More employers use market-based pay structures

By BenefitsPro


By Amanda McGrory-Dixon

Sixty-four percent of employers use market-based salary structures rather than traditional pay structures at 23 percent and broadband structures at 12 percent, both of which were once popular, according to the 2012 Survey of Salary Structure Policies and Practices, a new study by WorldatWork and Deloitte.

“Compared to prior survey results we have seen an upward trend of organizations using market-based structures over traditional structures,” says Kerry Chou, a Certified Compensation Professional and practice leader for WorldatWork. “Market-based structures have struck a chord with organizations because they combine the more well-defined parameters of a traditional structure with the range spread flexibility of broad bands.”

Most respondents report keeping salary structures, competitive positioning and frequency of updates consistent; however, variation by job function, job level, critical work force segment, or geography is not rare. Even 37 percent of respondents say they rely on multiple types of structures by job level while 30 percent of respondents base it on geographic location.

“Variation in structures based on critical work force segments, geography and job function is not surprising to us as we see continuing focus by employers on balancing the need to attract and retain critical talent with a laser focus on cost and judicious spending of organizational funds,” says Gregory Stoskopf, director, compensation strategies for Deloitte Consulting.

The survey also finds that traditional structure range spreads seem to have grown, but the midpoint progressions have loosened. Respondents from larger organizations typically have wider ranges for market-based structures, broadbands and step structures than respondents from smaller organizations.

Among the heaviest users of market-based salary ranges are consulting, professional, scientific and technical services. Eighty percent of respondents say they habitually modify salary ranges, and of those, 70 percent say they practice this annually. Only 12 percent of respondent adjust salary ranges every two years.

When it comes to salary structure design, administration, record and communication, respondents most often use spreadsheet applications, such as Microsoft Excel. Respondents also report using point solutions, which are specific tools centered on salary structure management, and Enterprise Systems, such as Oracle and PeopleSoft.

Originally published on BenefitsPro.com