The design process is started by identifying desired outcomes and goals for your organization. This is often referred to as developing your compensation philosophy. Your philosophy is formed by considering a number of factors, including: the balance of direct and indirect rewards; the complexity and responsibility of a position and the candidate or employee filling it; and your focus on internal versus external equity. These are just a few of the factors explored in this section. It is the ability to achieve results that is critical to organizational success.
Compensation can be defined as all of the rewards earned by employees in return for their labour.
In determining effective rewards, be careful about the perception of fairness in wages. The uniqueness of each employee must also be considered. People have different needs or reasons for working. The most appropriate compensation will meet these individual needs. To a large degree, adequate or fair compensation is in the mind of the employee.
Good Practice: A good compensation strategy includes a balance between internal equity and external competitiveness. Compensation and benefits affect the productivity and happiness of employees, as well as the ability of your organization to effectively realize its objectives. It is to your advantage to ensure that your employees are creatively compensated and knowledgeable about their benefits.
Links and Resources
The Ontario Network of Employment Skills Training Projects (ONESTEP) has developed an excellent manual on compensation practice and theory – Compensation Guide.
No pan-Canadian wage scales or approach to compensating the child care workforce currently exist. However, scales have been developed as a point of reference. See the links below for more information:
- CCHRSC compilation of average income of centre-based ECEs and Assistants by educational attainment and province
- Manitoba Child Care Association: Average Hourly Rates of Pay and Salary guidelines
- Market Competitive Salary Guideline Scale for Group Child Care Centres – Manitoba Child Care Association.
- The Nova Scotia Child Care Association has developed suggested minimum salary guidelines
- Guide administratif concernant la classification et la rémunération du personnel salarié des services de garde et des bureaux coordonnateurs de la garde en milieu familial 2007 – 2012 (Available in french only)
- Proposed Salary Scale: Early Childhood Development Association of PEI
Perceived inequity or unfairness, either external or internal, can result in low morale and loss of organizational effectiveness. For example, if employees feel they are being compensated unfairly, they may restrict their efforts or leave the organization, damaging the organization’s overall performance.
“Internal equity exists when employees in an organization perceive that they are being rewarded fairly according to the relative value of their jobs within an organization.”
Another way of stating this is to say that a person’s perception of her or his responsibilities, rewards and working conditions is seen as fair or equitable when compared with those of other employees in similar positions in the same organization. Factors such as skill level, the effort and the responsibility of the job, as well as working conditions are considered.
There are different approaches to pay. In the ECEC sector, there are examples of skill- and experience-based pay. With skill-based pay, as education level increases, so does salary. With experience-based pay, as experience increases, so does salary.
An internal equity study can determine if there is pay equity between similar positions and if all roles in the organization are governed by the same compensation guidelines. Usually each position is assigned a pay range with corresponding criteria that outline how to determine where an employee should be placed in the range.
An agency may employ a number of Early Childhood Educators (ECEs). By reviewing the salary of each employee and comparing it with others in the same role, you will be able to determine if internal equity exists. This does not mean that all employees are paid the same; it means that they are paid fairly in relation to other staff in the same role. Differences in salary may be based on education, experience, years of service, or responsibility level. In addition, in some provinces or territories the government provides subsidies for some positions. This may result in “internal equity” issues. It is important that the centre director can rationalize salary differences.
“External equity exists when employees in an organization perceive that they are being rewarded fairly in relation to those who perform similar jobs in other organizations.”
External equity exists when an organization’s pay rates are at least equal to the average rates in the organization’s market or sector. Employers want to ensure that they are able to pay what is necessary to find, keep and motivate an adequate number of qualified employees. Creating a compensation structure that starts with competitive base pay is critical.
Employees also compare their jobs and pay to jobs and pay in other organizations. Unfortunately, they do not always make comparisons to similar types of organizations or even those in the same sector. Generally, employees consider much more than base pay in determining external equity. For some, more emphasis may be placed on employee benefits, job security, education, years of experience, physical work environment or the opportunity for advancement in deciding if external equity exists.
The use of salary surveys is critical to your ability to determine if your compensation and benefits are comparable to similar jobs in other organizations. It is important to ensure that the key responsibilities and goals of the jobs being compared are similar, as well as the sector the organization is aligned with.
A number of organizations have tried to address quality of life concerns by only requiring full-time employees to work a 35-hour week, while many other organizations require their employees to work 37.5 or even 40 hours per week.
Many ECEC employers depend on funding and therefore salary increases are tied to available funds. Unfortunately, the ECEC sector in general pays below other occupations.
There are a number of components that need to be addressed when developing your compensation systems to ensure they align with your organizational strategy and objectives. One key to remember is that your compensation strategy must help to create the work culture you want. How you structure your systems and manage the internal and external equity issues will directly inform the culture of your organization.
A compensation philosophy is developed to guide the design and complexity of your compensation programs. This is done by identifying your goals and objectives, considering your competitiveness in attracting and retaining employees, your emphasis on ability to pay, internal and/or external equity and whether performance is tied to increases. Understanding what balance you want to achieve between direct salary and indirect benefits is critical in developing your overall total compensation approach. A consistent philosophy provides a strong foundation for both the organization and the employee. Without a philosophy, leaders often find themselves unsure of what to offer as a starting salary for a new employee. This can lead to offering too high a total compensation package for a new employee in relation to existing employees, or being unable to successfully hire because the total compensation offer is too low to be competitive.
Imortant: Your philosophy should be consistent with the size of your organization. If you have a small to mid-size employee base, keep your strategy simple and easy to administer. Ensuring your compensation guidelines are clearly communicated and consistently administered is a key to success.
Once you have developed the over-arching philosophy aligned with your strategic plan and organizational culture, it is important that you determine if any differences should exist in pay structures for management, professionals or front-line staff.
Compensation systems must be consistent with the existing legislation in the areas of labour standards, equal pay, human rights, Employment Insurance, pension or retirement benefits, labour relations and occupational health and safety. Regularly reviewing the HR Toolkit, key government websites, and connecting with an HR and/or legal professional can help you ensure your organization’s compensation practices are in compliance with current legislation in your jurisdiction.
Issues may include, but are not limited to, wages, leave options, bonuses, advancement opportunities, termination pay and more. Auditing your compliance with legislation annually is time consuming yet critical to the sustainability of your organization.