The Role of Job Titles in Salary Compensation
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The Role of Job Titles in Salary Compensation

The amount of time spent on your salary compensation program depends on the number of job titles you have

In many companies, a title is tied to lots of aspects of salary compensation such as job descriptions, market research. If you’re going to match your job’s pay competitively, you need to match your jobs to survey titles. And you need to be able to do that accurately. Job titles affect salary administration and sometimes stock and bonus awards. In addition, the amount of time you spend on developing and maintaining your salary compensation program is in many cases depending on the number of job titles you have.

Job titles should be generic but descriptive. And there’s again a balance that has to take place here between describing the job but being generic enough that you can include more than one individual in this particular description and also match the titles up with survey titles. A good rule of thumb is that if employee skill sets overlap by about 70%, that’s the same job. In some cases, you can calculate a ratio of job titles to employees. An average-sized company should have about one to three but that may vary depending on how large your company is. Smaller companies have lower ratios meaning they have more titles to employees. And larger companies will have fewer job titles for the same number of employees. So, it depends upon the size and the type of company that you’re really talking about.

System Titles
It’s also possible to accommodate two job title systems. And some organizations go back and forth about what the real job title is and managers want to be very specific about what titles are. And you may want to be a bit more generic. It’s really possible to have two different titling systems. You can have what are called system titles. These are the titles that you actually enter into your HR system even if you’re keeping track of everything on Excel spreadsheets. But these are the titles that are descriptive but somewhat generic in nature. The working titles – for example, an HR expatriate record-keeper. You’re going to have a hard time matching that up in the marketplace. It doesn’t really tell you a lot about the job.

The way you can actually use these two titles is you have a system title, this is the one that all communications – when communication comes out from human resources, this is the title that you’re going to use. But for managers and employees, if they want to call somebody – use a different title like manager, IFD prototype development for example, do you really care that they have that on their business title?

You probably don’t. As long as they’re not misrepresenting themselves in terms of the authority that they have, it’s probably okay to let them use whatever title they want to on their business card but maintain a more generic kind of a title in your salary compensation and in your HR system.

Some balancing also has to take place in terms of just the levels of jobs that you might have in a job family for example. And if you think about it, career paths are very, very important to people. A lot of people would think salary compensation would be at the top of the list of what people really want. But frequently employees are more interested in the ability to gain new skills in advance. And to the extent that your company can actually do that thing which not very many companies do it well, I think you’ll take some pressure off of your salary compensation system.

Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Oliveri

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