully expect that your
organization’s overall ratings will follow this same pattern.
99.72% of Performance
18

19. P4P Leads to:
 Consistency - creating a sense of fairness
 Compensation viewed as a reward for
performance (Vs. COLA adjustments and
length of service “entitlements”)
 Employees who understand what is expected
 Supervisors with tools and resources to
effectively evaluate and motivate performance
 Employees who perceive professional
development as unlimited
19

20. Salary Structure
The Salary Structure consists of a series of
salary ranges applicable to positions.
An annual structure review is completed by
the company to ensure salary ranges remain
competitive in the marketplace for each
upcoming year.
Midpoints are adjusted to be reflective of
market by beginning of each year (Lead/Lag)
20

21. Salary Ranges
Depth Midpoint is representative of market
value for jobs in each grade
Increments between midpoints (9%)
recognize difference in relative value
of positions
Width Typical Grade Range spread above & below
the midpoint
+/- 25% for Exempt
+/- 20% for Non-Exempt
These are the intervals that identify the maximum dollar levels to be paid according to
performance designation
21

22. Pay-for-Performance Matrix
P4P philosophy links individual performance to salary.
Linkage achieved by designating specific salary range
segments for each performance rating designation
Performance Designation: Target Salary Range
Improvement needed: < 95% of midpoint
Competent in all aspects of the position: 95% to 104.9%of midpoint
Outstanding: 105% to 114.9% of midpoint
Exceptional: 115% to 125.0% of midpoint
New to Position or Developing Good Performer: < 95% of midpoint
22

23. Salary Planning
Pay-for-Performance “Guidelines”
 Below Target Range
Employees with % of midpoint below the target
performance range may receive an increase to bring
them to the minimum of that range
 Within Target Range
Employees with % of midpoint within the target
performance range may receive a competitive increase
 Above Target Range
Employees with % of midpoint above targeted
performance range will not receive an increase
23

24. Salary Grade Structuring
 External salary surveys are used to determine market
average salaries for benchmark positions
 Positions are assigned to salary grade with midpoint
closest to market average, e.g., + or – 5%
 Remaining positions are “slotted” into salary grades
based on:
- Previous grade relationships
- Management judgment 24

25. Salary Structure
A Salary structure is the foundation of a
compensation system.
– The salary structure includes salary grades with a
minimum and maximum, which define the dollar
value for each position.
– Increments between salary grades recognize
difference in the relative value of positions.
– Intervals within each salary range recognize
differences in performance.
– The midpoints of the salary grades relate to the
competitive market.
25

26. Lag/Lag
Lead/Lag
Lead/Lead
In the course of the one-year period during which
data will be relied upon for compensation decisions,
the market itself continues to move.
1. Therefore, data effective at a point in time at the beginning of the
year will “lag” the market the entire year.
2. Projecting the market’s position at mid-end, and adjusting
compensation ranges accordingly allows one to “lead” the market
for the first half of the year then lag the market for the balance of the
year
3. Projecting the market’s position at year-end, and adjusting
compensation ranges accordingly allows one to “lead” the market.
A “lead/lag strategy” is broadly accepted as efficient in balancing
salary costs with competitiveness. This strategy is favored by many
organizations because of its “middle ground” position. It is not so
conservative as to detract from the organization’s ability to compete.
26
Yet, it is not so aggressive as leading the market for the entire year,
with a resultant higher cost.

27. Pay Positioning
vs. The Market
 “Competitive” = market median (most typical)
 More aggressive organizations target pay at
above-average levels, e.g, 3 Quartile Vs Mid or even 1 Quartile
rd st
 “Mix” of compensation (base vs. variable) is a
strategic lever, e.g., Pay-at-Risk.
27

28. Salary Range Example
Exempt Employees
Max for "Meets Max for Max for
Expectation" Outstanding Exceptional
Differential Minimum performer performer performer
EXEMPT between steps 95% MIDPOINT 105% 115% 125%
13 base $31,467 $37,020 $38,871 $42,573 $46,275
14 109.0% $34,299 $40,352 $42,369 $46,405 $50,440
15 109.0% $37,386 $43,983 $46,183 $50,581 $54,979
16 109.0% $40,751 $47,942 $50,339 $55,133 $59,927
17 109.0% $44,418 $52,257 $54,870 $60,095 $65,321
18 109.0% $48,416 $56,960 $59,808 $65,504 $71,200
19 109.0% $52,773 $62,086 $65,191 $71,399 $77,608
20 109.0% $57,523 $67,674 $71,058 $77,825 $84,593
28

29. Salary Range Example
Non-Exempt Employees
Max for "Meets Max for Max for
Expectation" Outstanding Exceptional
Differential Minimum performer performer performer
NON EXEMPT between steps 96% MIDPOINT 104% 112% 120%
1 BASE $15,974 $16,640 $17,306 $18,637 $19,968
2 109.0% $17,412 $18,138 $18,863 $20,314 $21,765
3 109.0% $18,979 $19,770 $20,561 $22,142 $23,724
4 109.0% $20,687 $21,549 $22,411 $24,135 $25,859
5 109.0% $22,549 $23,489 $24,428 $26,307 $28,186
6 109.0% $24,579 $25,603 $26,627 $28,675 $30,723
7 109.0% $26,791 $27,907 $29,023 $31,256 $33,488
8 109.0% $29,202 $30,419 $31,635 $34,069 $36,502
9 109.0% $31,830 $33,156 $34,482 $37,135 $39,787
10 109.0% $34,695 $36,140 $37,586 $40,477 $43,368
11 109.0% $37,817 $39,393 $40,969 $44,120 $47,272
12 109.0% $41,221 $42,938 $44,656 $48,091 $51,526
29

30. Salary Ranges
Non-Exempt & Exempt Employees
Pay Grade
Differential Minimum
EXEMPT between steps 95% MIDPOINT
13 base $31,467 $37,020
Minimum 14 109.0% $34,299 $40,352
Differential
NON EXEMPT between steps 95% MIDPOINT 15 109.0% $37,386 $43,983
1 BASE $15,808 $16,640 16 109.0% $40,751 $47,942
2 109.0% $15,417 $18,138 17 109.0% $44,418 $52,257
3 109.0% $16,804 $19,770 18 109.0% $48,416 $56,960
4 109.0% $18,317 $21,549 19 109.0% $52,773 $62,086
5 109.0% $19,965 $23,489 20 109.0% $57,523 $67,674
6 109.0% $21,762 $25,603
7 109.0% $23,721 $27,907
109.0% Management
8 $25,856 $30,419
Levels
9 109.0% $28,183 $33,156
(21 and above) Differential Minimum
10 109.0% $30,719 $36,140
between steps 95% MIDPOINT
11 109.0% $33,484 $39,393
21 118.0% $67,877 $79,855
12 109.0% $36,498 $42,938
22 109.0% $73,986 $87,042
23 109.0% $80,645 $94,876
24 109.0% $87,903 $103,415
25 109.0% $95,814 $112,722
26 109.0% $104,437 $122,867
27 109.0% $113,837 $133,925
28 109.0% $124,082 $145,979
29 109.0% 30
$135,249 $159,117
30 109.0% $147,422 $173,437

31. What is Market Pricing?
The benchmarking of pay
 using salary survey data
 against “comparable” positions
 in relevant labor markets
31

32. Advantages of Market Pricing
 Easy to explain and understand
Point-factors approaches confuse and frustrate line managers
 Competitive necessity
In increasingly global economy, much more pressure to manage
and control costs
Labor often viewed like any other resource whereby organizations
want to pay the “right” price for level of quality desired
 Reduces administrative burdens
 Puts Comp/HR person on more solid ground in pay discussions
32

33. Market Pricing Disadvantages
 You can’t market price every job
 Plenty of room for abuse of statistics
 Surveys cost $$$
 The approach requires expertise
 Requires a cultural shift in organizations
traditionally focused on pay equity
33

34. Market Pricing
Historical Perspective
Global & local business competitiveness
Focus on “human capital”
Focus on external pay competitiveness
GROWTH OF
USE OF MARKET PRICING
Number and types of compensation elements
Number and quality of compensation surveys
1950’s 2000’s
DECLINE Of
USA economic domination
Focus on internal equity
Job evaluation
34

35. Where & When
Market Pricing Typically Used
COMPENSATION PROGRAM’S FOCUS ON MARKET COMPETITIVENESS
Market Aware Market Integrated Market Based
INDUSTRIES
Government Manufacturing Technology
Education Health care Finance/insurance
Brick and mortar Deregulated
Health care
USE OF MARKET PRICING
By exception, when In parallel with job Basis of position
“system” doesn’t give evaluation, to set evaluation and pay range
the right answer grade/band pay ranges development for all positions
using specific set of
benchmarks
PACE OF INDUSTRY CHANGE
Low Moderate High
35

36. Benchmarking
• Intent is to match base pay to market to
remain competitive
• Competitive salaries are measured
through use of published salary surveys.
• Preference is to compare local
companies that are similar in terms of
skills required, technological
sophistication, size, and products.
36

37. BENCHMARKING MARKET
& JOB LEVELS (Example)
 MECHANICAL ENGINEER 1 (ENTRY LEVEL position) Bachelors Degree in
Mechanical Engineering or equivalent experience.
 MECHANICAL ENGINEER 2 Bachelors Degree in Mechanical Engineering
or equivalent experience, and 2 years of applicable mechanical
engineering experience.
 MECHANICAL ENGINEER 3 Experience and Training: Bachelors (Masters
preferred) in Mechanical Engineering or equivalent experience, and 5
years of applicable mechanical engineering experience.
 MECHANICAL ENGINEER 4 Experience and Training: Masters Degree in
Mechanical Engineering or equivalent experience, and 8 or more years of
applicable progressively complex Mechanical Engineering experience
 MANUFACTURING ENGINEER 5. Excludes those with full supervisory
responsibilities. Experience and Training: Masters Degree in
Manufacturing Engineering or equivalent experience, and 10 or more
years applicable progressively complex Manufacturing Engineering
experience. 37

38. What is a Career Level?
A Career Level is a distinct level of responsibility and proficiency
within a job family. In each of the job families positions are typically
assigned to one of the following career levels:
Management Professional Technician Admin. Hourly
M3 - 3rd Level Manager P5 - Expert T3 - Lead A3 - Lead H3 - Lead
M2 - 2nd Level Manager P4 - Advanced T2 - Skilled A2 - Skilled H2 - Skilled
M1 - 1st Level Manager P3 - Career T1 - Entry A1 - Entry H1 - Entry
MS - Supervisor P2 - Intermediate
P1 - Entry
While the definitions and requirements of the survey’s career
levels are generally consistent across our job families, some
differences exist between different types of job families (e.g.
technical vs. non-technical families). The career levels applicable
to each job family are described in terms of the general
experience/ education, knowledge/skills/abilities, and typical
responsibilities expected at each level in each family.
NOTE: Executive positions are not assigned career levels,
as all are assumed to be top managers.
38

39. Non-Benchmark Jobs
Jobs for which you can’t get good data
 Job evaluation is the traditional answer
 “Slotting” of jobs to estimate market
value can be an alternative
Link a given job to one or more other
benchmark positions that have been market
priced, and thereby assigning it to the same
reference data.
Example: slotting an OD Manager against an
HR Manager and a Compensation Manager
39

40. What is a Job Family?
A job family is a group of jobs in a major
work function sharing similar background,
education, and experience requirements.
 Matching positions to job families is done based
upon the duties, responsibilities, background
and experience requirements of your positions,
not the department or business unit that the
position is in.
 For instance, while Engineering positions (such
as Field Service) may exist in the Operations or
Customer Service departments, those jobs are
matched to an Engineering job family, not
Operations or Customer Service. 40

41. Position Matching
Blended Jobs
Financial Systems Analyst
Match to Financial Analyst, Systems Analyst or both?
1. “Highest Common Denominator” approach (recommended)
Survey Position Market Median Base Salary
Financial Analyst $60,000
Systems Analyst $70,000
Reference value for your Financial Systems Analyst should be at least $70,000
2. Weighted average blending of data
Survey Position Market Median Base Salary Percentage of job
Financial Analyst $60,000 60%
Systems Analyst $70,000 40%
Reference value for your Financial Systems Analyst should be $64,000
41

42. Salary Surveys
Survey Sources & Quality Considerations
Good
 Clear job or role definitions to ensure “apples to apples” comparisons
 Efforts to support job matching
 Sufficient sample size for statistical inference, i.e., lots of participants!
 Full range of compensation elements and appropriate statistical measures
 Rigorous data auditing and cleaning
 Flexible (electronic) output formats
Bad (Let’s just say, “not so good”)
 Very brief and/or generalized job definition
 Collect average pay per job instead of incumbent-specific data
 Base salary only
 Averages only
 Self-reported data (e.g., professional association surveys of their members)
Ugly
 Statistically biased (e.g., recruiting firm “surveys”)
 Unnamed sources and participants
 e.g., Monster.com, Salary.com, Payscale .com
42

43. Surveys &
Appropriate Labor Markets
Appropriate labor market should be
determined by level of position:
Non-Exempt (and Hourly)
Local only
Exempt
Local primary
Regional secondary
Key Employees & Management
National primary
Local secondary
43

44. Surveys & Similar Companies
Companies in the salary surveys
meet one or more of the following
criteria
• Similar size business, i.e. complexity of
the job is comparable
• Companies with similar positions
• Geographic location is in the area from
which location would recruit to fill the
position
44

45. Weighting Survey Matches
Most situations “simple averaging” (equal weighting) is appropriate
Under certain (limited) circumstances, sources may be more heavily
weighted to put more emphasis on Industry specific sources or
Significantly better match of survey description to your position
Some organizations weight by the number of companies or
incumbents for each data point
Sample criteria for weighting
Weight 1x: “Meets evaluation standards”
• acceptable source and match
Weight 2x: “Very trustworthy source”
• high quality survey methodology
• large participant base
Weight 3x: “Most relevant source/match”
• highly comparable participants 45

46. Aging Survey Data
Survey pay statistics are typically “aged” to a common point in time
To “standardize” data from
sources conducted at different dates 3% annual Aged Aged to Common Date
Survey A: 1/1/09 data x 1.0450 7/1/2010
Survey B: 4/1/09 data x 1.0375 7/1/2010
Survey C: 7/1/09 data x 1.0300 7/1/2010
To position pay recommendations to be competitive at a certain point in time
Pay policy or ranges effective
Jan 1 July 1 Dec 31
Lag/Lag Data Aged to Lead/Lag Data Aged to Lead/Lead
46

47. Salary Planning
Each year, the company should set
goals for the salary planning process.
These goals include:
1. Meeting Salary Budget Targets
2. Meeting Cash Flow Targets
3. Achieving Pay-For-Performance
Targets
47

48. Salary Planning &
Range Movement
Compare current Company midpoints
with market data (weighted average).
– The difference between midpoints and
market tells us how the midpoints should
move
– Example: Company midpoint and market
salaries are 3% apart. Midpoints should
move 3% to bring us back in line.
48

49. Salary Planning
• Annual Event
• Based upon projected performance levels
• Should take into account expected
promotions, progressions, terminations,
retirements, and leaves.
• May be carried out on-line
49

50. Salary Planning Flow
Compensations
July Compensation reviews submits the
salary survey data recommendations to
against pay rates and Division Manager
determines salary range for review and
movement if necessary. approval.
Mid-September
Executive Compensation Managers Overall designation
Management creates and begins salary of performance
communicates the planning process ratings are reviewed
approves the range through OSP
movements and salary planning by projecting by Division
establishes the Salary instructions for performance Manager and
Increase Fund. Managers. ratings. approved.
Compensation Salary Plan is Managers apply
communicates to reviewed by merit increases
Managers that Approvals are Compensation and staying within salary
the Salary Plan has completed on-line the Division budget and cash
been approved. Manager. flow targets.
Yes Plan is No
approved
Line Managers
approve the salary
actions per plan on a
monthly basis.
50

51. Salary Planning Process
• Each department is allocated a merit increase fund
based pro-rata share of merit pool.
• Every manager has discretion for planning increases
– Project next year’s performance
– Increase based on where employee is paid in the
range
– Internal Equity
– Within Company Guidelines
– Budget Constraints
51

52. Salary Planning Process
Departments must manage their salary plan
– Budget Constraints
– Cash Flow:
– Timing of increase changes cash flow
– An increase in January has a large cash flow than an
increase in October
– Goals:
• Meet Company Guidelines
• Recognize and reward strong performance
• Maintain equity with internal and external market
• Motivate and retain 52

53. Salary Planning
Projected Performance Ratings
• Projected ratings based on expectation of
performance against increasingly
demanding standards
• Distribution should reflect overall
performance of the unit “Plan” ratings
should be changed at the time of review if
performance has improved or deteriorated
53

54. Salary Planning
Position in Range
• Pay for Performance objective is to
achieve at least 75% of employees in
each performance rating within target
performance range by year-end
• Long range goal is to achieve at least
90% of employees in target range
54

55. Difference Between
Promotion & Progression
• Promotion only occurs through a job posting.
Most promotions are not planned ahead of time,
and therefore are not included in the salary plan
• Progression only occurs in a defined job family
where there is a review of employee’s readiness
for next level. Progressions are included in
salary planning
55

56. Merit Increase Fund
The Salary Increase Fund determines the amount of
money to be made available for merit increases in order
to maintain equitable and competitive salaries
throughout the Company.
A number of business and personnel factors are
considered in determining the Salary Increase Fund
such as:
– normal and continued changes in the work force;
– the need for acquisition of new personnel during growth
periods; and
– the fiscal resource of the company. 56

57. Managing the Merit Increase Fund
“PAY FOR PERFORMANCE PRIORITIES”
First Priority
• Good Performers Below 95% of Midpoint
• Should be Paid Within the Performance Target by Year-end
Second Priority
• Outstanding Performers Below Performance Target
• Employees who CONSISTENTLY have been rated at “O” Performance Level
Should be Paid Within the Performance Target by Year-end
Third Priority
• Exceptional Performers Below Performance Target
• Employees who CONSISTENTLY have been rated at “E” each Performance
Level Should be Paid Within the Performance Target by Year-end
Cash Flow Based on Anniversary Date increases and 12
Month Timing : Possible Use Of Two Increases To Reward While Managing Cash Flow
57

58. Adverse Impact Analysis
Mean & Standard Deviation
VARIABLES INCLUDE:
 CURRENT SALARY
(AS DEFINED BY EMPLOYER AND INCLUDES COMMISSIONS AND
BONUSES)
 TIME IN GRADE
OR, BAND/LEVEL/GROUP OR TITLE
TO IDENTIFY WHETHER THERE IS A “POTENTIAL PATTERN”.
Relative to Number of Standard
Gender/Race Title Average Annualized Pay Deviations from Mean
Female 12 PLANNER 81.3% 39,500 (1.63)
Female 4 PLANNER 89.0% 43,200 (0.96)
Female 3 PLANNER 94.1% 45,695 (0.52)
Female 2 PLANNER 94.4% 45,855 (0.49)
Female 6 PLANNER 95.9% 46,545 (0.36)
Female 10 PLANNER 96.1% 46,690 0.18
Female 9 PLANNER 98.3% 47,750 (0.15) % Females Below Female Mean
Female 11 PLANNER 99.9% 48,530 (0.01) 8 66.67%
Female 1 PLANNER 104.0% 50,501 0.35
Female 5 PLANNER 112.7% 54,750 1.11
Female 8 PLANNER 117.4% 57,000 1.52
Female 7 PLANNER 119.4% 58,000 1.70
Total in Group Average or Mean 48,668
12 One Standard Deviation 5,534 UCL $ 59,736
2 sigma 11,067 LCL $ 37,601 58

59. IDENTIFY RELEVANT
VARIABLES
CORRELATION ANALYSIS
BASED ON:
Male Correlation Table
 JOB RESPONSIBILITIES
SKILLS
70000

60000
 PERFORMANCE 50000
40000 Performance Rating
30000 Annualized Pay
20000
Female Correlation Table 10000
0
70000 1 3 5 7 9 11 13 15 17 19 21 23 25
60000
50000
40000 Performance Rating
30000 Annualized Pay
20000
10000
0
1 2 3 4 5 6 7 8 9 10 11 12 59

60. PATTERNS AND PROBLEMS
PATTERN
 LOOKING WITHIN EACH Relative to
COMPONENT OF EXEMPT Gender/Race Title Average
AND NON-EXEMPT Minority
PLANNER 75.6%
Male 13
 IF A PATTERN EXISTS THEN Minority
PLANNER 81.3%
SYSTEMIC REBUTTAL IS Female 12
NEEDED Minority
PLANNER 89.0%
Male 5
PROBLEM Minority
PLANNER 89.0%
Female 4
 LOOKING AT GROUPS AND
Minority
INDIVIDUALS Male 24
PLANNER 94.1%
 IF A PROBLEM EXISTS THEN Minority
PLANNER 94.4%
INDIVIDUAL OR GROUP Female 2
EXPLANATIONS ARE NEEDED
60

61. LOOK FOR PATTERNS I
1.REVIEW SALARY GRADES IN EACH
COMPONENT WITH COMPARATORS, I.E.,
 FEMALES Vs MALES;
 MINORITY Vs MAJORITY
2.FOR ALL GRADES WITH COMPARATORS
 DETERMINE ADVERSE IMPACT TO:
• MALE Vs FEMALE AND
• MINORITY Vs MAJORITY
61

62. LOOK FOR PATTERNS II
3. DETERMINE HOW MANY GRADES WITHIN EACH
COMPONENT WITH COMPARATORS ARE ADVERSE
TO:
 FEMALES
 MINORITY
 DETERMINE THE NUMBER OF SALARY GRADES
ADVERSE TO
• FEMALE AND
• MINORITY
4. CALCULATE THE ADVERSE PROTECTED GROUP
PERCENTAGE:
 DETERMINE THE ADVERSE % OF FEMALES TO TOTAL
EMPLOYED AND THE ADVERSE % OF MINORITIES TO
TOTAL EMPLOYED
62

63. Salary Planning Close-out
• Salary plan reviewed by CEO & Management
Team
– Distribution of Performance Ratings
– Compliance with the “Pay for Performance”
guidelines
– Spending within budget
– Reviewed for adverse impact
• Plan finalized and distributed to managers in
January
63

64. Communications
Make every effort to clearly communicate your
compensation plan to all employees. However,
understand that the compensation plan is a two-way
responsibility.
 Managers and supervisors are expected to explain and answer
questions pertaining to the plan.
 And to communicate salary information to employees
– Salary range for current position
– Salary range for next likely position
 Employees are expected to understand plan details and put forth
behaviors that will result in expected performance. When
uncertain about plan practices, employees are expected to ask
for further explanation or information.
64

65. Communicating The Process
1. Management is committed to fair and equitable
administration of the compensation plan.
2. Communication about the plan will be published
and distributed to all employees.
3. Decision making about pay and recognition will
be taught to all managers & supervisors to
ensure uniformity of practice. 65

66. QUESTIONS YOU NEED TO ADDRESS:
What is 2010 Strategy?
Business strategies are rapidly changing with
economic conditions
 Survival mode
 More cost controls in place
 Doing more with less
How important are Attraction and Retention?
Where does competitive compensation fit in?
Is there an opportunity to introduce pay for
performance (P4P)? 66

67. MANUFACTURERS’ ASSOCIATION
OF SOUTH CENTRAL PENNSYLVANIA
160 Roosevelt Ave
York Pa 17401
www.mascpa.org
JIM BAKER
SR CONSULTANT
TALENT MANAGEMENT
717-781-4070 67