The Purpose of Pay Strategies

September 25, 2018 • Luz Cadena

pay strategies

If you’ve worked in K-12 HR for very long at all, you know the issues you encounter in your job are far more likely to be complex, intricate issues than quick, easy-to-understand problems.

Fortunately, pay strategies are more simple and straightforward than much of what you have to deal with on a regular basis. It’s all about getting organized and setting goals for your district.

Pay strategies communicate how the district wants to pay its employees relative to the market, including neighboring districts and other competitors.

Why pay strategies are important

Employee benefits and salaries make up about 80 percent of most district’s operating budgets, so it’s important to make sure those funds are focused on a clear pay strategy.

Districts with no formal strategy tend to experience greater pay inconsistencies and may find their compensation program isn’t aligned with the strategic goals for recruiting and retaining quality employees.

There are three main pay strategies a district can adopt:

Match the market

In this pay strategy, districts set pay equal to the market for comparable positions. This means a district’s pay structure midpoints are set equal to or slightly above market. This is the most common compensation strategy and ensures the district maintains competitive pay structures and individual pay. This approach provides districts with pay ranges that are affordable yet competitive to attract and retain top talent.  

Lead the market

In this strategy, the district intentionally sets pay range midpoints above market rates for benchmark jobs. A district may pursue this strategy to attract the most experienced and qualified employees. Districts pursuing a lead-the-market strategy often have less turnover, but experience greater overall payroll costs. A lead pay strategy may be most appropriate in a highly competitive labor market. Few districts can afford to implement this strategy for all positions, but many will use this strategy for a job group or sometimes individual jobs, such as bus driver.

Lag the market

In this strategy, the district recognizes its pay range midpoints are lower than the market value for comparable jobs. Practical reasons for a district to lag market may include financial constraints, a robust applicant pool, and community values. 

Few districts implement this strategy intentionally and some may provide non-monetary rewards or incentives to offset this position. In most cases, this is a temporary strategy districts use while they work to catch up with the market. If prolonged, this strategy may place the district at greater risk of losing top talent to employers offering more competitive pay.

Mixing strategies

A one-size-fits-all approach may not work for every district. Some districts may need to use a combination of pay strategies for different job groups. For example, a district may adopt a lead strategy for teacher pay and a match-the-market approach for nonexempt employees. Regardless of the pay strategy adopted, districts need to make sure their pay strategy aligns with the organization’s strategic goals.

Tagged: Compensation, "Pay increases"