Compensation

Canadian firms typically spend from 40 to 70 percent of their operating budgets to compensate their employees. For most businesses, compensation is the largest operating expenditure. The purpose of a good compensation strategy is to attract exceptional talent from the job market and elicit the behaviour necessary for the organisation’s success. Although many organisations regard compensation as simply a source of cost, others believe that good compensation strategy can play a key role in the achievement of their goals and strategies.

The three components of good compensation mix are Base pay, Performance pay, and Benefits.

Base pay is the foundation component for most job seekers. It is also the largest component of the compensation package. Base pay is “guaranteed” pay. There are typically 3 methods for establishing Base Pay. We at “HRQuest” like to focus on 2 most commonly used methods.

1. Market Pricing and
2. Job Evaluation

Market Pricing as the name suggests is establishing base pay by determining the minimum amount of pay necessary to attract qualified individuals from the existing labour market. This is also a pay that other firms are willing to pay for similar jobs. Once the minimum is established, employers can decide to pay the “going rate” or pay above the going rate for exceptional performance/talent.

There are 2 key advantages of using the market pricing method:

1. The simplicity in establishing the base pay
2. It helps the organisations in keeping all the jobs aligned with market conditions

At HR Quest the goal will be to:

• Discuss the key factors in understanding labour markets
• Identify possible sources of compensation data.
• Describe steps in the process for conducting compensation surveys if needed.
• Most important, analyse, interpret and apply compensation survey data.

 

Job Evaluation – Click here