2. SALARY STRUCTURE ADJUSTMENTS

	Salary budget increases (prior page) reflect annual increase in wages plus the attainment of skills, competencies and experience, as well as employee performance.
	A salary structure embodies an organization's pay policy, i.e., how competitively it wants to pay versus its labor market. This policy is typically depicted in an organization's compensation philosophy. Salary structure adjustments (this page) help keep the salary structure competitive with the external labor market, especially in the years between comprehensive market studies (market pricing). Periodic updates of salary ranges protect an organization's ability to compete in the market place for talented employees.
	Most organizations move their salary structure (pay ranges for established grades or bands) annually, as budget permits. During the recent recession, some organizations chose not to increase their salary structures, either as a means of cost avoidance or as a result of their belief that there was no competitive pressure to do so.

World at Work points out that the salary budget increase and "the salary structure adjustment have wholly different purposes, and while there commonly appears to be a relationship between the two—both rising over time with the salary budget increase generally exceeding the salary structure adjustment—there is not necessarily a [causal relationship]." [Source: World at Work White Paper "Salary Structure Change and Compensation Increase Budgets," January 2011.

For the United States, the actual structure adjustment in 2011 was 2.0%, with some slight variations by industry. The projected salary structure increase for 2012 is flat at 2.0%, again with some slight variations by industry. See following table.

Historically, the projected salary structure increases are between two-thirds and three-fourths of the projected salary increases. Following this pattern, structure adjustments for 2012 are about 67% of projected salary increases. Most organizations move their salary structures less aggressively or less frequently than their salary increase budgets

	Salary Structure Increases
	2003	2004	2005	2006	2007	2008	2009	2010	2011 Actual	2012 Proj.
GEOGRAPHY
United States	2.5%	2.4%	2.5%	2.7%	2.8%	2.8%	1.5%	1.7%	2.0%	2.0%
Eastern US (incl. DC, MD, PA)	2.5%	2.4%	2.5%	2.7%	2.8%	2.8%	1.5%	1.7%	2.0%	2.0%
Southeastern US (inc. VA)	2.5%	2.4%	2.5%	2.7%	2.8%	2.8%	1.5%	1.4%	2.0%	2.0%
Baltimore, MD							1.4%	1.2%	1.8%	2.0%
Washington, DC							1.5%	1.3%	2.0%	2.0%
BY INDUSTRY
Continuing Care Retirement	2.5%	2.4%	2.6%	2.0%	2.7%	2.3%	1.5%	1.7%	1.8%	2.0%
Education	2.7%	2.1%	2.0%	2.7%	2.7%	2.7%	1.2%	0.0%	0.0%	1.6%
Finance/Banking	2.6%	2.4%	2.5%	2.6%	2.7%	2.5%	1.6%	1.7%	1.8%	2.0%
Health Care	2.5%	2.4%	2.6%	2.3%	2.7%	2.4%	1.5%	1.0%	1.5%	2.0%
Information Technology	2.3%	2.4%	2.0%	2.8%	2.7%	2.0%	1.6%	1.2%	2.0%	2.0%
Insurance	2.6%	2.6%	2.5%	2.7%	2.8%	2.5%	1.6%	1.7%	1.9%	2.0%
Manufacturing	2.6%	2.5%	2.5%	2.6%	2.8%	2.7%	1.4%	1.9%	1.9%	2.0%
Nonprofit	2.5%	2.5%	2.3%	2.7%	3.2%	2.2%	1.3%	2.0%	2.0%	2.0%
Public Sector	2.5%	2.3%	2.6%	2.5%	3.0%	2.5%	1.7%	0.0%	0.0%	0.5%
Retail	2.5%	2.4%	2.5%	2.5%	2.6%	2.2%	1.0%	1.1%	2.0%	2.0%
Service	2.7%	2.2%	2.5%	2.7%	3.2%	2.3%	1.3%	2.1%	2.0%	2.0%
Transportation	2.6%	2.5%	2.3%	2.7%	3.0%	2.0%	1.2%	0.0%	1.5%	2.0%
Utilities	2.6%	2.5%	2.3%	2.7%	2.7%	2.7%	2.0%	1.3%	2.0%	2.0%

Using the Salary Structure Increases

Follow these steps to adjust each range in your salary structure:

	Calculate the new grade midpoint by multiplying one plus the desired salary structure adjustment percentage times the current midpoint.
	Calculate the new minimum by multiplying the grade midpoint by the minimum factor. Note: If you do not know the minimum factor for your plan design, you can calculate it by dividing the current minimum by the current midpoint (often .75 or .80, depending on your specific compensation plan design).
	Calculate the new maximum by multiplying the grade midpoint by the maximum factor. Note: If you do not know the maximum factor for your plan design, you can calculate it by dividing the current maximum by the current midpoint (often 1.20 or 1.25, depending on your specific compensation plan design).
	If your organization's salary ranges are rounded to the nearest hundred or thousand, round the answers appropriately.
	If there are any employees whose salaries fall below the new minimums for their respective ranges, their salaries should be increased to the new minimums, provided that performance is at least satisfactory.

 

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