Category: Advantage Article

Do you feel a little lost in the world of compensation? You hear words coming out of someone’s mouth and you think you know what they are talking about but you’re not sure. Foundational to each discussion is understanding the terms related to the topic. While each organization might have different processes to gather information and procedures for applying the information, the terms describing compensation and related practices should be used with purpose. Below you will find a list of the most common compensation terms and processes with their customary meaning. Compensation doesn’t have to be a “black box”. Start off your next discussion a little more comfortable than you are now. Enjoy!
Annual Incentive Plan – An Annual Incentive Plan is the most common of all short-term incentive plan practices and includes a performance (merit) period of one year or less. It should complement the business strategy and be part of the overall strategy of the Total Rewards program. It is a non-discretionary award.
Benchmark Jobs – Benchmark jobs are commonly found in salary surveys and used to make pay comparisons, either internally or externally, for an organization. When selecting benchmark jobs, they should:
• Be important to your organization’s internal hierarchy,
• Represent all major job families, departments and levels, and
• Serve as an internal anchor for non-benchmark jobs.
A good goal is to match 70% of your internal jobs to the external marketplace. The more jobs that are matched, the closer the salary structure is to the external marketplace. Realistically between 50%-70% of your jobs will be found in the marketplace.
Bonus – A bonus is paid to recognize the achievements of an individual, team, department, operating unit, or a company. Payments may recognize a performance period (monthly, quarterly, semi-annual, annual) and are typically made in cash, but occasionally will be paid in equity or another form of award. A bonus may be discretionary or nondiscretionary and will have a lot to do with the laws of the state in which work is done.
Compa-Ratio – Compa-Ratio is a comparison of employee pay to the salary range midpoint.
Compensable Factors/Characteristics – Compensable factors/characteristics are used to evaluate jobs and develop a job worth hierarchy to provide fairness and equity throughout an organization. The Federal Equal Pay Act of 1963 defines the compensable factors/characteristics, and there are several states with their own set of factors/characteristics.
Compensation Benchmarking – Compensation benchmarking is best defined as the process of applying external market data to make fair and competitive compensation decisions. It may even influence the compensation strategy, policies, and practices.
Cost of Labor – The cost of labor includes all compensation, benefits, and payroll taxes paid by employers to employees and can be compared from location to location.
Cost of Living – The cost of living is tied to wages and represents the amount of money needed to maintain a certain standard of living as measured through housing, food, healthcare, and taxes and can be compared from location to location. Use cost of living data cautiously for compensation purposes as it can be much higher than the cost of labor in a location.
Grandfathering – Upon implementation of a new or revised compensation plan, grandfathering will protect the current compensation opportunity of existing employees when performing the same role in the organization and will support in minimizing employee relations issues to contribute to a successful program implementation.
Gross Up – A payment, such as a one-time award, may be grossed up so that an employee will receive the full amount even after taxes. In this instance, the company will bear that cost of the tax gross up.
Hours of Work (the math) – Assuming a regular, full-time equivalent at 40 hours per week, there are 173.33 work hours per month and 2,080 work hours per year.
Internal Equity – Internal equity is an important objective of the overall compensation program and can be accomplished when jobs are valued fairly and objectively both within a company and to the appropriate external marketplace. Employee compensation should be delivered based on fair and objective criteria (such as performance, merit, seniority, education, experience, and training) within the competitive marketplace to ensure the attainment of internal equity. Pay audits will support in the identification of internal equity issues. Several states have specific laws outlining criteria and process for internal equity.
Long-Term Incentive Plan – A long-term incentive plan is typically used to reward and recognize ongoing organizational achievements (typically ranging 2-5 years). Awards may be payable in cash or equity to the eligible management team (typically at the executive level).
Lump-Sum Merit – A one-time payment to recognize pay for performance, a lump-sum merit will not be folded into an employee’s pay. It is commonly used to recognize employees paid at the top of their salary range or as a cost savings strategy.
Market Pricing – Market pricing is a job evaluation methodology that creates a job worth hierarchy based on the “applicable market rate” for benchmark jobs in the external marketplace relevant to the business.
Market Ratio (Market Index) – Market Ratio is a comparison of employee pay to the market rate.
Merit Increase – A pay increase designed to recognize pay for performance.
Pay Transparency – Pay transparency is an approach to communicating compensation openly with employees. It typically includes the following: compensation plan documents, merit increase guidelines, market data sources, job descriptions, and employee communication for individual pay changes, including salary grade and range. Less frequently, companies might communicate other employees’ pay to all employees.
Salary Range – A salary range represents the minimum, midpoint, and maximum rates that a business is willing to pay employees performing a job. Typically, the midpoint or control point is set to provide market competitive, fair, and equitable salaries based on the competitive marketplace for a business.
Salary Range Maximum – The Salary Range Maximum is the point at which an organization would expect an employee to exceed in performance of essential responsibilities, be ready for promotion, or are highly experienced.
Salary Range Midpoint/Control Point – The Salary Range Midpoint/Control Point is the point at which an organization would expect an employee to meet essential responsibilities, be fully competent, experienced, and independent.
Salary Range Minimum – The Salary Range Minimum is the point at which an organization would expect an employee to need guidance and training to learn their essential responsibilities, grow towards proficiency, and be partially dependent on others for success.
Salary Range Midpoint Progression – The Salary Range Midpoint progression is the percent difference between midpoints.
Salary Range Spread – A salary range spread is the percent difference between the minimum and maximum.
Salary Structure Adjustment – A salary structure adjustment may be used in lieu of repricing an existing structure. In this case, a flat percentage (based on the market movement of salary structure adjustment projections) is typically applied to the midpoints of the existing salary structure to adjust them to the upcoming year. Salary structure adjustments are approximately 1% below the market movement of base salaries.

Have your employees complained that they are uncomfortable in their physical work environment? Do they complain of back, neck, or wrist pain or other physical discomforts?

Both answers give you important and valuable information. If you answered “Yes,” what  are you currently doing to address this issue? If you answered “No,” how do you know this is true? There are many reasons employees might not complain. Are they afraid of speaking up for fear of being scene as difficult or disgruntled? Or are they afraid to speak up for another reason?

HR folks often allow employees to pick and choose a “product solution” for their discomfort. This does not address the “HOW.” How do you use this new product using neutral posture principles AND is this product solution the “REAL” solution to the underlying issue? Let’s say someone has wrist pain, they get a new mouse but don’t know how to use it properly and their wrist problem does not get better but gets worse. Maybe the mouse was not the issue to begin with – it could have been caused by a non-neutral position, i.e.: reaching too far out to the mouse or maybe the person’s mousing height was incorrect and that was the cause of the issue. Ergonomics deal with root causes and takes the guessing out of the equation.

This is where an ergonomic professional comes in. They can help your employees who have physical discomforts feel better, have more energy and be more productive by teaching and training them in neutral posture (ergonomics). But even more important they can help you keep healthy people to STAY healthy. Ergonomics is a preventative tool. Kind of like brushing your teeth. We don’t wait to get a cavity; we brush them regularly to PREVENT cavities from occurring in the first place. Simple steps can make a BIG difference.

Here are examples which show that working from home without workplace assessments or appropriate equipment has increased musculoskeletal discomforts.

A study showed more than one-third reported more aches, pain, and discomforts in the neck (37%) and back (35%) than usual. An increased level of fatigue was seen at 42%. ~ from: Wellbeing under lockdown, Occupational Health at Work

With two in five workers reporting new pain or increased pain in their shoulders, back, or wrists, it’s time to make home workstations more ergonomically sound. ~ https://news.chubb.com/Chubb-Survey-of-Americans-Working-from-Home

Ergo Pandemic Study: Chubb

Here is an example from an ergonomic point of view when walking into a meeting or video conferencing in with employees: a five foot tall woman was sitting in a room with three identical desks and chairs. In that room was the five foot tall woman, a man over six feet tall, and a person of “average” height. All working at three identical desks, with their keyboard, and monitors at the same height. Do you think this solution was working for any of them? The answer is No! All three people had obvious different physical characteristics, yet they were working at identical work areas. Of course, aches and pain will follow, it is just a matter of time. Obtaining adjustable equipment or having the existing equipment adjusted for individual physiques, should be standard. You and your staff deserve to work pain free all of the time.

It is important for employers to remember that standard height desks and standard height monitors can never fit all the different kinds of physiques employees have.

How ergonomics can benefit your organization:

• Workers’ compensation – Invest money in your employee’s health and wellbeing to save you money in the long run
• Happier employees lead to higher productivity
• Probably the most overlooked aspect is having your employees feel cared for. As one person stated “I feel different about my employer knowing they care about my physical wellbeing. I have never had that feeling before in working for a company. It makes me feel important and that what I do and how I do it is valuable.”
• Employee retention
• Reduced missed days at work due to discomforts
• Help employees feel good and have more energy

How you can use ergonomic services for you and your employees:

Individual work-site assessments identify potential sources/causes of discomfort, pain, and fatigue. These assessments focus on:

• Improved work practices and techniques
• Adjustments to the work environment
• Selection of equipment or furniture as needed

Virtual ergonomic classes cover principles including:

• Ergonomics in general
• Adjusting the chair for comfort and positioning
• Adjusting the keying/mousing height and positioning
• Adjusting monitor height and distance

Interested in learning more? Please feel free to connect with Serafine Lilien, MS at serafine@ergoarts.net. She has 20 years of experience and has completed over 15,000 ergonomic evaluations. Reach out to her for classes, training information, and individual ergonomic evaluations for you and your staff. You can visit her website at: www.ergoarts.net. She also has an ergo tip newsletter and you can email her to get on her list.

According to a 2020 Harris Poll, 70% of employers check out applicants’ profiles as part of their screening process, and 54% have rejected applicants because of what they found. Social media sites like Facebook, TikTok, and Instagram offer a free, easily accessed portrait of what a candidate is may be like, potentially yielding a clearer idea of whether that person will succeed on the job—however, one should be asking if what is seen has anything to do with the job?

Very little of what you find is predictive of performance. What information is discovered is ethically discouraged or, in some cases, legally prohibited from being taken into account when used to evaluate candidates or make your hiring decisions. So extreme caution should be used when accessing this information.

There were three studies conducted offering employers’ insight into recruiting concerns and flaws. In the first of the three studies, the researchers examined the Facebook pages of 266 U.S. job seekers to see what they revealed. Some of the information that job seekers had posted (education, work experience, and extra­curricular activities) covered areas that organizations routinely and legitimately assess during the hiring process. But a significant number of the profiles contained details that organizations will be legally prohibited from considering, including gender, race, and ethnicity (evident in 100% of profiles), disabilities (7%), pregnancy status (3%), sexual orientation (59%), political views (21%), and religious affiliation (41%). Many of the job seekers’ profiles also included information of potential concern to prospective employers: 51% of them contained profanity, 11% gave indications of gambling, 26% showed or referenced alcohol consumption, and 7% referenced drug use.

This may give you a peek into why recruiters love social media—it allows them to discover all the information and details they aren’t allowed to ask about during an interview. Remember, our interviews need to focus on behaviors within the work context.

In a second study, the researchers explored whether such information affects recruiters’ evaluations. They asked 39 recruiters to review the Face­book profiles of 140 job seekers (obtained from a previous larger study) and rate each candidate’s hireability. The researchers then mapped the recruiters’ ratings against the content in each profile. Although the recruiters clearly took heed of legitimate criteria, they were also swayed by factors that are supposedly off-limits, such as relationship status (married and engaged candidates got higher marks, on average, than their single counterparts), age (older individuals were rated more highly), gender (women had an advantage), and religion (candidates who indicated their beliefs got lower ratings). Factors such as profanity, alcohol or drug use, violence, and sexual behavior lowered ratings; extracurricular activities had no effect on scores.

In the final study, the overall outcome: neither group’s assessments of the candidates accurately predicted job performance or turnover intentions, indicating that hiring representatives stand to gain little from probing applicants’ online activity. Details on the third study can be found with the information below.

There are better options! Steps and actions within your control and job preview. Please consider your candidate experience from beginning to end. Think of the questions you are asking: focus on questions that provide insight to the applicant’s emotional intelligence, to their soft skills that make them successful in the job, situational and behavioral questions focusing on their behaviors of the past, as well as cultural questions to confirm the applicant is in alignment with the values and mission of the organization. Ask about work related pet peeves, what motivates them, best work environments, greatest accomplishments, etc. Think about what they are bringing to the table today and what they bring that will benefit the organization in the future so that you are hiring for today and for tomorrow. Ask them what they want to learn. Seriously, you want to develop your employees over time. What do they want to learn? How do they want to learn it? How do they think they learn best? What can they teach others? Wrap this up with your onboarding process and training. Please do not forget or rush this step. This time sets the stage for the employment relationship which equals retention.

Side Note: participants in the studies willingly granted the researchers permission to view their Facebook pages—but as we know in many cases hiring managers don’t need to ask, because profiles are often public. What’s more, previous research found that a third of U.S. recruiters request access to candidates’ Facebook pages, and the vast majority of job seekers comply. As we know, that is changing. More than 20 U.S. states now prohibit employers from asking applicants to pull up their social media pages during an interview or to share their usernames and passwords. EU regulators go a step further, forbidding hiring managers from viewing a candidate’s social media unless that person explicitly consents.

About the research: “What’s on Job Seekers’ Social Media Sites? A Content Analysis and Effects of Structure on Recruiter Judgments and Predictive Validity,” by Liwen Zhang et al. (Journal of Applied Psychology, 2020)