By Pamela Watkins, Watkins HR Strategy

I am often asked, “Why are pay grades (salary ranges) important to establish and review annually?” and my short answer is that this helps businesses stay competitive in the marketplace by attracting and retaining quality staff.

It also provides a framework for compensation and career ladders within your organization. Additionally, you may want to consider the following points when thinking about compensation and compensation review:

1. Salary ranges are essential to help employers control their expenses and ensure pay equity among employees.

2. Accurate and up-to-date job descriptions are key to ensuring that job titles and salary ranges are weighted correctly.

3. An employer can choose to “lead, lag, or match” the market.

4. I recommend a careful look at internal and external pay equity when evaluating compensation.

5. Simple steps to reviewing your organization’s pay equity include: conducting a job analysis for each position, grouping like positions into job families, ranking positions using a job evaluation method (this ensures you are rank ordering jobs, not the people in the job), considering using a point method for each position, and conducting market research. There are many free sources available to evaluate your external market. Be sure to drill down to the specific geographic location you are working with. Avoid violating antitrust laws, employers should NOT contact other organizations directly for compensation information.

6. Stay current with trends and economic news. The Employment Cost Index is a reliable source.

If you need additional assistance, feel free to reach out to Watkins HR Strategy by phone at (814) 671-5652 or by emailing WatkinsHRS@outlook.com.

This article was published in the Venango Chamber’s August 2023 VenangoWorks! Newsletter.