![]() ![]() Most organizations budget about ½ to 1% of total salaries to fund traditional promotions and/or career development pay. Promotional/Career Development Compensation These budget dollars are used to give pay increases to employees whose pay is falling too far behind market due to significant market shifts. These are also referred to as market increases. Equity pay funds are also used to correct any compensation discrimination problems or issues with internal equity (how employees compare to one another in the same or similar roles). Most organizations rely on lagging data (how many dollars they have used each year to correct equity issues), or they use market benchmarking, internal equity analysis and discrimination analysis to determine budget dollars needed here. Evaluate all internal and external factors first, and then determine your merit budget. External factors include understanding the average market increase for your industry. Be careful, however, to avoid the common mistake of merely setting your merit level budget at the market average. Internal considerations include factoring in what your organization can afford, your market competitiveness position (where your organization stands relative to your industry market), what benefits and technology improvements you are implementing, and what additional training you are funding. ![]() You’ll need to consider both external and internal factors when determining your merit budget. ![]() So, what should you consider in each area as you develop your compensation budget? Let’s dig deeper: You will want budget for merit pay, equity pay, promotional/career development pay, bonuses, and other miscellaneous pay items. You can establish separate line items for each area or keep them together in one budget. However, separate line items do make it easier to track and ensure the dollars budgeted for each area are dispensed appropriately. Here’s what you need to know:Įffective Compensation Budgeting Has Many ComponentsĬompensation budgeting doesn’t have to be overly complex, but it should be realistic and comprehensive enough to encompass key areas of an employee’s total rewards. Successful compensation budgeting requires a more comprehensive approach, for the good of the employee and the company. But this shortsighted approach can lead to a budget shortfall and employee dissatisfaction – two critical errors that can threaten a company’s operations, culture, profitability and survival. Many employers tend to factor in only an employee’s annual salary and benefits when considering personnel costs. Compensation budgeting is often misunderstood, underemphasized and oversimplified. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |