Exploring Variable PayFair isn’t equal

Mykkah Herner, MA, CCPModern Compensation Evangelist

Paige Hanley, CCPManager, Customer Operations

A copy of the presentation and recertification credit will be sent out within a couple of business days

15,000 Positions 3,500 Customers 11 Countries

250 Compensable Factors54 Million Salary Profiles

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Paige Hanley, CCPManager, Customer Operations

https://www.linkedin.com/in/paige-hanley-ccp-26599716

Mykkah Herner, MA, CCPModern Comp Evangelist

https://www.linkedin.com/in/mykkahherner

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Protections for equal pay

Fair pay isn’t equal

Linking Fair Pay and Variable Pay• Variable pay basics• Creative variable pay

Where to start

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Less than 100 Employees

100 - 1,000 Employees

More than 1,000 Employees

Nearly 7600 Respondents

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73% of employers consider employees fairly paid

36% of employees feel they are paid fairly

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Protections for Equal Pay

Legal Disclaimer: this is intended to be informational, not to serve as legal advice. If you think you have a potential pay discrimination issue, seek out a lawyer.

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Definitionwhat counts

as a job?

Secrecynon-retaliation

for talking about pay

Burden of Proof 100% of difference

demonstrated from 1 of 4 reasons

California Fair Pay Act

WHAT’S THE BIG DEAL?

As California Goes…

…so goes the nation.

48/50 States have some version of a pay equity law on the books

9/10 Provinces* have some version of a pay equity law on the books

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Other legal protections

Federal, State, and Local laws

Minimum WageFair Labor Standards Act

Other laws

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Fair isn’t equal

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Fairdoesn’t

necessarily mean

equalEqualFair

https://hbr.org/2016/03/when-unequal-pay-is-actually-fair

There are some

really good reasons

to differentiate pay

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Appropriate differentiation by

Performance

Results

Experience

Skills

Education

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Linking Fair and Variable Pay

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Prevalence of bonuses has steadily increased over the past 4 years

68.5% 69.3%

73.4% 74.3%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

2013 2014 2015 Current

Do You Give Bonuses?

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Is your bonus budget bigger in 2016 than 2015?

41% of all companies, 50% of top performing companies

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Variable Pay Basics

Linking Pay to Performance

Culture and perks that reward high performers

Higher increases for top performers

Results-based variable pay

Performance-based rewards & recognition

The variable pay umbrella

Incentive

Project Bonus

Retention Bonus

Signing Bonus

Perks

So you need to put together a variable pay plan

Hint: keep it simple

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Mix of pay

What ratio of base to variable?

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Aligned goals

Company goalsTeam goals

Individual goals

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Incentive Plan Incentive LevelMix of Base to

VariableMix of Company

to Individual

Overall, it may look like this…

Bonus Level Possible Org Level(s)Bonus Payout as % of

Base

Bonus Percentage(Individual)

Bonus Percentage

(Organization)

Level 1 Individual Contributor 5% 75% 25%

Level 2 Lead, Supervisor 10% 60% 40%

Level 3 Manager 15% 40% 60%

Level 4 Director 20% 25% 75%

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Considerbudget

org culturejob level

job functioncompany life cycle

…

Overall pay structure may differ based on pay goals

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Mix of pay by life cycle

High Rewards & Recognition

High Rewards & Recognition

ModerateRewards &

Recognition

Moderate Rewards &

Recognition

ModerateVariable

High VariableModerate Variable

Low Variable

Low Base Low Base High BaseModerate

Base

High EquityModerate

EquityModerate

EquityLow Equity

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What other kinds of variable pay should we consider?

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What type of bonus?

15.8% 18.1%

61.8%

25.7%

40.0%

14.4%

Retentionbonuses

Hiringbonuses

Individualincentivebonuses

Teamincentivebonuses

Spot bonusesor other

discretionarybonus

programs

Other (pleasespecify)

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Who gets bonuses?

69.0%75.2%

69.3%

47.0%

12.6%

Executives Directors andManagers

Professional,Technical andAdministrative

Exempt Employees

Non-ExemptWorkers

Other (pleasespecify)

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How frequently?

4.9%12.6%

6.4%

66.6%

9.4%

Monthly Quarterly Biannual Annual Ad-hoc

Get Creative

Passes to sporting events

Catered lunches for winning teams

Days off after big deadlines

Choice of work assignment

Development opportunities

Lunch with the CEO

Remote work

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Need help getting started?

• If you don’t already have one, find an affordable legal resource in your state

• Get to know the makeup of your workforce

• Survey employees, formally or informally, to identify what motivates them

• What is your current mix of pay? Do you offer something in all four tiers?

• Evaluate your readiness for variable pay – what training is necessary?

PayScale Delivers Where Other Compensation Providers Fall Short

PayScale leads the world in compensation knowledge with the freshest and most detailed data from over 54 million salary profiles. More than 3500 organizations use PayScale’s software and intelligence to get the greatest return on their talent. Smart businesses use PayScale Insight to recruit, retain and motivate their people.

Visit our blog: www.payscale.com/compensation-today

Join our Group on LinkedIn: Compensation Today: HR Best Practices

Paige Hanley, CCP

Manager, Customer Operations

Mykkah Herner, MA, CCP

Modern Compensation Evangelist

www.payscale.com