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Best Practice: Salary Administration

Best Practice: Salary Administration

Definition and Example:
Salary Administration---Determining what to pay for a position and once the employee is on board, how to appropriately pay for that position going forward.

For example, if you wished to create a new position at your company, how would you determine the right salary for that position? 
You want to hire staff at a salary rate that is fair given the marketplace, their experience and skills.  At the same time, you don’t wish to overpay for a position.

A fair salary administration practice will make your hiring and retention process more successful.

A good salary administration program will assist in:

  • Keeping quality staff longer. 
  • Saving on costs of hiring and training of new staff.
  • Your company becoming an employer of choice.
  • Promoting a feeling of fairness and recognition with staff.
  • Building positive morale.

Each job should require a job description listing the current primary responsibilities of that position.

Qualifications for the position should be determined before hiring; for example, is a certain degree required?  A minimum amount of years experience in a like position?  What necessary requirements will we place on a candidate in order to be considered for hire?

A pay philosophy needs to be determined.  Will salary be provided via base pay only, a mix of base and variable pay, commission, etc.  Also, do you wish to pay at the industry/market average, above average, below average? 

Once philosophy is determined, the value of the position needs to be determined.  This may be done in a variety of ways---your own experience in the field, salary surveys, human resource consultant groups such as Hay Group, Mercer Consulting, etc.
The job level established for a position will carry with it a salary range for that job; that is, a minimum and maximum salary you may expect to pay between in order to fill the position.

Those pay levels in turn need to be reviewed regularly to ensure that they reflect current market value.

People Involved:
Varies by position.  Appropriate department manager, HR person….also, if needed, an overall “Director” (ie: E.D. or Division Director) to assist in determining/approving overall value of position.

Varies.  Depending on the number of positions involved, whether you make use of free information or require outside assistance…..the wider the net you cast, likely the longer to pull such a program together.

If done on your own, very little.  If your positions are more commonplace (bookkeeper, secretary, receptionist, programmer, etc.), you may tap into local personnel agencies, scan local papers for help wanted ads to see current going rates, ask neighboring companies and friends in business what they hire like positions for at their companies.  You may use published salary surveys for your area, have access to free information on the internet, etc.

If your positions are somewhat unique, the candidate base you draw from wide, the marketplace you need to draw from limited or the particular job you need to fill is a “hot” skill, you may wish to tap into other resources such as HR consulting firms…. and with that comes some expense.

Other Considerations:

  • Your budget
  • Cost of your time
  • Your expertise in an area
  • The number of jobs which require additional consideration
  • Your candidate pool…is it local, national?

1. Dario Otero, HR Director, USTA, 914-696-7207
2. Howard Levine, Mercer Consulting (pay for service)
3. Sasha Lazor, Hay Group (pay for service)

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