This is the last installment of my series on making annual salary adjustments. We first reviewed how to pick a pay strategy then moved onto setting guidelines. Having covered tools that can help in my last segment, it’s time now to focus on the other factors to consider when establishing pay ranges that will guide annual salary adjustments.
High-Low Spread
High-low spread is defined as the difference between the high and low figures divided by the low figure. Jobs that employees could conceivably retire from are going to have a much broader distance between the entry-level and high-pay marks. Other jobs that are occupied for short periods of someone’s career will have a tighter grouping.
Industry Matters
The Bureau of Labor Statistics has a large volume of compensation information across the U.S., and some states offer even more detail. (Pennsylvania is one of them.) The challenge is that you can’t see variances in industry or type of employers. For example, large publicly owned companies will pay differently than small private ones, to say nothing of governments, for a given job role. Also, for the example of news reporters, as we have, there are different ranges for daily newspapers vs. magazines vs. diversified media companies.
Cost-of-Living Concerns
Cost-of-living is relevant but cannot be used exclusively to adjust pay ranges. If you have multiple locations with the same variety of jobs in each, it can be tempting to benchmark one location and use a cost-of-living multiplier to project the pay ranges for a second location. But in reality, regional differences in skills demand can push pay ranges above or below the cost-of-living difference, especially for management positions. It’s better to run each of the jobs through the resource you’re using for each location separately.
The purpose of this work is aligning expectations around a sensitive subject. The employer is in full-throttle pursuit of each 0.01 percent of profit. The employee has growing daily, weekly and monthly expenses to cover; along with a spectrum of long-term aspirations. And everyone wants to make more next year. It’s kind of like the tension of watching two objects on a collision course with the point of impact being the annual review meeting.
Using information, we can shift the discussion away from “wants” and focus on “this is:” This is the verifiable pay range for someone in this position. This is the rationale for the range at our company. This is where you are in that range. Let’s talk about how we can grow together from here. This is what you can do and this is what you can expect. How does that sound?
