Managing Compensation in a Down Economy Demands Verifiable Data, says KnowledgePay

Layoffs have been a traditional corporate response in navigating serious economic downturns. Organizations now are increasingly using salary freezes, and in an unorthodox turn, more are considering and implementing pay cuts.

What was previously out of the question for companies, employees and unions is now on the table. Yet companies considering reductions in salaries may be begging employee questions theyÇd rather not faceòwhatÇs the actual basis for my pay? How does it compare to the market?

Across-the-board cuts can be egalitarian, like the recent Acco BrandsÇ 47 percent reduction. Yet for some companies, it can often reveal a surprising level of Ñguesstimatingâ according to KnowledgePay, a Chicago-area based provider of enterprise compensation management software.

ÑMany corporations base compensation decisions on dispersed data, not sufficiently integrated to provide a clear basis for individual employee pay levels,â said Chris Kelley, chief executive officer. ÑNo one wants their salary cut, but there are legitimate reasons why a company may consider reducing an individualÇs or a groupÇs salary over another.â

While an organization may be paying their marketing group a salary commensurate with local competitors, they may be underpaying their IT group, Kelley explained. Across-the-board pay reductions can exacerbate those already out-of-balance levels. Instead, companies want to make intelligent pay reductions based on verifiable data.

Compensation takes into consideration not only job titles and responsibilities, but also individualsÇ experience, seniority and performance, along with pay levels in the market. An employer may pay their engineer in Silicon Valley more than one based in rural Mississippi, but may also consider their relative value based on the scope of their role and their future potential.

In addition, companies need to consider what it will mean to replace the individual employee when economic conditions improve. Laying off an individual or a group not only immediately removes their expenses à it also eliminates their production. After a rehire, it might be years for the performance to reach that of the individual in that position.

KnowledgePayÇs new compensation software lets corporations integrate into a single environment all sources of compensation dataò independent market salary surveys, internal job analyses, job descriptions, organizational relationships, demographics, and other information about jobs and pay.

Compensation professionals can make better decisions with easy access to information and analytic tools. They can also provide employees verified information in context regarding any changes in pay.