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Compensation - Determining Fair Compensation

One of the most important roles HR will have is working to determine fair compensation. Fair compensation helps drive employee motivation, helps with attraction and retention and generally can help the business with its bottom line. Despite manager desire for more autonomy on pay, HR still maintains a lot of control. Greater cooperation with managers and frontline workers may be in order.

Goal


To help HR ensure best practices for determining fair compensation and working with management to do so.

What is Determining Fair Compensation?
Fair compensation is simply the base pay determined for workers at all levels of an organization. Being fair means that the compensation amount was impartially and honestly determined in an objective manner based on merit without any favour or prejudice. Paying for performance means that the compensation amount was determined by a thorough analysis of specific performance results.

How does Determining Fair Compensation improve employee engagement and culture?
When your employers are confident in the amount of compensation they receive for their work they are more inclined to be engaged at work and produce results accordingly. Pay, in many people’s minds, can equate to recognition or worth, which drives them to do more and apply themselves. Alternatively, if employees feel compensation is lower than it should be, there might be a disengagement effect.

What are the benefits?
More engaged workforce
Attraction and retention
Reduce stress
Improve financial (and overall) wellness
Reduce turnover

How do you Determine Fair Compensation in the workplace?
Fair pay can be looked at in a few ways. There are market determining factors such as what your competitors’ pay is and/or what the general range is for particular skills. There is also a pay-for-performance culture that would require performance review policy and actual reviews.

Action


Define Fair Pay In The Workplace

Know your competition: Conduct a market analysis of what competitors or similar workers are being paid.

Talk with managers: Get a good sense from management about roles and tasks and how best to evaluate workers.

Be transparent: Be open with workers about how pay is determined, whether merit or market base. Provide as much information as possible.

Consider a pay audit: Get leadership buy-in to conduct an audit. Certain pay policies may be unlawful and could be harming the company, in general. Consult lawyers when conducting the audit.

Phase in change: Review results when completing audits or informal analysis. Draft a plan of implementation, monitor compliance and act accordingly to employee feedback (or complaints).

Reference Material
Fair and Equitable Compensation: The Foundation for HR Programs
HR's Role in Pay Analyses

Updated on: 08/18/2023

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