My goal in this week’s column is not to make you a salary-planning expert. We will leave that to the human resources and compensation professionals. The goal here is for you to gain a general understanding of various salary-planning fundamentals so you can effectively participate in your department’s salary-planning process.


 

My goal in this week’s column is not to make you a salary-planning expert. We will leave that to the human resources and compensation professionals. The goal here is for you to gain a general understanding of various salary-planning fundamentals so you can effectively participate in your department’s salary-planning process.


The fundamentals of salary planning include job descriptions, job levels, salary ranges, salary surveys, position in salary range and salary range quartiles.


A job description is a description of the job, including its title (the name of the job, e.g., business analyst), responsibilities, tasks, needed skills, required certifications and needed level of experience. The job description is the primary communication vehicle of the job’s responsibilities. The job description is also the basis for defining the job level and salary range.


A job level is where the job fits within the company hierarchy. For example, the business analyst job family may go from junior business analyst to senior business analyst to principal business analyst. As a result, the job description for a senior business analyst should require more experience than the job description for a junior business analyst. Once a job is leveled, it has to be assigned a salary range.


A salary range is the range of pay that the company is willing to pay for a specific job. For example:




The range of pay for a junior business analyst may be from $40,000 to $60,000.

The range of pay for a senior business analyst may be from $50,000 to $80,000.

Conceptually, these salary ranges are determined by a number of factors, including:




Needed skills.

Required certifications.

Amount of experience.

Level of responsibility.

In reality, the salary range associated with a job tends to be driven by:




General market conditions.

Supply and demand for the specified skill set.

What other local companies are paying for similar jobs.

As an added point, sometimes specialized skills demand higher salary ranges. For example, knowledge in new computer software technologies tends to bring a higher price than the equivalent skills in standard or older technologies.


Many human resources departments define their salary ranges with the help of salary surveys. These surveys are facilitated by consulting firms that collect, aggregate and analyze salary data from hundreds of companies. Then they summarize the collected information by job type and sell it back to the participating companies. The companies then use it as a reference guide to define their salary ranges.


Once a job’s salary range has been defined, the general rule of thumb regarding where a person should be positioned in a salary range is a:




Less-experienced person should be in the lower end of the salary range.

Fully qualified person should be in the middle of the range.

Very-experienced person should be in the higher end of the range.

Some companies break salary ranges into salary ranges quartiles. Quartiles are four smaller ranges within the salary range. For example, as discussed earlier, if the junior business analyst salary range goes from $40,000 to $60,000, the quartiles would be $40,000 to $45,000, $45,001 to $50,000, $50,001 to $55,000 and $55,001 to $60,000.


With the range quartiles defined, people’s pay raises are then partially based on their quartile within the range. The rationale being if are fully qualified:




You should be at midpoint.

If paid less than midpoint, you are underpaid and should receive a larger than average increase.

If paid more than midpoint, you should get a smaller increase because you are already being appropriately compensated.

Sorry for all the math and numbers, but welcome to management. If needed, ask your human resources person for help. It’s their job to help you.


The primary advice and takeaways from today’s column is to know that:




The fundamentals of salary planning include job descriptions, job levels, salary ranges, salary surveys, position in salary range and salary range quartiles.

You don’t need to be an expert in these fundamentals, but as a manager you do need to understand what they are.

If you have trouble with the math, human resources can help.

Until next time, manage well, manage smart and continue to grow.


Eric P. Bloom, based in Ashland, Mass., is the president and founder of Manager Mechanics LLC. He is also a nationally syndicated columnist, keynote speaker and author of the award-winning book “Manager Mechanics: Tips and Advice for First-Time Managers.” Contact him at eric@ManagerMechanics.com or visit www.ManagerMechanics.com.