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Practical compensation Q&A

by Miki Saxon

When working towards fairness in compensation several basic questions usually arise. I’ve grouped the first two together since they address the same issue.

Q: How do you handle current employees who believe that they’re a “senior” whatever when they are not? (The problem often stems from friends who seem to have comparable credentials and do have that title at other companies.)

Q: What’s the best way to handle people whose titles were inflated at their previous company? (Title bloat probably started when the first boss called his ex-apprentice an associate to keep him from setting up shop on his own.)

What you’re looking for is a simple approach that won’t backfire on you sometime in the future. Start with an objective, third party industry-standard job description that also benchmarks salary and tweak it to fit your circumstances (for example, the duties and responsibilities of a sr anything will differ significantly in a company five times your size). You may find that purchasing one makes sense, but first do some in depth research on the new. Avoid using the descriptions found on many of the salary sites, since your employees can usually find one that supports their view. Publish the information internally so that anyone can look at it, know why they don’t have that title and what they need to do to achieve it in their particular area. It must be public; that way, every person in your organization knows where they stand, what they need to improve, what skills they must gain or whatever is necessary to get the next promotion and/or raise.

The descriptions also tells new hires what their title means and what the company’s expectations are. Although they should have some flexibility, they are firm enough to assure people of their fairness.

Be prepared! If you and an employee do disagree and can find no resolution to the position and/or salary issue, you need to be prepared for that person to walk. But even if it’s the middle of the project, remember that what you give one person sets a precedent for everybody else and that’s a can of worms that you really don’t want to open.

Q: What’s the best way to handle salary increases when bringing someone from a low-cost area to a higher-cost area?

A: Implement the objective descriptions/salaries described above and stick to them! Of course you want the salary to be competitive with the candidate’s internal peers, but you can’t increase it an additional 20% above that to offset the housing costs. It would be unfair, because everybody already in the area is dealing with the same costs. And don’t assume that you can “sneak” it in through some special kind of bonus or one-time compensation. Your people aren’t stupid, word will get around, they will get upset and they will start looking.

Yes, this makes relocation to some areas more difficult, since salaries are not nearly as geographically-disparate as they once were, but losing a candidate, even a great one, is far less costly than the loss in productivity as word gets around, let alone the cost of an X% increase in turnover (the X being determined by employee perception of just how unfair the difference is).

More tomorrow!

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