Taking a Salary System Health Check

Maintaining an effective salary system is a challenging task that requires ongoing diligence and attention to day to day decision making along with a continued review of the outcomes.  In many cases, we find that clients struggle to step back from routine to take a look at the overall health of their salary systems and can often miss opportunities to self-correct before issues leading to employee dissatisfaction have become embedded and hard to rectify without a major overhaul.

Below we’ve shared insight into our approach to conducting a comprehensive salary system health check.  Committing to the process needn’t be a daunting prospect and the key is to establish a methodical and repeatable approach that can be undertaken on a regular basis to provide leaders and decision-makers with valuable insight to calibrate their thinking and future decisions on employee salaries.

Objectives and Design Principles

Before launching into your review it’s imperative to first revisit the original design principles to ensure a common and consistent understanding of how the system is intended to operate and the outcomes it is seeking to deliver.  Often these design concepts have been lost to the memory, particularly in cases where the salary system was designed and implemented many years ago as is still the case for many Councils.

If this is the case for your organisation you may find it helpful to review our guide to developing effective salary systems and consider how well your system stacks up against the common design considerations.  As an alternative, there could be value in conducting a review workshop with your senior leaders to establish a set of criteria against which to test the efficacy of the current arrangements.

For a greater insight to the best practice principles click below for further reading.

Best Practice Salary System Design

Job Evaluation and Internal Relativities

The first element of your salary system that likely requires a health check relates to the grade or band structure itself.  Before considering the salaries on offer for roles at any given level it’s important to assess how well your organisation is doing in regard to the placement of roles within the structure.  In short, if these foundations are not well set it will be very difficult to demonstrate fairness in the sense of roles of a similar size and complexity being offered the same rates of pay.

A little history can help here.  Based on guidance provided to practitioners back in the 1990s, most councils developed a salary structure covering 7, 14 or 21 grades (each with an in-principle alignment to the Bands/Levels of the Award).  The Parties to the Award agreed that, in ‘job size’ terms at least, several Bands/Levels overlap – for example, B1/L4 and B2/L1 are considered the same size.  In practice, however, difficulties arose in several ways when assigning roles to the appropriate grade; what if a job meets a mixture of skill descriptors at different Bands/Levels?  How do we differentiate requirements for the grades within the Bands/Levels (in case of >7 grades)?

Hence, formal job evaluation took on a new importance….

To provide some context for the expected alignment of common roles to the Bands/Levels of the Award, the table below sets out some examples based on our findings from over 20 years supporting the industry in relation to job evaluation.

The examples below are well established across the industry and offer a reasonable reference as to where roles might sit in relation to the Award Bands/Levels. Clearly, the actual positioning of roles at your council requires an evaluation as the specific skills, experience, qualifications and responsibilities of the role must be properly assessed rather than relying on job titles alone – you can read more about best practice job evaluation by clicking below or contact us to explore the Mastertek Job Evaluation System (MJES),

Band Level Example Roles
Operational Band 1 Level 1 Apprentices, Trainees
Operational Band 1 Level 2 Cleaner, Kitchen Assistant, Labourer (not qualified)
Operational Band 1 Level 3 Plant Operator, Cook, Labourer
Operational Band 1 Level 4 Plant Operators (Large excavators, grader operators final finish)
Administrative/Technical/Trades Band 2 Level 1 Arborist (Qualified), Payroll Officer, Tradesperson
Administrative/Technical/Trades Band 2 Level 2 Accounting Officer, Leading Hand (Tradesperson)
Administrative/Technical/Trades Band 2 Level 3 Fire Control Officer, Parks Supervisor
Professional/Specialist Band 3 Level 1 HR Officer, Community Services Staff
Professional/Specialist Band 3 Level 2 Accountant, Engineer, Surveyor
Professional/Specialist Band 3 Level 3 Co-ordinators, Senior Professionals
Professional/Specialist Band 3 Level 4 Managers, Executive Managers
Executive Band Directors

Market Benchmarking

Having reviewed the placement of roles within the salary structure you can now begin to assess the market competitiveness of the salary ranges on offer.

Your start point for market benchmarking analysis will be selecting data from a robust source, with good coverage of the roles in your organisation and the labour markets that you compete in is as complicated as it needs to be.  Find out more about the Mastertek Local Government Remuneration Database here.

You’ll need to allow sufficient time to complete a job matching process as the basis for comparing the salaries of you people to the market.  We advocate taking a ‘job content’ based approach, where your roles are matched to the generic role descriptions covered by the survey, rather than matching based on job size.  This is helpful for a couple of reasons, most notably that we get a more direct view of the market for specific skills rather than aggregated data that doesn’t relate to any specific role or skill set.

There are two ways that we recommend you seek to analyse market competitiveness.   the first is to look at data on a role-by-role and job family basis.  This method provides the clearest insight as to how well you’re meeting market expectations as the markets for different skills and experience, even for those roles considered to be similar in job size terms, can be quite different based on the availability or lack of it.

The second method of market benchmarking we recommend is to aggregate your market data based on job grade.  This approach means you can then test your salary ranges against the general trends for all roles at any given grade.  Here your key considerations include determining a target market positioning so that you have a clear point of comparison to your market data, as well as remembering to test the ranges against the Award minimum rates for compliance pourposes.

Salary Progression Arrangements

A further critical element of your salary system, and therefore your salary system health check, are the salary progression policies and practices.  The Award intends for salary progression to support an underlying principle of focussing on productivity and efficiency improvements to fund future wage increases.  In our experience many systems are failing to deliver on these objectives for the following typical reasons:

  • Salary progression decisions in many cases have become akin to annual increments with little or no rigour applied in determining whether the increase is warranted in regard to a genuine (and applied) increase in capability/capacity
  • A net result of the more ‘tick and flick’ type approach has been staff ‘capping out’ in large proportions, which is exacerbated by generally low turnover levels and limited/slow career progression.
  • Even in more contemporarily designed systems that aim to align progression with capability frameworks, a lack of flexibility in job design practices means individuals are limited in their ability to ‘grow’ their contribution beyond the definition of their role without triggering a re-evaluation and potential recruitment process (which would lead to an increase in salary level if the role is assigned to a higher grade).

To test how well your progression arrangements are working you’ll need to come back to the design principles and intentions that we revisited at the start of the process.  One of the tests you might look to apply is cross-referencing individual salary levels with performance ratings to assess whether higher performers are being appropriately rewarded.  Depending on your design principles you may look to apply additional tests such as undertaking a skills audit to assess whether individuals are progressing appropriately within their salary range.

Salary Budgets and System Maintenance

The last step in completing a comprehensive salary system health check is to review the maintenance processes your organisation uses to keep the system in shape.  Probably the main consideration in this regard is the budgeting process which will have direct implications for the management of your salary ranges.  Our own market analysis continues to highlight that the salary expectations of candidates are increasing at a faster rate than the vast majority of Councils salary ranges are being adjusted each year.

This is a result of the typical practice of adjusting salary ranges uniformly at the rate of the negotiated Award increase.  Whilst this reflects a minimum requirement it does not consider the impact of salary progression or broader challenges such as skills shortages and the impact they have on salary expectations.  By considering your salary budgeting process in the context of your market benchmarking activities, as well as your overarching design objectives, you may find there is a business case for additional investment in the salary system in any given year.

Need more help with your salary system review?
Contact us to learn more about our salary system health check process.

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