The purpose of designing and implementing a salary administration plan (SAP) is to allow for a competitive and equitable compensation structure that assists in attracting and retaining talent. It also helps protect organizations by managing compensation expenses, navigating volatile talent markets, and establishing guidelines around human resources policy and procedure.
The design of an SAP typically starts with benchmarking existing positions against the competitive marketplace to establish a pay range for each position. Many organizations stop there and simply use the data as a jumping-off point for setting compensation levels. However, as compensation professionals have come to understand, the process should not end here.
A sound SAP continues through the review and assessment of the benchmarked data and works to align with the organization’s internal hierarchy, establishing the groundwork for internal equity within the organization. An important part of establishing how to best review the data and establish your policy is developing the organization’s compensation or total rewards philosophy. This philosophy will assist in establishing the internal hierarchy and position value, as well as determining differences when incumbents are performing similar roles with varying degrees of responsibility, experience, or performance levels.
For example, the benchmark position of project manager has roughly the same job-related functions across companies and industries. Its responsibilities, however, could vary from managing a $5,000 implementation to overseeing a $50 million build. While the job-related functions are similar, the skillset and experience level are likely very different. As such, an organization wants to make certain they are developing different levels for these positions, so the range of talent can be properly established, documented, and defended.
Similarly, as organizations grow and roles expand, the human resources function needs to partner with business operations to clearly delineate any differences in job-related tasks or the skills necessary to perform each role successfully. Establishing these differences will allow organizations to properly market price their jobs and establish their internal hierarchy to avoid pay equity issues. This also provides a systematic career path for employees so they clearly understand their level and what needs to be accomplished to move up within the organization. A properly designed salary structure not only addresses compensation but is also an organizational development tool.
Establishing a well-designed SAP sets your organization up for long-term success by protecting its interests while also providing employees with a path forward in a fair and equitable environment.