Hi, my name is Candice Elliott and I am a human resources strategist, and I use what's called a holistic human resources approach, looking at all of the different facets that are involved in human resources and not just one of them at a time. Today, I'm going to be talking with you about defining job compensation ranges. Compensation ranges are used to define the amounts that your company will pay for specific positions within the company.
Having compensation ranges helps you to define the levels of your positions within the company. It creates incentive to move into higher levels of authority and management. Developing compensation ranges also helps you to ensure that you have equity among all of the people who are in a certain job category, if they're all making a similar pay range. There are a few different ways to go about defining wage ranges for your positions. The first step that I recommend is to do some research and to collect a little bit of data about the positions that you have.
Start with a list of your positions and when I do a compensation analysis, this is also how I start. The first resource that I usually check is a free resource and it's salary.com. Salary.com lists typical wage ranges for positions, and you can narrow down the location of the position to even the city that you're located in. [00:02:00] You can find what people make in similar positions in your same city. You could look at a couple cities over the next county so that you can start to have an idea of what others are paying for the position.
The next thing that I look at are open jobs. I'll go on all the job posting websites and look at how similarly situated companies are posting for job ads and what they're including for the compensation range. This helps me understand if the wage that I'm considering offering for a potential position or what I'm currently paying staff if that's competitive with the job market. Having a wage that is lower than the job market may mean that you have higher turnover. Having a wage that exceeds the job market can help you to retain staff longer.
Having wages are really different from the job market is something that you would really want to look at and see if there's really a strategic reason why you're doing that or if there are other things going on. There are two other services or ways to find out more information about wages, one of them is paid services. There are compensation reports that you can purchase. For example, the California Non-profit Association has an annual compensation report for all these different positions in non-profit organizations.
There's a company called Mercer that has a lot of industry specific reports and there are a number of other companies out there that you can pay to receive information about compensation and benefits in your industry or for particular jobs. The last thing [00:04:00] is if you're using exit interviews in your company to ask some questions from your employees who are leaving. If they're comfortable sharing information about the positions that they're leaving for and any pay that's associated with those positions, you could also include that in developing your compensation ranges.
As you you're collecting this information, you'll find that you would probably have a lower end that you're seeing and a higher end that you're seeing in the compensation. You may decide to make your compensation range right there with say 25% of what companies are typically paying for the position as the bottom end of your pay range, and then 70% to 80% or 90% of the pay for that position to be the top end of your pay range. There are some other considerations to think about just outside of establishing the pay range.
You want to think a little bit long-term. What happens when you have someone who has gotten to the top of the pay range? Are you going to expect them to apply for the next senior position, or will you make some kind of provision in your policy or in your practice for allowing them to stay in that position, but still maybe receive a living wage increase or like a 3% increase year over year?
Some companies separate out that 3% cost of living increase from a performance-based increase and they'll have cost of living be around 3% and then performance could be anywhere from zero to however high [00:06:00] you want that percentage to be that's affordable for your company. Then just the last point that I wanted to make related to wage ranges is thinking more long-term, thinking 10, 20, 30 years into the future , if your company is around that long, creating a system that will provide for changes that come over time.
If you're a restaurant group and you pay minimum wage and minimum wage is currently increasing, but it's not going to be increasing in the near future, then working that into your plan. Really looking at how cost of living will increase over the coming years and building that into your compensation plan so that you don't end up in two years with wages that are much lower than what other similarly situated companies are doing.
Once you have your wage ranges, you can build around these other kinds of criteria to make sure that you're providing increases at a consistent rate that makes sure that your wages remain competitive. Working wage increases in with performance reviews is a good way to do those if you're doing them annually or every six months. Later I'll be talking about that. Thank you for spending time with me today.
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