At a time when discussions about equality and diversity in the workplace are gaining momentum, having a pay structure in place has never been more relevant. A comprehensive approach to compensation not only complies with ethical standards, but also serves as a cornerstone for cultivating a positive and inclusive organizational environment.
Engagés discussed this with global compensation consultant Pierre-Yves Legault.
E: What exactly is a salary scale?
PYL: It’s the minimum and maximum salary – and everything in between – that an organization is willing to pay for a group of jobs of similar value.
E: How is this useful?
PYL: To begin with, pay scales allow us to comply with the law. In Quebec for example, pay equity legislation is already in force, and if the trend continues, pay transparency legislation may be adopted, as is the case in British Columbia. Pay scales are useful tools for meeting these requirements.
On the other hand, having salary scales makes it possible to be objective in determining remuneration, to talk about remuneration and demonstrate transparency, and to satisfy staff by respecting three major principles of salary management: internal equity, external equity, and individual equity.
E: How?
PYL: In order to set up salary scales that cover all jobs within an organization, you have to take the time to study these jobs in terms of their value to each other, their value on the market, and the individual characteristics of the people who hold them.
E: Let’s talk about setting up salary scales. How do you go about it?
PYL: Here are the main steps in developing salary scales:
In step 1, the organization needs to reflect on its compensation philosophy, which is shaped by its values and resources. This forms the basis for subsequent decisions.
In Step 2, each of the organization’s jobs must be listed, described and evaluated on the basis of a number of factors, including the following:
Basically, step 2 enables different jobs to be grouped into common categories so that they can be equitably assigned the same pay scale.
In step 3, the organization asks itself who represents its competition on the job market. The answer to this question is really personal to each nonproft: some compare themselves to all the organizations in their region, in both the private and public sectors. Others compare themselves to organizations in the same field of activity, but across the province, for example. Still others choose to look at all nonprofits, putting aside companies. There are a number of ways to determine this reference market and the salaries against which to compare. The organization can :
Finally, step 4 is based on an important principle to understand: pay equity does not mean equal pay. In other words, there may be differences from one resource to another for the same job, and these are justified by individual factors. The organization must therefore take the time to reflect on the criteria which, according to its values, justify such differences, such as :
E: Is it worthwhile for organizations to go through these steps to ensure well-constructed pay scales?
PYL: Absolutely! There are many advantages for employers.
I’ve talked to organizations that didn’t want to implement salary scales, because they said they couldn’t afford to increase their payroll anyway. That’s why reviewing your total compensation package and the working conditions you offer allows you to determine what you can afford to offer and sell to staff to recruit or retain. Salary is part of overall compensation, so an organization which, when comparing itself to its reference market, finds that it has less to offer in the way of salary can make the effort to offer more in the way of vacations, insurance plans, flexible working hours, and so on. And salary scales remain a sure-fire way of offering the best possible salary in a fair process.
Another advantage of pay scales is that they correct inequities that may have taken root despite good intentions. And, even when there is no inequity, staff have the right to ask questions and may have doubts about pay equity; an organization that has introduced pay scales is better equipped to discuss compensation transparently with its staff.
E: Which should help with staff retention…
PYL: That’s it. Nobody wants to feel cheated, and everybody wants to feel valued.
E: So you recommend disclosing salary ranges?
PYL: It depends on each organization. However, it’s becoming more and more common to indicate the salary range for a posted position, especially as candidates are becoming more and more comfortable with openly expressing their expectations in terms of compensation. For existing employees, knowing the salary range for their position allows them to consider advancement; it’s a source of motivation.
E: But do salary scales ever restrict an organization’s freedom of action to attract or retain a resource who would like to be offered more than the maximum scale threshold for his or her position?
PYL: Salary scales set the broad guidelines for determining fair compensation. But employers retain the latitude to negotiate compensation, taking into account individual wage-determining factors.
E: To sum up, we’d be crazy to do without pay scales!
PYL: That’s pretty good! One last point, though: it’s important to keep pay scales moving. Of course, we may decide to freeze a salary scale for a year, for various reasons. Otherwise, they will quickly become outdated, i.e. no longer in line with the market.
To make them evolve, we take into account :
In this way, salaries remain as competitive as possible, which contributes to staff recruitment and retention.
This blog was originally published on Engagés, and translated from French.
