It seems the economy is finally on the rebound and it’s not just pundit hawking opinions on cable TV.  While new workplace statistics are providing a positive economic outlook, there are also some indications in a big shift within the job market.

CareerBuilder reports that more than one-third of employers expect to add full-time employees in 2015, the best outlook since 2006 and that salary increases are on the rise with projections at an average three percent increase for 2015. In addition, Jobvite reports that 70 percent of the workforce is either actively looking for another job or is open to hearing about a new opportunity. For those of my colleagues that work with or for a federal government contractor, expect increased scrutiny on your compensation from OFCCP during future audits, the upcoming Equal Pay Report and the soon-to-be-released Final Rule on Non-Retaliation for Disclosure for Compensation Information.

So really, what does this all mean? For the better part of the past decade, employees and employers alike have been treading water simply waiting for the economy to improve. Now that things are finally looking up, employees are looking for greener pastures (pun intended).

As the factors listed above come into play, it’s safe to say that it’s a good time to create a compensation plan or, if you already have a plan, to update it to prepare your organization for what may be coming down the road. The benefits of creating or updating your compensation plan allows an organization to:

  • Be knowledgeable about industry best practices in compensation,
  • Retain key employees,
  • Continue to attract top talent,
  • Maintain internal equity,
  • Ensure legal compliance,
  • Promote transparency and understanding about pay, and
  • Establish a platform for career paths and expanded growth opportunities for all staff.

These plans can range from very basic, to extremely complex. For smaller organizations, plan development typically is a collaboration between senior leadership and a compensation consultant. Collectively, they determine the organization’s compensation philosophy, form opinions about the current state of compensation, and evaluate a desired market position. Individual data is then collected for each employee, included in the plan and the market rate for each job is calculated before salary adjustments.

But don’t stop there! Often organizations expand tasks to include additional plan components such as job families, job levels with associated job titles, one or more salary structures, training, and a communication plan

Job families represent the functional areas in which employees work, such as software developer, accountant, engineering technician, and project manager. The job levels within each family normally include both management and non-management. Also, organizations need to ensure they are always looking to the future, so it’s important that titles match the roles outlined in each family and levels are added beyond those needed for current employees which will provide a road map for employees’ careers.

Following industry-specific, geographical and general market pricing, the next step is to develop one or more salary structures with grades and grade ranges. Each job is mapped to the appropriate grade and range based upon market pricing results. A classification structure is created to summarize the mapping results and to serve as an easy reference for managers who will be using the plan.

Based upon available data, it’s important to provisionally map each employee to a job family and level. This step is typically followed by manager meetings to discuss, revise or confirm these assignments.

As numerous studies have shown, companies that take the time to train managers and supervisors about the company’s compensation plan before rolling the plan out are much more successful. Managers and supervisors must understand how the structure was developed and their individual roles in administering it.

The final step is to communicate the new compensation plan with the entire staff with unique messaging for each employee level. Transparency about pay carries a lot of weight with today’s employees, especially millennials who are keen to understand how their pay is determined and what they need to do to advance.

Other plan output may include classification guides, job descriptions, career paths, and compensation policies and procedures, but we’ll address those more detailed plans at a future date.

So don’t rest on your laurel while you celebrate the rebounding economy, leverage this positive momentum to review your compensation practices.