Universal Compensable Factors, Hay Factors and Dimensions

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Universal Compensable Factors, Hay Factors and Dimensions

UNIVERSAL COMPENSABLE FACTORS
Compensable factors simply refer to the factors of a job for which a company is willing to pay. Different types of job may contain different compensable factors. But there are Universal Compensable Factors that exist in almost any jobs we see around. As you may know, identifying compensable factors is a crucial step in job evaluation process. There are 4 universal compensable factors i.e. Skills, Responsibilities, Efforts and Working Conditions. In this post, I will go through each of the universal compensable factors and will elaborate the list (Note: it is not an exhaustive list):

1. Skills:

• Technical skills and certification
• Work experience
• Verbal and written skills
• Problem solving skills
• Education
• Interpersonal skills e.g. leadership skills etc.

2. Responsibilities:

• Managerial responsibilities
• Impact on end results
• Financial responsibilities
• Scope of the job
• Impact of absence

3. Efforts:

• Complexity of tasks
• Diversity of tasks
• Creative and analytical thinking requirements
• Availability of asistance

4. Working Conditions:

• Exposure to potential hazards/health risks
• Remote location
• Extent to deal with VUCA (a situation characterized by Volatility, Uncertainty, Complexity, Ambiguity)

The above are commonly known as Universal Compensable Factors.
Yet, various commercial organizations have introduced their own set of compensable factors.

HAY FACTORS AND DIMENSIONS (KORN FERRY)
One of them was the Hay Group who developed the "Hay Guide Chart". Hay is now part of Korn Ferry, hence the charts are now also referred to as: "Korn Ferry Hay Guide Charts". The Guide Chart Profile Method (their proprietary point-factor job evaluation system) starts with 3 factors (each sub-divided into "dimensions"), briefly summarized below:

1. Accountability: Value each role adds to the organization.
   
   • Freedom to act
   • Magnitude
   • Impact
2. Problem Solving: Challenges that need to overcome in order to deliver that value
   
   • Thinking Environment
   • Thinking Challenge
3. Know-how: Knowledge, Skills, Experience required to make all these happen.
   
   • Practical and technical knowledge
   • Planning and organising skills
   • Communicating and influencing skills

I tried to make the list a comprehensive one by integrating lots of articles, books, and other sources. I hope it will be helpful. Will be happy to see your reactions!

Sources:
Jeff Stinson (2012), "A Practical Guide to Human Resources Management", Page:101-102
Jeffrey A. Mello (2014), "Strategic Human Resource Management", Cengage Learning, Page:495
https://hr-guide.com/data/G413.htm
http://www.payequity.gov.on.ca/en/DocsEN/Minikit_EN.pdf
https://www.eeoc.gov/eeoc/publications/fs-epa.cfm
https://www.youtube.com/watch?v=dBfcWcQWJbg
https://www.youtube.com/watch?v=L07rWAQJAoY
https://uwaterloo.ca/human-resources/support-managers/compensation/hay-evaluation-method
https://en.wikipedia.org/wiki/Job_evaluation
https://en.wikipedia.org/wiki/Hay_Guide_Chart.

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		2 David Wilson Manager, Canada
	Developing Compensable Factors Hi Munadil Shafat, I agree with your list of the four pay equity categories. However, the factors within each category will vary from country to country and organization to organization. As an example, some plans do not use education and experience, but will use knowledge. The Hay Plan typically includes Working Conditions as a fourth category. The hard part in developing compensable factors is identifying the number of degrees within each factor, as well as the applicable degree definitions and number of points. The plans need to ensure the factor weights and degree points are properly calibrated and weighted. Some plans used by employers and their unions have not ensured the factor weights are fairly and consistently weighted. As a result, the plans do not provide equal pay for work of equal value. Compensation is also driven by the number of pay ranges or grids, band widths, weighted pay lines and market data, not to mention male and female pay lines. If you enter into the work of compensation management and job evaluation, you will find there is lots to learn. Thanks for your posting. I look forward to your response.

		0 Munadil Shafat Student (MBA), Bangladesh
	Adaptive Compensation Factors @David Wilson: Sorry for the late response. I completely agree with you on the points you mentioned about the universal compensable factors. Designing a "competitive" compensation is challenging but at the same time rewarding. Approaching that with compensable factors I think is a very practical way to start tackling the challenge. I got interested into the topic as I was wondering how to design a pay scale for a charity. But I have found the know-how required is very massive. As I have just started learning on this topic, I will appreciate any practical know-how you have on this essential organizational practice.

		2 David Wilson Manager, Canada
	Practical Know-How on Developing Compensable Factors Hi Munadil: There are lots of books, but sometimes the theory can be hard to apply. The system should be designed with organizational support. You can adapt a system used by a similar organization. Depending upon the size and complexity of the organization (more than 100 employees), you may want to use a point factor system with 6-12 factors. If you have a smaller and more homogenous organization, you may want to use a simpler system. Once you have determined the factors, you need to identify (e.g., calibrate) the factor weights. The factor weighting should be the same at both the bottom and top. Once you have the factors weighted and the points developed for each degree, you can rate every job. Try using a 1:10 (maximum of 1000 points) to 1:12 (maximum of 1200 points) ratio. After you have rated all of the jobs, you then need to conduct a market survey. With the survey results, you can develop internal and external (market) pay lines. The final step is to create pay ranges (using a width of 50 to 60 points). The market survey needs to be properly weighted (use all of the jobs) and data should use the weighted market mean (e.g., 50th percentile). Before you start down this path, you should ensure the organization is willing to cover the costs and they know that they need to communicate, communicate and communicate. I would also advise you that any system will take time to implement. You should take a look at the materials on the website for the Ontario Pay Equity Commission (http://www.payequity. Gov. On. Ca/Pages/default.aspx). Finally, you could also consider using an online system developed by companies, such as Encompassing Visions (https://encv.com/). It's not a simple process. Do you have a professor to support your efforts? Remember, you are developing a job evaluation and compensation system. You will also need to create the appropriate policies, processes and procedures to ensure a fair and uniform application of the systems used. Do you have professor to assist? Good luck! Regards, David.

		1 Munadil Shafat Student (MBA), Bangladesh
	Professor Assistance on Implementing a Pay Structure @David Wilson: The know-how you shared is wonderful. I'm very grateful that you took the time to share these with me. About your question, I have no professor to help in my effort. To be clear, I'm no...

		2 David Wilson Manager, Canada
	Try a Local or National HR Compensation Professional @Munadil Shafat: Perhaps you can find a local or national company where you live and ask one of their HR "compensation" professionals to guide your efforts. Many organizations and professionals will b...