Broad-Based Pay Guidance

Job Grades & Salary Ranges
Job Families & Career Ladders
Annual Bonus Plan Design

In the world of broad-based compensation (as opposed to Sales or Executive Compensation), plan developers help companies create internally equitable and externally competitive compensation structures for their employee population.  There is often one structure for non-exempt employees and a different structure for exempt employees (see FLSA). These compensation structures typically involve developing salary ranges, job grades, job families and career ladders. It may also include developing or revising annual incentive plans for broad employee populations. Let's look at each piece separately so you can understand what is and is not included and whether Prosperio may be of help.

JOB GRADES AND SALARY RANGES

Many organizations use job grades and salary ranges to ensure that titles, responsibilities and pay are aligned throughout the organization. The chief benefit from job grades is an understanding of which jobs are similar in terms of skills, education required, responsibilities, and scope across different departments. This ensures internal equity in pay and can help with career development, enabling employees to seek other opportunities that they are ready for in other departments. Without job grades and salary structures, managers tend to devolve to just offering whatever pay is needed to attract and retain employees and pay levels can quickly explode. At best, this can lead to resentment among employees when they realize there is extreme pay disparity based on nothing more than who one's boss is or one's ability to negotiate upon hire; at worst it can lead to a discrimination lawsuit. We worked with one organization that hired a brand-new employee with no experience (male) into the same position as an existing employee with 20 years of experience in the role (female) and set his salary at more than $20k a year higher than her salary. This was a lawsuit waiting to happen. Management didn't do it to be discriminatory - the new male employee simply “negotiated better” and the longer tenured female employee had never made much fuss about getting a raise. This doesn't make it safe from a legal perspective or fair from an equitable perspective, however. People in the same role should be paid the same (within a range to allow for variations in both experience and competence). Pay should be a function of their performance, not the personality of the person hired.

Prosperio has worked with several trucking organizations to develop a streamlined method for analyzing jobs (called job leveling) and setting up grades and salary structures for those jobs.  Outside of trucking companies, however, we would recommend that you reach out to Madell Consulting (http://madellconsulting.com/) as Moira and her team are much more experienced with job leveling and salary structures in a variety of industries.

What about job grades for sales reps?  Sales reps present a unique challenge for HR professionals trying to "slot them into" an existing structure because they often have very small (or non-existent) salaries, which is one of the primary factors used to normalize jobs across departments.  For this reason, sales jobs are usually managed under a different structure entirely, with "S" code grades (vs "A", "P" or "M" grades).  This enables HR to account for using target total cash vs. salary as the job value determinant. Whatever your industry, Prosperio can help you figure out the best approach to slotting sales jobs into an already defined job structure.

JOB FAMILIES AND CAREER LADDERS

A side benefit of a well-defined job structure is that you now have a way to group roles into job families. This provides a career ladder for your employees. This will help you attract and retain highly motivated employees who want to stay with an organization for a long time. This is because they will be able to visualize a future path where they can continue being challenged, grow professionally, and see their pay increase.

This work can be as simple or as complex as needed based on what level of detail you would like in your career levels. Often, Prosperio helps companies understand career paths within a closely knit group (e.g., operations in a trucking company, warehouse jobs, or sales and operations within freight brokers) and develops a quick and easy job structure (Sales Rep 1, Sales Rep 2, Sales Rep 3) along with qualifications for promotion from one level to another.

Note that we rarely recommend solely using production (or any other purely objective) metric for promotion from one level to another. The basic volume of work done for the job should be a minimum requirement to open the door to promotion, but not a guarantee that they will walk through that door. We often tell clients to consider this the "we don't promote jerks" clause in the employment agreement. If they are obnoxious, have poor attendance, don't complete their paperwork or any host of other common behaviors found among top producers, they SHOULD NOT be promoted, even if they are a top sales rep. If your incentive plan is done properly, and aligned with job levels, then this lack of promotion will have a detrimental financial impact on the individual, thus giving them extra motivation to improve the quality of their work, not just the quantity.

ANNUAL BONUS PLANS

Many organizations use annual bonus plans to provide additional pay, usually phrased as a percentage of base salary. These plans are usually quite structured, but organizations sometimes need help taking a decentralized historical approach and applying more focus to it, to ensure role consistency and sensible budget management throughout the organization.

Featured

Freight Broker Organization Structures Part 2: Split Model

In the previous article we looked at the Cradle to Grave organization structure and the common compensation approaches used to go along with those roles. Now we will look at the Split Model, the roles commonly found in this model, and how they should be paid (spoiler…paying everyone a commission (% of the load), while common, is suboptimal).

Freight Broker Organization Structures – Part 1: Cradle to Grave

I’ve been working with freight brokers for over 15 years now, helping them revise their organization structure and align their compensation plans to support the goals of their business. While the number of different possible organization structures is almost limitless, there are really only two approaches, with some variations on each: Cradle to Grave and Split Structure. This article deals with the first; we will address the Split Structure in the next article.

Commission vs Goal-Based Incentives Part 4: Preparing for Goal Based Incentives

We’ve been working our way through the various ways you can calculate incentive pay and have covered quite a few so far. As a recap, here are the various methods and the articles you can reference to find the content on that method.

Commission vs Goal-Based Incentives Part 3: Retroactive vs Progressive

A better approach, though I admit it’s harder to explain, is the progressive rate. This pays the higher commission rate only on the dollars within the tier…NOT back to previous tiers or the first dollar. This allows you to get a much smoother payout curve so there is now very little reason to cheat the plan.

Commissions vs Goal-Based Incentives Part 2: Draws vs Seat Cost

On the commission side of our graph (see the article from September 2023), we are moving toward using some sort of “goal” to affect payout, rather than simply paying a straight commission from the first dollar. One of the ways companies initially think of doing this is by deducting the salary or a “seat cost” from the commission calculation. This ensures that commissions are not paid until the employee as covered their costs to the organization, which is usually an approach that CFO’s like… a lot. And it can have it’s place in an organization, particularly when it is just starting up. However, it does have some downsides.

Commission vs Goal-Based Incentives Part 1

In previous articles we looked at different organization structure such as Cradle to Grave or Split model organizations and I referenced the need to understand different compensation approaches when dealing with split roles so that you can do something OTHER than simply paying everyone a smaller and smaller percentage of the GM$. This article will be the first in a series that will go into detail on these different approaches and how you can learn to select the best one for your various roles.

The In's and Out's of Successful Recruiting and Compensation - June 2023

In this webinar, Beth previews key topics covered for her upcoming training and answers questions from the audience. Learn more strategies to recruit and retain top talent and how to shape your organizational structure to fit your compensation needs.

Introduction to Brokerage Organization Structures and Compensation Methods - March 2023

At the TIA’s recent Lunch and Learn, Beth gave a quick introduction to the most common Freight Brokerage organization structures, compensation methods, and the pros and cons of each.

Beth Carroll 2021 OTA Annual Conference Presentation Video

The Ohio Trucking Association recently hosted their 2021 OTA Annual Conference, presented by Pilot Company, this week in Columbus. Over 160 in-person and virtual attendees joined exhibitors and sponsors for the event. The conference featured outstanding programming, opportunities to network and of course featured speakers, including Beth Carroll.

OTA On The Air - Episode #24 - Taming the Compensation Monster

Earlier this month Beth Carroll was a guest on an episode of OTA on the Air with President & CEO Tom Balzer. For anyone unfamiliar, OTA on the Air features industry experts and thought leaders who provide updates on the regulatory, legislative and compliance environment. Beth will also be one of the Keynote Speakers at this year’s OTA Annual Conference in September.

Common Project Types

EXPRESS PROJECT

When your needs span several roles, but you have only a few people, our Express Project is your best bet. We’ll spend time with you and your senior leaders understanding your business and working alongside you to develop the plans as quickly as possible. We’ve successfully executed hundreds engagements for small to medium-sized organizations just like yours (typically 5 to 50 employees).

An Express Incentive Project includes:
• Strategy and structure assessment
• Compensation design for up to 5 roles
• Includes salary bands and incentives
• Market benchmarking of pay levels for those roles
• Plan documentation
• Pro-forma economic modeling (minimal historical testing)
• Roll-out guidance
• Development of an incentive calculator via Excel
• Additional automation possible
• 3 months of post-project support
• Project turnaround is approximately 4-6 weeks

1P1P PROJECT: ONE PERSON, ONE PLAN

A 1P1P Project is great for start-ups and small companies! It is our smallest project size, but this makes it ideal for those who need a single plan immediately.

The 1P1P Project includes:
• All plan design details
• Basic market pricing
• Economic testing
• Incentive plan documentation
• Outlining of goals and expectations
• Assessment of business goals and…
• Assessment of impact of this role on those goals
• Role clarification
• Development of an incentive calculator via Excel
• Additional automation possible
• 3 months of post-project support
• Project turnaround is approximately 2-3 weeks

FULL-SERVICE COMPENSATION PROJECT

When you need to clarify your business objectives, streamline your organization structure, improve employee accountabilities, AND want to develop plans for several interconnected roles, a Full-Service Compensation Project does it all! This project features multiple virtual meetings with our developers and your design team and is often selected by medium-sized to larger companies, as well as small companies undergoing major transformations.

A Full Service Compensation Project includes:
• Business goal clarification
• Incentive compensation plan design for all roles in scope
• Salary bands suitable for job postings
• Development of career levels for highly populated roles
• Employee change management
• Extensive pro-forma and historical economic modeling
• Goal-setting sharpening
• Market benchmarking of pay levels for all roles in scope
• Roll-out support and guidance
• Organization redesign and role change/definition
• 12 months post-project support
• Detailed and automated Excel calculator
• Additional automation possible
• Possible introduction to one of our EIM vendor partners
• With integration assistance into their platform
• Turnaround time is at least 90 days
• May vary depending on size and magnitude of change