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Dear Workforce How Do We Make the Move to a Unified Pay Structure Across Various Companies

I am the group HR manager of a group with four companies. Prior to now we have utilized different pay structures for each company, and this has created challenges when moving staff from one company to another. In addition, we have seen the need to unify the pay structures to drive effective performance and for the purpose of developing future leaders for the group. What are the steps to take in objectively achieving a unified pay structure?
August 31, 2010
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Related Topics: Compensation Design and Communication, Dear Workforce, Compensation
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Dear Big Task:
Your organization would appear to value a variety of developmental assignments in “training up” its future leaders. Differing pay structures make this a complicated but not insurmountable task. Nonetheless, even though you have already decided to make this change, it would be productive to review the specific reasons that your separate pay structures were created in the first place. It also gives you a chance to explore ways in which this system could be made to work. At the very least, this will uncover specific business conditions or needs that should be considered in any conversion process—especially since the challenge of integrating four pay structures within your organization likely will be highly visible to managers and employees.

In implementing this change, ensure that whichever integrated system you develop effectively meets the business needs of each of the companies. Enhancing leadership development opportunities, as well as performance, are of course your organization's ultimate goals. There are other considerations, however. The pay structures were probably put in place to address specific competitive labor-market considerations. As a result, your organization will need to “market price” benchmark jobs across each of the companies to make a thorough appraisal of the competitive pay situation. Once this process is complete, a cross-functional team can be created to “level” both benchmark and managerial positions across the companies, independent of the market data, to determine internal job worth. This second step is crucial since internal equity is a major consideration in talent development—and could become a serious issue if similar types of positions are placed in different levels.

The two sets of information then can be combined to create a salary structure that works for the integrated organization. This structure can assume a variety of shapes. Your organization may find that broad grades or broad bands are most appropriate. Or a traditional structure may best suit the organization's needs. It is important that positions be placed in salary ranges that enable the organization to attract and retain top-notch employees, as well as to reward high-performing employees (particularly potential leaders). Your organization should carefully evaluate, again in light of business needs and strategy, the advantages and disadvantages of each type of salary grade/band structure.

Two often-overlooked elements of this type of conversion are costs and communications. You do not want to set the new salary ranges too high, as cost becomes an issue (especially if the original range was set at a lower point). The goal is to balance your desire to pay people a competitive wage while at the same time ensuring that costs do not spike needlessly. A full business/cost analysis of various alternative structures allows the top management team to make an informed decision. Nor should you overlook the issue of communication. You may need to advise employees and managers of the process and the desired outcomes, as well as the rationale for the change, before starting the process. 
Once you begin implementing the new system, be sure to communicate the changes to both managers and employees—again, so they are aware of the business reasons. This will help managers more easily administer salaries for their work groups. If salary adjustments are required to adjust pay levels between companies, these can be done in two or three steps. Compensation is one of the most visible and fundamental business management systems. Care and planning should inform any changes to that system.
SOURCE: Robert Fulton, Pathfinder's Group Inc., Glenview, Illinois, June 17, 2010
LEARN MORE: Please read why transparency is pivotal when changing pay structure.
Workforce Management Online, August 2010 -- Register Now! The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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