A software company with approximately 600 employees across a dozen locations was experiencing challenges with the competitiveness of their base and variable pay practices. Initially a fast growth company, the business had reached a stable revenue stream and size of staff, while the changing market demand for technical talent over the period of growth resulted in disparities in compensation which ran counter to their pay strategy. With staff salaries being the company’s main expense, they needed an assessment of compensation competitiveness — as well as an ongoing benchmarking approach to keep them on track with market pay practices. Of particular concern was the competitiveness of the technical staff members who are instrumental to the development of products and solutions for the company’s customers.
An in-depth review of the organization’s structure and technical jobs took place, as well as a comparison to the relevant market. The company’s existing job structure had not been aligned to adequately reflect the most senior levels of jobs (and compensation) that exist in the marketplace for software professionals.
The consequent practice of positioning senior talent into lower-than-market pay bands was causing salary compression and related pay equity issues. Through identifying and prioritizing the issues and concerns with senior management and the HR team, a new market-based job leveling structure was established. The study also confirmed that variable compensation practices were not being targeted correctly for the most senior individual contributor technical staff. The project team benchmarked and developed salary ranges and incentive bonus targets using salary surveys specifically geared to the high tech industry. Job grades and salary bands that overlapped management levels (“dual track”) were also implemented to ensure the highest level of technical talent would be competitively compensated.
It is not uncommon for fast growing organizations to require a “reset” of their compensation practices once they reach a more stable organizational structure and headcount, or even following a period of inattention to the compensation structure. This company lacked any market benchmarking process to determine a competitive range of pay and bonuses, as well as some fundamental job grading structure to provide titling flexibility yet maintain a competitive pay program for the long term.
The new program allows managers to easily track the progression of junior- to consulting-level software engineers and programmers against an annually updated market-based salary curve. The establishment of new job leveling guidance provides a high level of confidence that employees are fairly and equitably compensated. Incentive targets are clearly tied to market for certain technical roles that have leverage in their line of business. In addition, geographic pay differences were analyzed for the various work locations, and the new location-based adjustment guidelines are used by HR.