Inequity in Pay Scales--A Problem at CPA Firms

Source: Public Practice E-News

The following recap includes excerpts from the article cited below.

Salary compression means inequitable compensation. It can be created by the need for specialized talent, who may command compensation higher than employees above them. If the causes of compression are not addressed openly, and staff find out about pay differences, the situation can lead to resentment, depression, and disengagement. Staff may feel their tenure and experience are not valued.

One of the best solutions to the compression challenge is to establish a salary structure.

As tight as funds are, your firm should try to build increases into your annual budget. For example, if your firm can allot 3 percent for salary increases, split that amount into 2.5 percent for merit raises and 0.5 percent to alleviate compression.

Clear career paths with realistic advancement opportunities may persuade employees to tolerate lower pay for a while.

An option for those who are at the higher end of their pay scales is to give lump-sum amounts instead of salary increases. New staff may be offered hiring bonuses instead of higher starting salaries.

While many employers plan to increase pay this year, it isn't clear whether those adjustments will allow them to alleviate inequities.

Here are this year's compensation expectations from some major consulting firms:

• Hewitt Associates surveyed 555 large employers and found that base salary increases for salaried exempt, salaried nonexempt, and nonunion hourly employees are expected to be 2.5 percent in 2010.
• The median salary increase for employees, excluding those who will get no raise, will be 3 percent in 2010, according to Towers Perrin. The average overall salary increase for executives was forecast to be lower, at 2.5 percent.
• Sibson Consulting's research projected salary budget increases for exempt employees at 2.2 percent.
• Towers Perrin found that 10 percent of employers planned to increase 401(k) contributions in 2010. Among those who cut back their contributions during 2009, 35 percent of companies plan to increase them this year.

For the complete article, click here and read "Salary Compression: Will it Be Your Next Pay Challenge?"

From Public Practice E-News, Texas Society of Certified Public Accountants, February 2010, http://www.tscpa.org/.