Publisher: KnowledgePay (Author: Gail DeLano and Tom Mandel)

Trends towards pay cuts may question companies underlying salary foundations

SYCAMORE, Ill., March 30, 2009 -- 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 theyd rather not facewhats the actual basis for my pay? How does it compare to the market?

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

Many corporations base compensation decisions on dispersed data, not sufficiently integrated to provide a clear basis for individual employee pay levels, said Chris Kelley, chief executive officer. No one wants their salary cut, but there are legitimate reasons why a company may consider reducing an individuals or a groups salary over another.

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 individuals 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 it also eliminates their production. After a rehire, it might be years for the performance to reach that of the individual in that position.

KnowledgePays new compensation software lets corporations integrate into a single environment all sources of compensation data 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.

About KnowledgePay

KnowledgePay, http://www.knowledgepay.com, delivers enterprise HR software with a relentless focus on compensation intelligence. KnowledgePays innovative on-demand technologies help organizations and their people succeed by maximizing engagement, alignment, passion and productivity. KnowledgePay solutions integrate all sources of compensation and job data with groundbreaking analytic tools to drive HR productivity and business results.