Market adjustment processing overview
This process affects only resources whose pay rate is associated with a salary structure
Organizations that use salary structures typically analyze their salary structures once a year against market trends. This may result in updating the salary structures.
When salary structures are updated, organizations must verify that the resources that fall below the minimum pay rate in their updated salary structure are identified and their salaries are adjusted to the minimum.
You can use Compensation to incorporate automatic market adjustments with your annual salary award processes.
The market adjustment process is similar to the general compensation planning and award process. The overview in this table identifies the differences.
| Step | Task | Description | Role | Reference |
|---|---|---|---|---|
| 1 | Update salary structures | After a market analysis, the compensation manager updates salary structures to bring them up to salary trends. | Compensation analyst | Updating salary structures without changing effective dates |
| 2 | Define a planning rule for market adjustments |
This must be a planning rule of the Salary type. For managers to be unable to override the default adjustments, select Default Budget Amount and No Manager Override To Default Amounts. For budget calculations, select Adjust To Salary Range Minimum. Guidelines and lump sum amounts are irrelevant for market adjustment planning rules. Approval rules and validations are meaningful only if the manager can override default budget adjustments. When your rule is complete, change the status to Final. |
Compensation analyst |
Defining budget calculations for planning rules |
| 3 | Define a compensation awarding view |
You can combine market adjustment processing and other salary awarding processing, such as merit increase, on one compensation awarding view. For the merit increase to be based on the updated pay rate after the pay rate is adjusted to the minimum of the salary range, select the market adjustment salary rule as the first rule. For the merit increase to be based on the current pay rate, select the merit increase salary rule as the first rule to be processed. You can also specify rules to assign budget owners other than the direct supervisors to the budgets created by the budget calculations. When your compensation awarding view is complete, change its status to Final. |
Compensation analyst | Defining compensation awarding views |
| 4 | Create budget records | Select the compensation awarding view that contains the market adjustment planning rule. When processing a market adjustment rule, the budget calculations identify all resources that are below their new salary structure range and calculate the adjustments required to bring their salary up to the new minimum. The budget calculations create resource budget records for each resource in the eligibility group. Budget calculations include adjustments to FTE, annualized calculations, and percent increase calculations. If Default Budget Amount is selected for the rule, then the calculated amounts are the default in the awarded amount fields on the manager's compensation awarding form. | Compensation analyst | Calculating resource budgets |
| 5 | Make budgets available to owners | The compensation analysts can make changes to the budgets before making them available to budget owners in Manager Space. | Compensation analyst | Making budgets available to budget owners |
| 6 | Review, update, and submit awards (compensation analyst) | The compensation analyst can review and adjust the proposed awards. Resources affected by market adjustments are flagged. | Compensation analyst | Making compensation awards (Compensation Analyst) |
| 7 | Review, update, and submit awards (managers) |
If the planning rule is set to No Manager Override, then managers can only view the proposed increases. Resources whose salaries are affected by market adjustments are flagged. If managers can override the default budget values, then any validation rules that are specified for the planning rule apply. Managers can concurrently specify values for any other planning rules on the compensation awarding view where No Manager Override is not selected. |
Manager | Making compensation awards (managers) |
| 8 | Approve awards | If an awarding view requires approval, then submitting the award triggers the approval flow. | Approvers on flow | Approving, rejecting, or updating submitted compensation awards |
| 9 | Reverse approved awards | In exceptional cases when errors are found and an award needs to be reversed, the compensation analyst can reverse the approved awards. | Compensation analyst | Reversing approved awards (Compensation Analyst or Administrator) |
| 10 | Review and finalize the pay rate changes | The compensation analyst reviews the final compensation and updates the affected work assignments. | Compensation analyst | Viewing and finalizing pending pay rate changes |
Budget calculation examples
Assume a 10% merit increase on a base pay of $10.00 per hour and a minimum salary of $12.00 for the salary structure.
Market adjustment as rule 1
| Rule 1 | Market | Increase (12-10) = $2.00 | New rate = $12.00 |
| Rule 2 | Merit | Increase (12*10/100) = $1.20 | Final rate = $13.20 |
Merit adjustment as rule 1
| Rule 1 | Merit | Increase (10*10/100)= $1.00 | New rate = $11.00 |
| Rule 2 | Market | Increase (12-10) = $2.00 | Final rate = $13.00 |