Compensation Planning for 2010

By Kathryn O’Connor, CCP, PHR, HR/Compensation Analyst

Reprinted with permission from the Management Association of Illinois’s Web site, www.hrsource.org. The article was posted December 2009.

[Editor’s note:  Results from the 2010 ALA-APA Salary Survey: Librarian—Public and Academic will be reported in the fall about compensation and reward strategies used in the nation’s libraries.]

Having trimmed workforces and decreased employee work hours, many organizations continue to struggle with cost containment challenges. The economy is forcing organizations to examine their compensation practices and make many difficult decisions. The goal is to stay competitive in the market, remain internally equitable, attract and engage key employees and remain affordable in the short and long-term.

Going into 2010, organizations should take a three-step approach to their compensation planning.

1. The first step for 2010 compensation planning is to review your organization’s compensation philosophy. Most organizations seek to match the market in terms of pay, but this may no longer be affordable or attainable for your organization. Ensure your philosophy matches your current business strategy, which may have changed due to the economic downturn. Re-examine your organization’s desired market position for base pay and total compensation.
2. Second, look at your total rewards package to see if you are offering a diverse and meaningful rewards package to your employees. Does your organization offer a generous health insurance package, but find employees would rather have the money in their paycheck? Do employees receive total rewards statements and understand the value of their total compensation package? Re-allocating dollars between compensation and benefits can increase employee satisfaction, without spending extra dollars. Also consider implementing non-cash rewards such as career development mentoring, workplace training and flexible work arrangements.
3. Third, make sure your organization continues to track market pay rates and always know how your organization compares to the market. The Management Association of Illinois’ September 2009 Economic Conditions Survey reported 20% of organizations reduced merit increases and 58% eliminated them entirely in 2009. Additionally, 22% reduced employee pay. If your organization was part of this group, you most likely have jobs now lagging the market in terms of pay.

If you are thinking of reinstating merit increases for 2010, there are special considerations to make. Be as generous as you can to individuals in key positions, top performing employees and employees in jobs that are typically hard to fill. If possible, make mid-year increases to bring employee pay back to market levels sooner. To speak with a compensation professional at The Management Association of Illinois about your 2010 compensation planning concerns, call 630-963-7600.

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