Tiered Pay Structures - what works what doesn't
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    Default Tiered Pay Structures - what works what doesn't

    I'm seriously looking at going to a tiered pay structure. Various categories of work, each with three tiers of set wages.

    The criteria I've thought of using to determine someones tier is Skills (what complexity and quality of work they are they capable of), Productivity (time wasting with 45 min bathroom breaks or consistently beating the job's hours) Versatility (willing to do whatever is asked, field work, occasional shift work etc) and Attitude (is the culture better or worse for their presence). There is a lot more to each, but that should give a sense of it. Open to criticism/ideas on other ways to look at it.

    I see lots of advantages to this, everyone knows where they stand and they get cost of living increase every year. No more parade of asking for raises and the key advantage I see is if I'm not attracting a certain category and tier of worker, I can assume my rate for it is inadequate. I can raise that to whatever it needs to be and have a rational for doing so without raising the hackles of everybody else (in theory anyway, or at least there is a defense/argument for why). That means existing guys in that tier and category get a bump...but really, if I'm I'm below market to point I can't attract talent, they should get a bump anyway or I risk loosing them.

    The idea is that the tier rate should mimic or just lead the market rate for any given trade and quality tier of individual. I'm ok always paying just a little ahead of market. That isn't out of altruism, but because its the way ensure you get all the quality people you need (an over simplification, but you're going to get all you need otherwise). Nailing quality and productivity will make me more money than the 'lead' costs me. There is no reward for tenure, but it would be reasonable to expect skills and productivity would increase with time (for anyone who wanted to)

    I'm told many firms have three 'levels' of pay with a tier. I see merits in this because it give some flexibility, but otoh its a step backward in that the formal structure is to get away from discretion based pay rate and and the constantly pleading of cases. I think its easy to distinguish three tiers, but three levels within each tier? That's 9 gradients! I can tell if a welder is a 1 or a 2 or a 3......doesn't seem so meaningful trying to rationalize what makes a welder a 6 or 7 (on the 9 part scale of 3 levels each in 3 tiers)

    Biggest negative of a major change to pay structure are the unintended consequences....the thing that'll bite my ass that I haven't thought of.

    This is new territory for me and I welcome a discussion and your advice on pro's and cons, whether to pursue this, doe's and don'ts etc

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    Attitude? Shouldn't be part of the tier structure. Wasting time? No. Both of these are things that should be corrected or else... out the door.
    I had a tier structure for a department that I led. Operator A, Operator B and Operator C, Set-up Person, and programmer.'
    I enumerated skills required for each level, and a checklist through the year when a skill was attained or learned. When they stepped up a level, they got a merit raise (not cost-of-living). We'd review the current level, and make a plan on how to reach the next level. Not really using it in my current position, but as I add employees, I'll see how upper management feels about this.

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    As a former HR Manager, I think the "attitude" is all about creating a positive overall company culture, with diversity and inclusion. I totally get your point of view as well. I think they try to rate using soft skills (attitude, ability to collaborate with team members, etc.

    With all of that aside, I just learned more about why I'm recruiting for a person to set up mills and lathes. Now, if only I knew what the heck a mill and lathe was I'd be well on my way to finding a person to operate and set them up!

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    I just replied to the reply of the initial post. I think that the least amount of change will typically be the best. I would never say that on the record, as it is certainly not a best practice within HR, but are you being required to set up a new pay structure? If so, I guess I would take the each skill set and rate them based on level of complexity, easy or hard to find skills and easy or unable to teach or train on the skills.

    Just a thought.

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    It certainly wouldn't be my choice to try to categorize my employees skills in this way. I already do those things in a general way, but I can see a lot of problems with trying to justify the definitive levels you are proposing. Seems like there would be too much chance for perceived favoritism because of personal preferences skewing your decisions. All this depends on how closely you observe / monitor your employees work. If it's production work that is time sensitive and can be measured accurately, and that is what is critical, it has some merit. If the work is one of a kind and you quoted it wrong, is it the employees fault that it took too long? I think it would have a lot of pitfalls IMHO. The employees direct supervisor should have a good handle on their capabilities.

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    sounds like the kind of shit I come up with after a little too much vino

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    Many years ago I worked for a large company that had a similar system. The tiers were labor grades which had steps inside them. It was very complex, yet completely unfair to the overly ambitious types with great attitudes. The place was non union but seemed to have a lot of union type protocols. There was a yearly cost of living raise that everyone got that was tied to inflation. All other raises were tied to promotions climbing the steps. I really don't think you can factor in attitude and attendance in such a system unless you just used them for a negative. Let's say poor attitude or attendance costs a person a step or two. Example, you have the skills required of a labor grade 12 level A, but your poor attitude and attendance drops you to labor grade 12 level C.

    Someone with an extremely poor attitude I personally would just send packing, that can spread like cancer and do a lot of damage.

    I personally would just pay someone what they were worth and make it company policy that anyone who discusses wages with fellow employees will lose perks as that causes nothing but trouble. Nothing drastic of course, like take away their turkey and $50 gift card at Thanksgiving.

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    Quote Originally Posted by CITIZEN F16 View Post
    I personally would just pay someone what they were worth and make it company policy that anyone who discusses wages with fellow employees will lose perks as that causes nothing but trouble. Nothing drastic of course, like take away their turkey and $50 gift card at Thanksgiving.
    My brother had just got a promotion at his shop. He told a "buddy" how much he was making. They walked him out later that day......

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    Quote Originally Posted by CITIZEN F16 View Post
    I personally would just pay someone what they were worth and make it company policy that anyone who discusses wages with fellow employees will lose perks as that causes nothing but trouble. Nothing drastic of course, like take away their turkey and $50 gift card at Thanksgiving.
    Quote Originally Posted by lakey0 View Post
    My brother had just got a promotion at his shop. He told a "buddy" how much he was making. They walked him out later that day......
    Did the buddy go run and ask for a raise based on what your brother was making? I worked at a place that discussing wages was cause for termination. I was way underpaid as my skills far exceeded my years in the trade, also the place I worked had moved a couple departments quite a distance and a lot of guys quit instead of commuting. I was told I would be brought along quickly if I proved myself, but they had a cap on raise amounts. I didn't give crap if I had two years experience and another guy had 12, if I produce the same I want to be paid the same. I went in the bosses office and demanded to be paid the same as the guy I followed. The guy said "how do you know what Mike makes". I told him I know what pretty much everybody makes. The boss got infuriated and said it was against company policy to discuss wages and he could fire everybody, like that would work.

    I told him to calm down, nobody told me anything. On payday at lunch time most everyone ran to the bank which was right around the corner. I stayed back and picked check stubs out of the trash cans until I had a good collection.
    I know many a person I told that story to that proceeded to do what I did.

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    It's federally illegal to fire someone for discussing their wages. Just an FYI.

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    Agree with beege ... time wasting and attitude are too emotional to go into a wage scale. If you can't quantify it, it doesn't belong.

    Besides, excessive time wasters and bad attituders shouldn't be there anyhow. Not unless their dad owns the place

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    Quote Originally Posted by lakey0 View Post
    My brother had just got a promotion at his shop. He told a "buddy" how much he was making. They walked him out later that day......
    I'm pretty sure that discussing pay is a "Protected Concerted Activity" according to the NLRB and firing someone for it is actually illegal.

    Protected Concerted Activity | National Labor Relations Board

    What Employers & HR Can Do When Employees Discuss Wages, Salary

    Edit: I see I'm a bit slow.

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    With a tiered system, does every new hire automatically start at the bottom of their respective fields? Then have to "test" their way up to the highest tier/division they can?
    Or, will you have a series of tests during the interview to determine where to start a new hire?

    Existing employees would be even tougher I would think. Figure, for example, two maintenance techs who have worked together for years though one is known to be more "skilled" than the other in certain areas and vice versa. Regardless of their strengths, they're peers under the current system. Suddenly the company goes to tiers, one tests higher than other, now they aren't really peers anymore. Seems like it could lead to tensions. On the flip side, that could motivate the lesser-skilled tech into working harder to level-up and it becomes a competition where suddenly you have a whole crew of top-tier folks.

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    thanks for the input. You've got me thinking twice about attitude. My thought for including it was to have some way of encouraging improvement other than the binary its good enough to be here or its so bad you're fired. Its a soft, but with some I'd sure like to improve it and they're people who are good enough other ways that I don't want to fire them. It would be an aspect of biannual reviews.

    Maybe its the wrong thing to bundle here....or maybe just the wrong name for it. the overused 'team player' would be another way of saying it, the guy who was always willing to help coworkers, didn't spend all day telling anyone who would listen everything that is wrong with the place etc.

    How else would you factor in how much of a team player someone was or wasn't....because we know with each person its different shades of grade not just black and white.

    With a tiered system, does every new hire automatically start at the bottom of their respective fields? Then have to "test" their way up to the highest tier/division they can?
    No they would not have start at the bottom - that's one of the problems I'm trying to over come. For most it would probably be proposing to start someone at a II or III but they know going in the structure and where they can move themselves to. However It gives me the option of hiring at the top salary and talent level - a top person is going to pass if I can't meet his wage expectations. Of course we'd have to be confident in them and be ready to jettison him fast if we made a mistake or he oversold. Most would start most a level below where could get to....but overall, I want a mechanism that accommodates what we've got but also lets us mover toward paying more to get better talent. If I tell an existing guy he's a tier II and bump him $1 hour, he's not going to have much to say when I hire Tier I for more. He can argue he should be a Tier I ....and then we can talk about what he has to do to get there

    I agree it could create tension, but that's kind business, tension everywhere...its not necessarily a bad thing, just the nature of conflicting interest. e.g. sales and production. It's time to do a round of raises anyway, so they would all see some bump by being slotted in a category so that will overcome a lot of objection (I think) to the change. If the business strategy says what we've got now doesn't meet the needs and change is needed, there is bound to be some tension created. Don't care so much though if a tier III has his nose slightly of joint if it means I can hire 6 more A listers and drastically increase through put

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    Quote Originally Posted by TeachMePlease View Post
    It's federally illegal to fire someone for discussing their wages. Just an FYI.
    Got a link?

    This came from Illinois.gov:

    Can an employer terminate me without advance notice or without giving a reason or an unfair reason for the termination?

    Yes. Illinois is an "employment at-will" state, meaning that an employer or employee may terminate the relationship at any time, without any reason or cause. The employer, however, cannot discriminate based on race, color, religion, sex, national origin, ancestry, citizenship status, age, marital status, physical or mental handicap, military service or unfavorable military discharge. If you wish to locate additional information, visit the Illinois Department of Human Rights.

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    Quote Originally Posted by ShaunM View Post
    With a tiered system, does every new hire automatically start at the bottom of their respective fields? Then have to "test" their way up to the highest tier/division they can?
    Or, will you have a series of tests during the interview to determine where to start a new hire?

    Existing employees would be even tougher I would think. Figure, for example, two maintenance techs who have worked together for years though one is known to be more "skilled" than the other in certain areas and vice versa. Regardless of their strengths, they're peers under the current system. Suddenly the company goes to tiers, one tests higher than other, now they aren't really peers anymore. Seems like it could lead to tensions. On the flip side, that could motivate the lesser-skilled tech into working harder to level-up and it becomes a competition where suddenly you have a whole crew of top-tier folks.
    The place I worked the person signed off on claimed skills that qualified them for the pay slot they were brought in at. They had a 90 day probationary period. If it was proven they exaggerated their skills they were offered the option of remaining with the pay rate that matched their true ability or to quit at the end of 90 days. Refusing to accept a pay cut was considered a voluntary termination, so they could not collect unemployment. That place fought every unemployment claim made against them unless it was during a mass lay-off.

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    Quote Originally Posted by CITIZEN F16 View Post
    Got a link?

    This came from Illinois.gov:

    Can an employer terminate me without advance notice or without giving a reason or an unfair reason for the termination?

    Yes. Illinois is an "employment at-will" state, meaning that an employer or employee may terminate the relationship at any time, without any reason or cause. The employer, however, cannot discriminate based on race, color, religion, sex, national origin, ancestry, citizenship status, age, marital status, physical or mental handicap, military service or unfavorable military discharge. If you wish to locate additional information, visit the Illinois Department of Human Rights.
    While I don't dispute the validity, how come these employers won't accept that that door swings both ways?

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    Quote Originally Posted by machinistrrt View Post
    While I don't dispute the validity, how come these employers won't accept that that door swings both ways?
    As in not expecting a two week notice when you plan to move on or warn someone they will be terminated in two weeks?

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    Quote Originally Posted by Mcgyver View Post
    You've got me thinking twice about attitude. My thought for including it was to have some way of encouraging improvement other than the binary its good enough to be here or its so bad you're fired.
    You can come up with other incentives ...

    How else would you factor in how much of a team player someone was or wasn't....because we know with each person its different shades of grade not just black and white.
    Yearly bonuses. You can make those amounts be anything you want. That also encourages stability. Or you could do it monthly, which would probably be more of a work-hard incentive. Two sets of bonuses ?

    Of course we'd have to be confident in them and be ready to jettison him fast if we made a mistake or he oversold.
    Everyone in China has a contract, even the floor sweeper. But they all have 90 day probationary periods the first time, too. It's not a bad idea (although some people misuse it).

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    Quote Originally Posted by CITIZEN F16 View Post
    Got a link?

    This came from Illinois.gov:

    Can an employer terminate me without advance notice or without giving a reason or an unfair reason for the termination?

    Yes. Illinois is an "employment at-will" state, meaning that an employer or employee may terminate the relationship at any time, without any reason or cause. The employer, however, cannot discriminate based on race, color, religion, sex, national origin, ancestry, citizenship status, age, marital status, physical or mental handicap, military service or unfavorable military discharge. If you wish to locate additional information, visit the Illinois Department of Human Rights.
    Link: Interfering with employee rights (Section 7 & 8(a)(1)) | National Labor Relations Board

    Section 7 of the National Labor Relations Act, enacted 1935. Excerpt from the link:

    (The NLRA) prohibited employers from limiting employees’ activities related to “collective bargaining or other mutual aid or protection.” The National Labor Relations Board (NLRB), the body charged with enforcing the NLRA, has interpreted Section 7 to mean that employees have a right to discuss salary and wages.

    So they can't fire or penalize you for it.

    But in an "employment at will state" you can be fired for any reason at any time, as long as it is not something to do with a protected class or a federally illegal reason.

    So they can't fire you for discussing wages. But they can fire you because "It's just not working out" as long as they don't mention to you that the "not working out" part is you discussing wages.

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