Stupid Things in Compensation

By Tripp Ritter,

Save Yourself
Some Pain and Read On
you miss last week's hugely popular PayScale webinar? The one in which Stacey
Carroll, PayScale's Principal Consultant, detailed the big mistakes companies
make in compensation decisions? Well don't worry, we've got you covered. Read
on for highlights and then, when you are ready to learn, listen in on the recording.

Don’t Make Across-the-Board

The first mistake is providing flat across-the-board increases to all employees
in the organization. As Carroll notes, this is expensive, provides the wrong
incentives and can lead to the flight of your top performers. Fixing this
mistake requires accurate salary ranges, a pay-for-performance
culture and having leaders who are engaged in the comp planning process.

Location Matters. Don’t Ignore it.
Making decisions based on just a little data can be worse
than with no data at all. Using a single factor like cost of living to adjust
compensation for employees in differing geographies can lead to severely
inappropriate salaries. Instead, companies should use a broad and deep set of data
that takes into account the market rates of specific job types in a given geography,
Carroll advises. 

Leveling for People not Positions
Another common error is basing pay on the employee's
circumstances rather than the needs of the position. Too many times, companies
increase the salary due to tenure, rather than what the role provides the
company. Moving to a focus on position will correct out-of-whack salaries.

Solving Management Problems through Compensation
Many companies succumb to the temptation to use raises to
address employee dissatisfaction. Using salary as a blunt instrument tends to
have limited impact on retention and may not even retain the employees you
really want to keep, Carroll argues. Instead, companies should ensure they have
the right overall compensation strategy, and should implement a broad incentive

Doing the Smart Thing
Now that you know the basics, it's time to go deeper. Watch
the video and learn how to start making changes in your organization.

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