Aligning Compensation Benchmarking

A Paradigm Shift in Salary Benchmarking practice to bring in the apt Pay Philosophy & building the fundamental block of Total Rewards Strategy

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Problem: An Indian fintech start-up was facing:

1. High Regrettable Attrition
2. Low Offer Acceptance rate
3. Significant number of exiting employees cited Compensation as the main reason for leaving
4. Fragmented use of salary data sourced from the consultants which was also not aligned with Total Rewards Strategy (TRS)

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Success:

We helped the Company to redefine their Salary Benchmarking approach which also became the foundational block towards curating their Pay Philosophy and TRS, resulting in measurable success:

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Underlying issues with the current Salary Benchmarking Practice:

Recognizing the importance of getting the pay philosophy right, the founder and the HR leadership team embarked on a journey to assess their current situation. The situation was attributed to several factors, including:

1. The scope for sourcing the annual salary benchmarking data was not curated basis factors like pay elements, peer group, geographical locations, etc.
2. Best fit consultant as per their scope was not selected basis availability of peer group data, industry expertise, pricing, etc.
3. Ineffective pay ranges as the sourced data from the consultant was used as-is, without data sanitization or incorporating multiple other factors like companies hiring trend, function criticality, last year’s ranges and its impact.
4. Below market pay positioning due to ineffective pay ranges not linked or aligned with the pay philosophy.
5. The final market data was not aligned to the Total rewards strategy and hence was used for point in time activity and decision making.

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Approach & Solution:  The overall project was managed in 3 phases over a span of 8-10 weeks

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Phase 1: Scope Finalization

1. Pay elements were determined like Fixed pay, Variable Pay (Bonus / Incentives), ESOPs and other non-monetary benefits like flexi-pay, health benefits, recognition, etc. forming Total Rewards
2. Peer Group was selected with comparable scale of operations (Revenue, Headcount, etc.) and basis the talent movement i.e., loosing talent to; and hiring or aspiring to hire talent from.
3. Scope of the exercise was curated basis pay elements, peer group, geographies, critical functions, etc.
4. Vendor was finalised considering factors like industry expertise, participation of desired peer group, cost of data sourcing, data & report delivery timelines.
5. Jobs were diligently mapped with market through:  a) leadership interviews to delve deeply into the internal roles  b) engaging people managers in role mapping exercises.

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Phase 2: Range Finalization

1. Sanitization of raw market data shared by the consultant by identifying and rectifying errors, inconsistencies and outliers.
2. Further analysis of : a) last year’s market data and its impact on the current pay ranges, pay positioning and pay structure of the organization b) current year’s market data to evaluate current pay positioning of the roles as against the market which was subsequently identified as below market  c) current hiring ranges along with past hiring trends, like source mix, most backfilled roles, offer acceptance rate, etc. to identify the pain areas.
3. Created relevant pay ranges factoring in various significant factors like pay elements; desired pay positioning; pay mix; differentiation basis role criticality & geography; attrition and hiring trends.
4. Devised a strategic roadmap outlining a phased approach to annual budgeting for pay corrections, ensuring a gradual progression towards the desired level of pay positioning, i.e., at par with the market

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Phase 3: Adopting to Total Rewards Strategy

1. Philosophy – focussing on fairness, equity, and competitiveness by rewarding employees based on their role, contributions, experience, and performance.
2. Positioning – at par with the market to maintain competitiveness and ability to attract and retain talent. Given the function / role criticality, desired positioning was carved which led to surgical and effective differentiation of the pay ranges
3. Pay mix – higher variable & equity-based pay for senior roles, moderate variable pay for mid-level roles, while higher fixed pay for junior or entry level roles.
4. Parity vs Differentiation – framework to devise fair pay and thereby annual increments for employee's basis their performance measures, talent classification, role tenure, company tenure, etc.
5. Transparency - pay ranges, pay positioning, key drivers and motivators of each compensation elements were shared with people managers for various roles within their teams

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At TalentMonk we deliver tailored solutions for new age start-ups and SMEs. To craft a compelling Salary Benchmarking practice for your business, which is not only aligned to your Pay Philosophy, but also lays foundation for a curated Total Rewards Strategy, reach out to us at: https://talentmonk.com/contact-us/

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