In their excellent Worldatwork article on pay transparency published in September 2023, Mariann Madden and Lindsay Wiggins state that one of the ways organisations should respond to pay transparency is to get the starting pay right: “Starting pay often sets the course for employees’ pay throughout their careers. Getting pay right from the start is critical for any new job, whether it involves a new hire, promotion or transfer.” An excellent way to accomplish this is to develop a pay zone calculator, to determine an appropriate zone within the grade or job pay range for the new hire or the promoted / transferred employee based on criteria deemed important to the organisation. I have developed several of these for different clients, and the criteria for each organisation was different. In the pic I show some typical criteria that could be used for new hires (criteria 1 to 4) or internal moves(criteria 2 to 5), with the zone range percentages on the left. This is assuming all pay ranges are from 75% to 125% of midpoint. The zone ranges would need to be adjusted for narrower or wider pay ranges. Each criterion would score between a 1 and a 4, with the average score determining the recommended zone. The criteria can also be weighted based on importance to the organisation, or weighted / adjusted based on type of role. The second pic shows what the new hire template could look like. In this case the appropriate pay range is brought in using the division, which determines the pay ranges, the location, which determines a premium %, the grade and the zone rating. By naming each set of pay ranges the same as the division, you can use the INDIRECT function to call up the correct pay range. Division and location can be substituted for whatever category/ies you use to determine pay ranges. The same logic and calculations can be applied to all current employees by entering the criteria ratings next to a list of employees, and applying the calculations in this sheet. Adjustments can then be made so that no employees are below the minimum of the appropriate zone. Obviously there may be a significant cost in doing this, which would need to be factored into the exercise. And the organisation would need to decide whether to red circle or take any action about those above the zone max. But, once this has been done, the pay transparency conversation with internal employees becomes so much easier, because pay positioning in the range is fair, defensible and based on objective criteria.
I like this 👍 one thing I would add is that if someone was trying to justify the scarcity point I'd want to see that they had at least attempted to advertise a role for a period of time unsuccessfully.
Jerry Ong
9mo
Thank you Dianne Auld GRP, CCP, CSCP, WLCP, AGRP for sharing. I fully agree with your last sentence. However, much too often, Managers are overly anxious to pay "whatever it takes" to bring in a candidate. Their defense is "we have the budget" for it. This tend to be prevalent In tight markets where business needs override sound compensation practice.
Absolutely love your work and your courses. Would you be doing a course developing your own pay zone calculator?
I agree, Dianne. Starting pay is the most important. That said, I feel a courageous manager can also correct inequities at annual review time if given some sound training, some flexibility (and/or HRBP support) and the courage to make some tough decisions on lower contributors.
I like the various criteria. Scarcity can be a point in time. I'm sharing this. Thanks for the post.
Jill Ayuso
9mo
In healthcare it's common to have a crediting system to determine pay. However it's not common in other industries. I completely agree that it's very important to ensure the starting pay is appropriate so the pay journey is equitable for retaining talent.
Ana Opulencia
9mo
Starting pay is one of the strongest correlates of future pay. Basic tenet of compensation learned from my first boss in HR, over 20 yrs ago. Highlights the imperativeness of pay transparency to achieve pay equity.
Bernadine Goosen
9mo
Love this! Very useful to ensure pay equity
Managing Consultant/Registered Occupational Psychologist at Industrial Psychology Consultants (Pvt) Ltd
9moI like the logic in the model. How sustainable is it to pay people based on experience in a role when we know scientific evidence shows very weak to zero relationship between experience in a role and job performance. On scarcity i see it as a good criteria but scarcity is not in perpetuity. You pay someone a premium salary today because of scarcity next year there is no scarcity of the same.skills but the individual is already being paid a premium salary. On competencies i have reservations given how unreliable job interviews can be. On using performance its a good one but how do you get this for a new hire? The challenge for me is that these factors is that they all lead to a permanent adjustment to a salary when we know the individual may not give corresponding value into the future. I guess its better than no criteria. Salary is easy to give but hard to take away when performance does not match with salary awarded.