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Setting salary
structures is an analysis exercise completed annually by most
organizations. These structures set the means by which both
internal equity and external competitiveness are maintained throughout an
entire organization. Determining how much a company should pay an employee in
terms of base salary is a decision with far-reaching total compensation
and benefit impact. Total compensationexpenditures are often the
greatest single expense category for an organization.
Base salary philosophy is the heart of benefit and compensation strategy and
management. Most organizations' benefit plans and coverages are affected
by the salary level decision; almost all benefit plans are nationwide. For
example, Salary Reduction plans (125 cafeteria plans reportable on Form
5500s) are benefit plans with which every benefit consultant/agent work.
Shaping these plans so that individuals can realize sufficient take home
pay is essential. 401(k) and defined benefit plans leverage off the salary
decision. Most pension plans now utilize a "final years' average" salary
base to calculate benefits. Salary levels set the values for a host of
coverages: group life, accidental death and dismemberment, long term
disability, workers compensation, and short term disability are all tied
directly to the salary levels paid to employees (salary levels that may be
local in nature, but with national benefit plans applied).
Failure to understand salary administration and the impact it has on total
compensation, cripples a consultant's ability to serve his or her clients.
A lack of understanding of salary administration and
the salary level decision can severely affect the internal management
(staffing and payroll) of an insurance agent's or employee benefit
consultant's practice should it, too, utilize salary structures. |
