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Benchmarking compensation

Monday December 28, 2015 Written by  Retain Canada
The majority of global organizations use today's competing labor markets and the need to recruit top talent in determining how much money to pay their workforces.

According to a new survey by WorldatWork, a nonprofit HR association, and Empsight, a compensation consulting firm, 70 per cent of organizations have a written compensation philosophy and 33 per cent specify the method of job evaluation within their philosophy.

The survey also found that 88 per cent of organizations have an established method for evaluating jobs and market pricing continues to outpace all other methods as the dominant form of job evaluation, ranging between 68 per cent and 74 per cent.

Many organizations use three or more survey sources to price their jobs. National data often is used to evaluate senior management roles. Local, industry-specific data is most commonly used to price production-level positions.

"The fact that market pricing is now the dominant method of job evaluation is clear evidence that employees are much more knowledgeable about competitive pay levels and are likely to change employers more often than their parents were," said Kerry Chou, senior practice leader at WorldatWork. "Employee compensation is a constantly moving target and it is necessary for compensation specialists to know the salary and benefits trends driving today €’s workforce."

Additional highlights from the survey include:

  • About half of organizations surveyed characterized their job evaluation system as "very effective," with a similar percentage of organizations deeming their systems "somewhat effective."
  • Job evaluation is mainly prompted by a newly created job, followed closely by significant changes in the job.
  • The majority of organizations (93 per cent) use a numeric or alphanumeric job code within their HR/payroll system. Of these organizations, more than half (55 per cent) use a "smart" code in which certain digits or characters have specific meaning.
  • More than one-third of organizations match at least 80 per cent of their jobs to survey sources and nearly 70 per cent of organizations match at least 60 per cent of their jobs.

"The new research supports our experience that companies market price the majority of their professional and executive positions to national surveys," said Jeremy Feinstein, managing director of Empsight. "We know that large, more complex organizations tend to benchmark their specialized jobs to highly relevant market data. As this study shows, companies competing in the 21st century workplace will need to dig deeper to evaluate long-standing, traditional jobs as well as new hot jobs such as big data/analytics, digital marketing and privacy."

Survey invitations were sent electronically to 5,573 WorldatWork members on Aug. 19. The survey closed on Sept. 4, with 753 responses – a 14 per cent response rate.

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