I can still hear the echoes of Tom Cruise shouting out ‘show me the money’ from the 1996 movie Jerry Maguire or Dolly Parton singing her lively 1980’s song ‘Working 9 to 5.’ We all need money to provide the essentials for things such as food, shelter, and clothing.
One of the biggest challenges for an employer is determining the right amount of pay. Compensation (or pay) strategies will vary, and as this topic is rather complex I’ll aim to provide you with a few insights as a starting point only.
How does my employer decide how much I should get paid?
Employers typically consider some, or all, of these factors in designing their pay structures:
- At minimum, they must ensure they are complying with government regulations such as the Employment Standards Act (for provincially regulated employers) and the Canadian Labour Code (federally regulated employers). PEI currently has the highest minimum wage in Atlantic Canada, at $11 per hour.
- They examine the availability of workers with the required skills and analyze what other companies pay for similar jobs. The purpose is to examine the external labour market to determine a “competitive set.” Based on these factors, the company will choose to pay higher, lower, or the same amount for the position. This typically only takes into consideration base pay and excludes other forms of possible compensation such as bonuses, shares, and benefits.
- They base compensation according to a prescribed classification system. Classifications are based on detailed job evaluations to determine the value of a job. Larger organizations, and often unionized workplaces, will adhere to a classification system to determine pay.
- They will assess their organization’s future plans, the performance of the organization, the reputation of the organization, geography, and additional benefits.
- And finally, great companies ensure their compensation is internally equitable, fair, and free from discrimination (such as age, gender, race, and disability).
Determining an employee’s compensation is not a simple task. It is equally important for you to understand the value of your skills so you can participate in the conversation with your employer. Better workplaces are a shared responsibility!
About Detry Carragher
As a Chartered Professional in Human Resources (CPHR), Detry Carragher has led Carvo Group since 2004. The team is consulted regularly by employers, industry groups, and employees from across Atlantic Canada on a range of employment-related topics. Detry’s work extends to several of Canada’s Top 100 Employers and Fortune 500 technology companies, and she has contributed her insights on CBC, CTV, and the national HR Reporter publication. Detry was recently awarded the prestigious HR Award of Excellence, representing Nova Scotia and Prince Edward Island.
She has offered to share her HR insights with Employment Journey readers. Read more here.
If you have a specific question you would like featured in the HR Insights column, or you are interested in expanding your skills in human resources, email [email protected]. Visit www.carvogroup.com.