At a time when discussions on equality and diversity in the workplace are gaining momentum, having a pay structure in place has never been more relevant, or even necessary. A comprehensive approach to compensation not only complies with ethical standards, but also serves as a cornerstone for cultivating a positive and inclusive organizational environment.
We discussed this with global compensation consultant Pierre-Yves Legault.
E: Hello Mr. Legault, and thank you for agreeing to answer our questions about salary scales. First of all, what exactly is a salary scale?
PYL: It’s the minimum and maximum salary – and everything in between – that an organization is willing to pay for a group of jobs of similar value.
E: Why is this useful?
PYL: For a start, pay scales allow us to comply with the law. In Quebec, pay equity legislation is already in force, and if the trend continues, pay transparency legislation could be adopted, as is the case in British Columbia. Pay scales are useful tools for meeting these requirements.
On the other hand, having salary scales makes it possible to be objective in determining remuneration, to talk about compensation and demonstrate transparency, and to satisfy staff by respecting three major principles of salary management: internal equity, external equity, and individual equity.
E: How?
PYL: In order to set up salary scales that cover all the jobs within an organization, we need to take the time to study these jobs in relation to their value to each other, to their value on the market, and to the individual characteristics of the people who hold them.
E: Let’s talk about setting up salary scales. How do you go about it?
PYL: Here are the main steps in developing salary scales:
- Determine where the organization wishes to position itself in relation to the market in terms of salary and total compensation;
- Describe and compare the jobs within the organization;
- Identify the reference market for the organization, and collect compensation data relating to this market;
- Determine the criteria on which the individual positioning of the organization’s staff in the salary scales will be based.
- In step 1, the organization must reflect on its compensation philosophy, which is shaped by its values and resources. This is the foundation on which subsequent decisions will be made.
- In Step 2, each of the organization’s jobs must be listed, described and evaluated, taking into account a number of factors, including:
- Main job responsibilities;
- Skills required;
- Experience required;
- Level of education required;
- Complexity of tasks;
- Impact of job-related decisions;
- Effort required to achieve job objectives;
- Risk of work-related accidents.
Basically, step 2 allows different jobs to be grouped into common categories, so that they can be equitably assigned the same pay scale.
- In step 3, the organization asks itself who represents its competition on the job market. The answer to this question is really personal to each NPO: some compare themselves to all the organizations in their region, in both the private and public sectors. Others compare themselves to organizations in the same field of activity, but across the province, for example. Still others choose to look at all NPOs, putting aside companies. There are a number of ways to determine this reference market and the salaries to which it compares. The organization can:
- check the backgrounds of its staff;
- check the backgrounds of the people who applied for the most recent positions;
- use free data offered by recruitment firms, the Institut de la statistique du Québec and the collective agreements of competitors or similar organizations;
- purchase salary surveys produced by specialized firms.
- Finally, step 4 is based on a very important principle to understand: pay equity does not mean equal pay. In other words, there may be differences from one resource to another for the same job, and these are justified by individual factors. The organization must therefore take the time to reflect on the criteria which, according to its values, justify such discrepancies, such as:
- staff performance levels;
- the experience of each employee;
- specific or specialized acquired skills.
E: Is it worthwhile for organizations to go through these steps to ensure well-constructed pay scales?
PYL: Absolutely! There are many advantages for employers.
I’ve had discussions with organizations that didn’t want to implement pay scales, because they said they couldn’t afford to increase their payroll anyway. That’s why reviewing your total compensation package and the working conditions you offer allows you to determine what you can afford to offer and sell to staff to recruit or retain. Salary is part of overall compensation, so an organization which, when comparing itself to its reference market, finds that it has less to offer in the way of salary can make the effort to offer more in the way of vacations, insurance plans, flexible working hours, and so on. And salary scales remain a sure-fire way of offering the best possible salary in a fair process.
Another advantage of pay scales is that they correct inequities that may have taken root despite good intentions. And, even when there is no inequity, staff have the right to ask questions and may have doubts about pay equity; an organization that has introduced pay scales is better equipped to discuss compensation transparently with its staff, and to wipe away any doubts raised.
E: Which must help with staff retention…
PYL: That’s it. Nobody wants to feel cheated, and everybody likes to feel valued.
E: So you recommend disclosing salary scales?
PYL: It depends on each organization. However, it’s becoming more and more common to indicate the salary range for a posted position, especially as candidates are becoming more and more comfortable with openly expressing their expectations in terms of compensation. For existing employees, knowing the salary range for their position allows them to consider advancement; it’s a source of motivation.
E: But do salary scales ever restrict an organization’s freedom of action to attract or retain a resource who would like to be offered more than the maximum scale threshold for their position?
PYL: Pay scales set the broad guidelines for determining fair compensation. But employers retain the latitude to negotiate compensation, taking into account individual wage-determining factors.
E: To sum up, we’d be crazy to do without pay scales!
PYL: That’s about it! One last point, though: it’s important to keep salary scales evolving. Of course, we may decide to freeze a salary scale for a year, for various reasons. Otherwise, they will quickly become outdated, i.e. no longer in line with the market.
Salaries are adjusted to take into account:
- inflation;
- annual benchmark market data;
- the organization’s ability to pay.
In this way, salaries remain as competitive as possible, which contributes to staff recruitment and retention.
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Thanks to our contributor:
Pierre-Yves Legault, CHRP
Human Resources and Total Compensation Consultant at Gamma RH
pylegault@gamma.hr