How can I organise and manage my pay structure?

How can I organise my pay decisions?

Reviewing reward design holistically featured on 62 per cent of respondents’ agendas in 2019, with 78 per cent looking to benchmark their pay in the year ahead, according to the spring edition of Paydata’s UK Reward Management Survey. Pay structure is the critical starting point for many organisations to ensure that they have an effective framework in place that achieves fair and consistent pay decisions.

To develop a pay structure, you need to understand two things: pay levels in the markets that your business operates in, and how your actual pay levels compare to the market. A pay structure is what ultimately manages this relationship, so your decisions can be visibly consistent, fair, cost-effective and competitive.

Reviewing salaries through pay benchmarking is an important factor in deciding what to pay your people. Unless jobs are clearly structured, pay decisions can become inconsistent and unfair – reducing employee satisfaction and increasing attrition.

Identify sources of reliable market data

In order for you to conduct market benchmarking, finding out where employees join from, and go to, will help you decide what information you need. This is likely to vary for different groups of employees depending on factors such as skills sets and geography.

Compare like-with-like jobs

It is important to access information concerning the right type of job from the right type of company and select data for comparable roles. You need business tools that will help you to do this (or a survey with well-defined jobs).

Decide what type of pay structure you want

There are two basic types – a single structure that covers all roles, or multiple structures that are often based on job ‘families’. Read a more in-depth guide to pay structures here. You also need to decide whether to underpin your structure with a job evaluation system.

Compare the assembled market data to your internal data

Depending on your business size and complexity, this can be tricky. Take extra care if using a spreadsheet approach, as these can become unwieldy unless you’re very experienced in this area.

Develop the pay structure

The final structure that works will be based on the ‘best fit’ between the market data, your internal data and budgetary needs. This is an iterative process; you need to work with individual salary data rather than pay averages, to iron out any anomalies.

Distribute pay throughout the range

This process in itself provides insight into the type of salary management issues you may face. For example, if lots of people are near the bottom of the range, you may face pressure for pay progression; if the majority are clustered towards the top of a range, you may not want to award further base pay increases.

How can I organise and manage my pay structure?

How can I organise my pay decisions?

Developing pay structures

Identify sources of reliable market data

Compare like-with-like jobs

Decide what type of pay structure you want

Compare the assembled market data to your internal data

Develop the pay structure

Distribute pay throughout the range

How Paydata can help with pay structures?

Pay Benchmarking

Pay Modelling

Job Evaluation

Would you like to know more about how to organise and manage your pay structure? Get in touch.

Tim Kellett

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