The 7 P’s of Pay Planning

In today's competitive job market, employees are increasingly seeking transparency in their organization's pay practices. They want to understand not only their own pay and ranges but also how their compensation compares to others and how the company determines what is competitive. This growing demand for insight makes it crucial for managers to be well-equipped to make pay decisions and discuss pay with their teams.

The Importance of Training Managers YOUR Way

I was talking with a client recently about job architecture and whether they buy or grow talent.  Her response (in brief) was they needed to be more purposeful about growing their talent because they wanted to change how their employees thought about the work.  In other words, learn it from them, not from others.

If you aren’t training your managers how to think about pay at your company, chances are they are going to default to the last place they worked and that approach.  Does that seem like an effective way to execute your pay strategy?  Hopefully not! Providing managers with the knowledge and tools they need to make pay decisions and engage in meaningful pay discussions is essential. Managers must be comfortable addressing employee questions about compensation and owning their decisions.

Now how about those 7 P’s.

Quotation

Proper Prior Planning Prevents Pitifully Poor Performance

See how I did that?  Pay Planning wasn’t in the 7 P’s.  I could have made it 9 P’s though but that seemed taking it a touch too far.

Pay Planning Is More Than a Smart Worksheet

Consider this carefully.  For the most part, managers are asked to make pay change decisions once a year.  Out of their “regular job” that’s very few hours and very infrequently.  How well do you think they’ll perform given that dependent variable?  Consider that an investment in training might actually pay some dividends avoiding those 7 P’s.

Key Topics for Compensation Training

Here are some suggested topics to include in your compensation training for managers:

1. Objective: Clearly state the goals of the training, such as sharing relevant information and tools to assist managers in making pay decisions and providing a basic understanding of compensation to help address employee questions.
2. Roles and Responsibilities: Define what is expected of the training participants, both during the session and in their ongoing roles. Clarify what managers should handle themselves and when to involve HR. By the way, pay planning is actually “part of their regular job.”
3. Compensation Philosophy: Explain your organization's compensation philosophy, the role of each compensation element, peer groups, target pay, and other relevant factors.
4. Elements of Compensation: Define the different elements of pay, such as base pay, short-term incentives, and long-term incentives, and explain their purposes.
5. Basics of Determining Pay Ranges: Describe how market data connects to your pay management structure, how jobs are classified into grades and ranges, and the difference between external competitiveness and internal value.
6. Annual Compensation Planning: Provide guidance on managing within your compensation structure, including how to consider employees' positions within salary ranges, the impact of performance on pay increases, and addressing pay equity.
7. Considering Promotions: Explain the process for handling promotion requests, including what constitutes a promotion versus skill development and how to submit promotion requests.
8. Role-Playing or FAQs: Prepare managers for common employee questions about pay and provide them with ways to respond effectively. Nothing beats practicing, especially for tough conversations.

Process and Technology

Ensure managers understand the tools and processes involved in the annual planning process and any other compensation decisions throughout the year. It could be a spreadsheet or access to a cloud-based system that feeds your payroll.  In any case, give strong consideration to the user experience.  I’ve often seen requests for data that go overboard when it comes to giving managers employee data for pay planning.  Focus on what is most relevant.

No More P’s

Developing a comprehensive compensation training program can be challenging, but there are resources available to assist you. The first and most important step is to understand how important it is to avoid all those P’s.