Written by
Dragana Dzelajlija

LinkedIn

04 February 2021

We asked Dragana Dzelajlija, Project Manager at CURO, to provide some tips for success with pre-compensation review analysis and how the right compensation management technology can simplify and streamline this phase of the compensation review. Drawing on her experience working with CURO clients and her time as an in-house reward analyst, here is what she had to say.

One of the perks of having a compensation management software system to help with your compensation reviews, especially a compensation specialist like CURO Compensation Management (wink-wink, I had to, I do work here after all), is that it takes away much of the manual reporting and analytic functionality that you're used to doing offline. The even better perk of compensation management software is that it takes a lot less time to organize and conduct the actual compensation reviews, so you get extra time added back to your day for you to review your own analysis and conclusions, and generally add more value and strategic input rather than focusing on purely administrative tasks.

Prior to our client’s switching to CURO Compensation Management software, we were constantly told that their teams would spend so much time collating data and producing outputs and results for others, that they didn’t even have the time to review the outcomes for key trends and compliance with reward principals.

With that said, there are a few common types of analysis you'd expect to do in pre- and post- compensation reviews as well as directions and review guidelines you should be providing managers based on what the analysis is showing. This blog aims to look at pre-review analysis and give managers direction on how to interpret and use the analysis to make smart recommendations.


1. Cost Modelling & Projections

When setting review budgets, aside from determining how many dollars you have available in the bank, you'll have to model projected spend scenarios to give your Finance team an indication of how much the review could cost. Hopefully you’ll have data from prior years' review history in terms of the average percentage increase. If you are lucky and have the data, you might even be able to break this down by grade (level, job band, etc.), by increase type (merit or promotion), and even location. If you have statistics over percentage of population promoted, or percentage of population receiving an increase, you can then use these ratios in projecting a more detailed spend forecast using those averages for the current team and their current salaries.

Cost constraints are of course a major feature of this year’s reviews, due to the economic impact of the Coronavirus crisis so far. It’s crucial to adapt your pay review processes to account for lower budgets and the need to do more with less. So we have also seen organizations including salary reduction scenarios into their budget modelling.

CURO Compensation Management Hack: You can set budgets up on multiple different criteria for different awards. Budget for merit, market, promotions/adjustments, bonuses, etc. where the manager can see spend against their budget in real time. You can model budgets in Curo as well using the scheme rules set up in the tool. We also introduced the ability to use salary decrease functionality, something that was never a previous requirement, for clients to use where pay or bonus budget reductions are needed due to the pandemic. Clients also use eligibility rules for salary review with a proportionately smaller population being eligible, in order to decrease spend and ensure that where there are limited budgets, they are allocated to those employees that are contributing the most value.

 

2. Benchmarking, Position Against Market

Your organization likely does some sort of external benchmarking on your employees, either in comparison to market percentiles or internal pay bands that are set based on market percentiles. If your organization does, you are probably already looking at comparison ratios (CR) of an individuals' FTE salary against a market point, or their position within the pay band. Some things to think about as you're doing this are:


Market Percentiles
    1. Have you identified to your managers where a person should sit in comparison to their percentile under different employee scenarios to help aid them in their decision making? For example: Recent promotions to that job, new hires, those in the role for a longer period of time. What is the compensation direction of how to consider an employee "full-fledged" in their role and when they should be on target with a specific percentile?

    2. Have you flagged any employees to your managers that are drastically below the ideal comparison ratios against your specified market percentiles? For example: Any employees that fall out of 80% to market CR?

    3. Have you looked at those employees specifically to check why they fall drastically outside of the ideal comparison in either direction? Has their job been properly matched to the market? Have they been in their role a long time?
Pay Bands
    1. Have you given direction to managers for where employees should be within the min and max of the range based on their performance, time in role, etc.?

    2. Have you flagged which employees are outside of the range to pay attention to them? With CURO Compensation Management, the software solution can do this for you and flags anyone that sits below or above the band min and maximums respectively.

    3. Are your managers leaving room for progression within an employee’s job in their pay range?

CURO Compensation Management Hack: CURO Compensation Management can calculate comparison ratios of where your employees sit against specific data points. CURO’s software can also calculate bandwidth penetration of where your employees are at within their pay range.

Along with calculating positions to market, you’ll be able to configure multiple guidelines based on your internal rules whether across the board, or related to benchmarking and where a person sits in relation to the benchmark.

Many clients are choosing to use Market Zone descriptors to highlight to managers employees benchmarking positions, rather than focusing on a specific comparison ratio percentage. This can then be combined with advanced filter functionality so you can easily view key at risk employees.


CURO Compensation Management product guide

 

3. Pay Equity Analysis

Lastly, pay fairness and wage equality have emerged as big reward topics recently. For certain industry sectors, the situation has worsened throughout COVID-19, as female and BAME (Black, Asian and Minority Ethnic) categories are being impacted the most.

CURO has been working with many organizations this year to conduct Pay Equity Audits as part of their pre-compensation review analysis using our Pay Equity Software. The outcomes from audits (recommended pay remediation by employee) form part of the cost modelling and projections outlined above. Some potentially create ring-fenced budgets for pay equity adjustments, so funds do not get reallocated by managers to other employees during the compensation review.

This analysis can also inform desired outcomes in terms of performance rating and salary allocation distribution by protected category status which you may choose to use as guidance to managers.  

CURO Compensation Management Hack: Some of our own clients are tracking performance rate distribution or average salary increases by protected category groups as well as seeing average pay gaps calculated with real-time analytics. This is much easier to do during the compensation review rather than relying on moderation and push back after recommendations have been submitted. Some have even created a specific pay equity adjustment budget pot as a result of pay equity analysis and configured it as part of their salary review.

 

Last but not least...

Those are only a few items to cover before the compensation review commences. Other things to look at include any location/cost of living adjustments that are required in terms of what the market is doing, years of experience that employees have, any competitive analysis of the marketplace and which jobs are “hot” in the market, and the employee and company performance overall.

I hope you enjoyed another instalment in a Beginner’s Guide to Compensation and that you now have further insight on the pre-review analysis to be doing for compensation reviews, what direction your managers need, and how to optimize CURO Compensation Management to fit your team’s needs.

Thanks for tuning in,

Dragana

 

 

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