I had my weekly meeting with our controller, Jane, this morning.  One of the things we talked about is organizing our pay policy.  We have a procedure and a strategy and now we need to organize it all together and make an official process.  Some of what we did to create a pay strategy is the following:

• Written job descriptions

• Establish pay ranges for each position within the company

• Market research on what those positions are paid in our market area

• A process for each department head to request raises

• Pay level spreadsheets for each department head

• Each employee gets an annual review. Raises are not given at that time. Expectations and goals are clearly communicated

• Annual review of pay ranges

There are market forces that affect pay policy.  If there is a limited pool of qualified employees for a particular position we are recruiting for we may modify the pay range.  The profitability of the company and forecast for future work could also affect pay ranges.

Once an employee reaches the top of their pay range for any position they would have to offer value in some other way in order to be paid outside of their pay range.  This also applies to making progression within your pay range.  An employee that has diversified skills may be more valuable.  If you can sculpt, paint and do woodworking that may be more valuable than someone that can only do woodworking.  If you can produce something fast you may be more valuable (this applies more to hourly workers than salary, but counts in both).  If you have not offered more value than you did in the previous year your raise may match that year’s inflation rate.  In 2009 there was no inflation.  According to the BLS it was negative .4% for 2009.  In 2010, it has been 1.1%.

Pay may also vary depending on what other benefits we are offering individuals.  We offer a variety of training.  If we are sending someone through extensive and costly training that may affect their pay for that particular period.  If we have to train someone extensively that may affect their pay level.  The pay strategy includes all benefits (health insurance, 401k, life insurance, etc.).

The work that we do is very unique and very competitive.  We compete with companies across the U.S.  Our competition often bids lower.  We assume part of their ability to do this is based on their pay strategy.  If you have to pay workers less in Atlanta for the same work we produce in IL that can make it difficult for us to compete.  We consider the unique work we do as a competitive advantage.  How many people can work at a place in which one day you learn about dinosaurs and the next the civil war?  It’s a very creative environment which also makes it appealing to come to work every day.  This advantage may mean we pay slightly less than the contractor down the street.

Do you have a pay strategy?