Our board of directors recently approved the creation of a new position, and I have to staff it quickly. I don’t want compensation to be a problem in bringing the right person in. How do I go about establishing an appropriate salary?
Pay can certainly be problematic when it comes to staffing a new position, especially if your organization is small, and this is not something you do very often. Here are some things you can do to help you decide what you want to pay for the right person.
1. Determine your compensation philosophy.
All organizations fall somewhere on the pay scale range. Some consciously use salary as a recruiting tool. If you decide to do this, you’re saying that you’re looking for people who are motivated by high earnings, and who will change jobs in order to pursue that motivation. You’re saying that you won’t let salary demands stop you from hiring the best person. Other firms don’t do this; they compete for talent on some other basis. This is a philosophical decision. Understanding whether or not you will use pay as a differentiator is an important first step.
2. Make the salary equitable.
There are two kinds of salary equity: internal equity and external equity. External equity implies that salaries in your organization need to fit in the job market in which you operate. There shouldn’t be a very big difference in salaries for case workers, for example, from one organization to another, unless the jobs are in different job markets. Gimli, Manitoba and Vancouver, B.C. are two different job markets. A salary that’s equitable (competitive) in Gimli may not be in Vancouver, even though an identical job may exist in both job markets.
Internal equity speaks to the size of the job relative to all other jobs in your organization. The relative ‘bigness’ of the position should, as a rule, command a salary that is a fit with the salaries assigned to smaller and bigger jobs.
3. Determine the pay range for the job.
You need to decide what’s the most you will pay for this position, no matter who the incumbent is, and what’s the least, again, no matter who the incumbent is. This can be a difficult task if you already have someone in mind for the position, so try and block out that person’s face when you make this determination. Bear in mind also that the maximum is a ceiling that the salary may not exceed regardless of how long the incumbent has been in the job and regardless of performance.
4. Remember total compensation.
The voluntary sector doesn’t normally have access to the variety of compensation levers that the private sector does. But don?t minimize the ways in which you compensate your employees beyond salary. These other forms of compensation may include:
- Health benefits
- Financial benefits other than salary
- Education subsidies
- Vacation and other leaves of absence
- Location (small community vs. big city, for example)
- Relocation/housing/remoteness allowances
- Flexible working conditions
- Parking
Don’t overlook the importance of these ‘extras’. Once I moved from an organization where employees paid for coffee to one where the coffee was employer-paid. Was I impressed! (I was young.) In any case, it’s not inconceivable that the value of these ‘extras’ may reach as high as 35% of salary! Feel free to communicate these things to candidates. Trading a 90-minute commute for a 10-minute walk may be very attractive to the right person at the right time.
One manager of my acquaintance used to brag about how he hired ‘bargains’ or ‘steals’. Hiring on the cheap is a compensation philosophy, but not one that I would recommend. After all, you usually get what you pay for.
One more point to consider: a salary is a reflection of the value of the job to the organization in its job market. It is not a reflection of performance. That’s the theory. In practice, each organization needs to decide how tightly to toe that line. And that’s another philosophical decision. An organization where I once worked was found at a point in time to be paying more than the salary range maximum to 25% of its employees! There were no bonuses, or commissions, or profit-sharing arrangements (sound familiar?), so managers were pushing salaries up in recognition of good performance. You can see where that leads. You could find yourself paying unwittingly generous salaries, attracting all the wrong people while pricing yourself out of the market.
In the final analysis, of course, you want the right person. And while all organizations have pay constraints (they just vary from sector to sector), I’d rather compromise them to get the right person than settle for a less than right person. The management challenge is to make the case for doing that.
To submit a question for a future column, or to comment on a previous one, please contact editor@charityvillage.com. No identifying information will appear in this column.
Tim Rutledge, Ph.D., is a veteran human resources consultant and publisher of Mattanie Press. You can contact him at tim_rutledge@sympatico.ca.
Disclaimer: Advice and recommendations are based on limited information provided and should be used as a guideline only. Neither the author nor CharityVillage.com make any warranty, express or implied, or assume any legal liability for accuracy, completeness, or usefulness of any information provided in whole or in part within this article.
