HR101-Compensation

When most people think of compensation the 1st place they look is at their paycheck. But there’s more to it than that and in this next ‘HR101’ post compensation is explored more fully by our guest contributor Darcy Dees. Darcy provides a practical overview, its impact on our organizations, and why HR needs to get this right.
The stage is your Darcy!


First off, please introduce yourself and let the readers know what you do?
My name is Darcy Dees, and I am a Certified Compensation Professional (CCP). I have been working for Rock Bottom Restaurants, Inc. for about 10 years now. My responsibilities include compensation programs, performance management, HR analysis, and HR system maintenance. I also blog at the Compensation Café with a group of very talented Compensation professionals. Visit us daily for great compensation related information.
Compensation is more than the salaries we give to employees, correct?
Absolutely. Depending on how each individual employer defines compensation, it can include base pay; various types of variable pay such as cash, stock, or other rewards; recognition; and some types of benefits programs. The goal for compensation professionals is really finding a way to pay employees that motivates the best performance while simultaneously being fiscally responsible for the business.

Generally speaking, how much of an organization’s budget is linked to its compensation program? Why is this important for people, particularly HR, to know?

It depends on the type of industry, in the restaurant/retail industry we see anywhere from about 30% to 50% of the budget for compensation and related costs. Some types of industries that aren’t as labor intensive don’t have costs quite this high, but it is always a large expense for any company. This obviously makes it a cost that is very important to the financial health of the company, and the money must be spent in a responsible manner.

Who owns comp-HR, Finance, or the CEO?

Compensation is an HR function and must be integrated with other HR functions. However, it really does cross over to other disciplines. I report officially to the SVP of HR, but I also spend a great deal of time with our CFO. Particularly when looking at equity compensation (stock) I have to work very closely with the Finance department. I personally think one of the best ways to make a real difference in Compensation is to have strong working relationships with both HR and Finance. Note to readers: this is the not the first HR pro to mention this (look here and here) so I would make a sincere and sustained effort to follow this advice.

How does a well crafted comp plan help companies?

Ideally compensation plans align employee’s efforts with required business results. For example, if a business needs to improve sales by 5%, employees are rewarded through a compensation plan for behaviors that result in sales improvements.

Can you describe some of the key differences bet. the compensation needs of a small business and larger corporations?

Large businesses frequently need their employees to be specialists, while smaller businesses frequently have a need for generalist employees. So what you’ll sometimes see in a small business is an employee who is asked to wear multiple hats and this can be difficult to match to market data and use position-based pay. Smaller businesses may take more of a pay for the person approach where the employee who can do the most different things in the office makes more money. Large businesses more often use market data to pay their specialist employees a market competitive salary package.

What is the link between compensation and Total Rewards?

Compensation is piece of Total Rewards. Total Rewards needs to viewed holistically, and compensation needs to work in conjunction with development, performance management, benefits, etc. to be successful. It’s important to have a grasp of the how all of these areas work together to create a value proposition for the employee.

What legal considerations must HR pros be aware of when it comes to comp?

Compensation doesn’t have as many hard and fast rules as other areas of HR, but there are still both federal and state statutes that we need to be aware of. The primary federal regulations that impact how we pay people are the Fair Labor Standards Act; Equal Pay Act; Civil Rights Act of 1964, Title VII; Age Discrimination in Employment Act; Americans with Disabilities Act; National Labor Relations Act; and more recently legislation such as the Lilly Ledbetter Fair Pay Act. It’s also important to understand state statues where you do business as they can differ from federal statutes and you must generally follow the statute that is most favorable for employees.

What are some of the most common mistakes organizations make when it comes to comp? How can they be avoided?

One of the biggies is a poorly designed incentive program. If an incentive (a.k.a. “bonus”) program doesn’t align employee behavior with business needs, there is no positive return on investment, and it can actually induce behaviors that are harmful to the business. For example, if a company simply pays for improved profits, you may inadvertently cause people to participate in unscrupulous activities that could hurt the business long-term. When only the outcome is measured you could have people refusing to spend money for maintenance and upkeep, or making sales at the expense of the customer. We need to understand what behaviors we’ll cause when creating an incentive program.
Another is handing out titles when we can’t give pay. This creates all sorts of issues down the road. Here’s a good post by my fellow Compensation Café blogger Chuck that discusses some of the pitfalls that can occur with title inflation.


What are some good resources for comp-related information, both online and off?

WorldAtWork is a really good source for compensation information. One of the things I like best is the Public Policy Perceptions blog that tracks legislative updates. This allows me to stay current on legislation that could impact our business. WorldAtWork does require a membership fee, but it is very reasonable for all that the membership provides.
There are also several good blogs out there that address compensation issues such as:
Offline I belong to my local compensation association as well as a national industry association. Both of these memberships provide invaluable resources not only in presentations and newsletters, but also in networking with other professionals who are dealing with many of the same issues as my company.
Note: The opinions expressed here are the personal opinions of Darcy Dees. Content published here is not monitored or approved by Rock Bottom Restaurants, Inc. before it is posted and does not necessarily represent the views and opinions of Rock Bottom Restaurants, Inc.


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