The
recurring reason why employers decide to introduce career-family pay systems is
to avert the employee disappointment habitually caused by the implementation of
broad-banded structures; these are indeed perceived by individuals as not based
on a clear, structured and easy to understand pay progression mechanism. In
many respects, this may be considered as the turn of the tide; employers after
having broad-banded their pay systems, with the intention of establishing flatter
structures and understating the importance of promotions, subsequently decide to
introduce family-based pay arrangements with the contrasting aim of making employees
aware of the prospects for professional growth and pay progression these can
offer.
Job-family and career-family pay
structures are both designed and developed grouping under the same family jobs
which are connected the one with the others in that requiring the same set of
skills, abilities and competencies in order to be properly carried out. The distinctive
feature of this method is that a specific family is designed and developed for
each organizational function (HR, Finance, ICT, Legal, Sales, Marketing, etc.) where
a different degree of expertise and knowledge is required to assume the diverse
levels of responsibility included within each family. Job families and career families
essentially enable employers to group the jobs existing within a company in a
more systematic and consistent way. The distinction between the two approaches
is represented by the circumstance that whereas career families share exactly
the same architecture, job-family arrangements do not.
In the case of career families, each
family identified within the business should employ exactly the same grades and
pay ranges for all of the levels included within it. This homogeneity amongst
families enables employers, but indeed also employees to easily compare the different
families or in the Armstrong words (2010) to “read-across” families.
A different approach is required
for the development of job-family pay structures; in this case, each family has
its own architecture based on the various functions peculiarities. Yet, pay
rates are in this instance determined according to the trends emerging from the
relevant external labour market. This entails that, differently from career families,
the size and pay rate of the roles included in a job-family scheme may be
completely different amongst the various families, precluding thus employers
and employees from reading across them.
By defining the degree of
knowledge and expertise required by the roles of the different grades existing within
each organizational function, career-families practically help employers to introduce,
outline and explain to employees what qualities and competencies are required and
sought-after by their organization, and thus on the basis of which elements employers
decide to offer individuals opportunities for career progression and development.
Career families, like the pay structures based on the job levelling methodology,
represent somewhat of career-maps enabling individuals to find out what skills
and competencies are required within a function to progress, which prospects
for growth and development might be offered within this and which level of pay is
associated with every career stage included within a family.
Families can be related to organizational
functions, occupations groups and business units (Reilly, 2004). Whether the functional
or occupational groupings taken into consideration are associated with business
units’ structures, families can provide vertical in addition to horizontal
integration.
The identification of the number
of families represents a straightforward exercise for reward specialists, whether
it has been decided to introduce as many families as the number of functions
existing within the organization. This can actually mostly, but not necessarily
exclusively be the case of career families, which are not based on the external
market rates. Things can work differently when pay structures are based on
job-families. Keeping in mind the aphorism “the simpler the better” and that
the main aim of developing job-family systems is introducing pay arrangements as
far as possible aligned with the external market rates, it can be argued that
the most suitable number of families should be that enabling employers to
consistently differentiate their employees pay according to the practical and
real organizational needs.
In the event, for instance, an
employer should plan to introduce a specific family so as to group together all
the professional and specialist roles, this should duly consider that this
family is highly likely to be transversal to the different organizational
functions. In the labour market, nonetheless, there might be considerable
differences between the pay rates of the different specialists comprised into a
sole family, depending on the functions these activities are associated with. An
ICT specialist pay, for example, is likely to be sensibly different from that
of a HR specialist and, indeed, considerable differences may also be identified
amongst the diverse specialisms existing within the ICT and HR functions;
payroll, employment law, reward, L&D and R&S specialists are likely to
receive different levels of annual pay. In such cases, the problem might be
overcome introducing a given number of families covering the largest part of
the employee population and a different system for those roles which can
actually be considered more difficult to include in more generic and
comprehensive families (Reilly, 2004).
Differently from what occurs in more
conventional pay structures, where the definitions provided for each grade are broadly
the same, in family-based structures diverse definitions are introduced to
outline the skills and competencies required by individuals in order for these to
progress within each family (Armstrong, 2010). Job families can thus reveal to
be particularly useful when broad-banded pay systems are in place in order to
establish a more structured approach to pay progression within a single band.
Whereas career families are more
internal-relativities centred, job-families are mostly focused on labour market
rates. Aiming at mirroring and reproducing internally external pay rates trends,
job-families tend to differentiate pay amongst the different families. This
circumstance actually allows employers to attain some additional wider
benefits. One of these is associated with the enhancement of the firm recruitment
and retention practices. Employers whose pay structure is constantly kept in
line with external market rates should potentially be able to more straightforwardly
attract quality staff and talents, whereas improving the effectiveness of their
retention practices.
Benefits and likely pitfalls
associated with the introduction of families
Designing and developing pay
systems adopting this approach can unquestionably enable employers to attain a
wide range of objectives. Family-based pay structures can first and foremost
effectively and successfully help employers to develop a “common language” to
reward, whilst differentiating the different functions the one from the others.
Yet, families can also enable businesses to develop pay systems taking heed of
the different market rates existing for the different job groups (Reilly,
2004).
According to the Herts County Council
(UK), the introduction of job families can also favour employee mobility
amongst the different departments and contrast the formation of organizational
silos (Personnel Today, 2002). Moreover, job families can reveal to be
particularly helpful in order to harmonize a business pay structure following
the merger of two or more companies. The National Australia Group Europe (IRS,
2001) and Abbey (IDS, 2001), which both introduced a family-pay system after having
merged with other companies, represent two good examples of successful introduction
of this method under such circumstances.
An additional distinctive benefit
provided by families is the reduction of the administrative burden typical of
the job evaluation exercise. Pay structures based on families are designed and developed
by associating jobs with grades on the basis of the jobs description. Especially
in the case of career families, the exercise can be conducted taking as a
reference the competency framework already existing within the organization for
each function. This will clearly enable reward managers to more faithfully and
swiftly complete the evaluation process, whereas establishing a more reliable
and consistent link amongst career progression, the skills and competencies
required to move up the career ladder and the salary associated with the
different steps of the career pathway.
The disadvantages of career-families are not limited
to the legal problem and to the Unions opposition; career- and job-families systems
pose serious problems also in terms of practical design, development and
execution.
The description of
career-families levels is in general more reliable and consistent compared with
that provided by more traditional pay structures. The former relate to roles
sharing the same features, albeit with different levels of responsibility,
rather than summarizing the different skills and abilities required throughout
the whole organization, which may sometimes also be difficult to amalgamate
(Armstrong, 2010).
Career-family structures
developed according to the same grading system, especially when based on the
job evaluation exercise, are fairly defensible and sustainable in case of equal
pay claims. These are indeed developed emphasizing the importance of internal
relativities insofar as enabling to read-across the grades of the different families.
In contrast, job-families structures, mainly focused on considering the impact
of the external labour market, are prone to expose employers to equal pay
legislation complaints. In the case of job-families, jobs of the same value
could actually be paid differently as a consequence of the influence exerted by
the external labour market. The fact that these differences are very likely
involving the overall family, rather than a single level of the family, can only
contribute to eventually make pay differences even more unjustifiable and
unsustainable before a Court (Armstrong, 2010).
To resolve the problem, reward
specialists should do their utmost to collect reliable and accurate external data
on the basis of which defining the internal rates. Performing this activity may
sometimes prove to be a daunting feat, especially for public sector employers
(Reilly, 2004). For reliable the data gathered in the external market might show
to be, it is unlikely that these may accurately take heed of and reflect the
local equal pay legislation tenets. That is why job-family structures are more often
than not less likely to be defensible in case of equal pay legislation claims.
The problem associated with accessing
reliable market data is clearly also important in order for employers to
maintain the internal rates of pay in line with those offered by the other
employers operating in the same market. External data collection is hence of paramount
importance for two different reasons: equal pay legislation compliance and talent
acquisition and retention practices effectiveness.
An additional means to curtail
the negative impact produced by family-based pay structures could apparently be
that to reduce base pay and balance up the difference offering pay supplements.
In this instance, notwithstanding, employers should be prepared to face the
likely individual unwillingness to accept a pay reduction whether supplements
should subsequently be withdrawn; albeit this would affect additions, rather than
basic pay. Yet, the longer the period of time individuals have benefited of
such supplements, the harder it will prove to be for employers to remove these.
With the passing of time, supplements tend to consolidate or to be perceived by
individuals as consolidated into their base pay and managers usually feel uncomfortable
whether asked to support employers in this type of move (Reilly, 2004).
One of the most significant downsides
provided by family-based structures, notwithstanding, is that these are
perceived as divisive by individuals and in open contrast, for instance, with
the “single status” tenet fostered by the National Joint Council for Local
Government Service (Armstrong, 2010). The harshest opponents of the
family-based pay structures in unionized organizations are in fact Unions.
These schemes are openly contrasted by these in that potentially or even
practically justifying differences in pay for jobs of equal value. This should
not indeed come as a surprise, these systems are opposed by Unions as are opposed
in general by these the rates of pay based on market rates, rather than on
internal relativities and length of service.
At development level, albeit being
less demanding than job evaluation, families require a lot of work and efforts
to be accurately designed. It clearly depends on the number of jobs which need
to be evaluated and on the difficulty encountered by the reward professionals concerned
on matching jobs with families and with the grades within these. To favour
accuracy, this activity may be performed using a template enabling reward specialists
to evaluate jobs and allot hence these into the relevant family and grade.
As contended by Reilly (2004), also
the implementation phase represents everything but a straightforward process.
Individuals are all too often disappointed about the family their job is included
into. In some cases, that is, when a job is characterized by features making it
objectively difficult for evaluators to determine the most suitable family, it
might even be harder resist individual disagreement. In general, the reasons
for employees’ complaints about their job allocation may concern either the
status or the level of pay. In both instances their feeling is that of having
undergone somewhat of a downgrade for which they ask for remedy.
It is supposed, albeit not by
common consent, that family-based pay structures can also negatively impact internal
mobility policies within a business. As discussed earlier, some employers consider
that families, clearly outlining the requirements necessary to fill a position,
favour internal mobility, whereas others note that these actually contribute to
favour progression only within functional or occupational silos. Whether clear
skills and level of expertise are described for each family and for each grade
within this, individuals may actually find it difficult, if not impossible,
accessing most of the roles allotted in families different from that where their
role is allocated. This actually depends on the circumstances and more in
particular in the way internal mobility is fostered and intended within a
business. This should be essentially intended as an opportunity by employees
and indeed by employers, too. It has to be used as a means of recognition and
as a way to encourage individual professional growth. Depending on the
circumstances and on the specific roles in question, barriers should be definitely
removed and individuals put in a position to gain different skills and a
broader knowledge of the business roles and activities; which will in turn also
certainly contribute, in the mid to long term, to the attainment of organizational
success.
Despite this aspect is not
strictly associated with pay, reward managers and specialists have to be aware
of all of the possible consequences and pitfalls typically associated with the introduction
of family-based pay structures. Another crucial aspect reward specialists need
to duly consider concerns how pay progression has to be managed within the
business once this approach has been introduced. As discussed earlier, both
career-family and job-family structures practically endorse transparency and
clarity about the skills, knowledge and expertise required to progress within a
family. Career progression, however, is clearly associated with pay progression
so that since decisions about these aspects usually rest with line managers, before
introducing this approach, employers need to ensure that all of the managers
with responsibility for their direct reports career have received the necessary
training to effectually manage this type of scheme. The risk being that,
efforts and hard work notwithstanding, inequalities, bias and pay drifts occur or
continue to occur within the business.
The reasons why employers introduce family structures
Albeit family structures at large
cannot be considered completely flawless, many organizations have decided to
adopt these over time in order to attain their specific aims and objectives.
The circumstance that the companies which have introduced family-based
structures still use these clearly entails that the schemes have enabled them to
meet their expectations and have proved to fit the business needs, corporate
culture and reward strategy and philosophy.
The pre-set objectives can be fairly
different, but properly designed, developed and monitored family structures can
effectually help employers to attain their intended aim. What certainly matters
is that before introducing such schemes employers ensure that these are
suitable for their organization. The final decision has to be invariably made
according to the existing circumstances and not just in that this approach has proved
to be successful elsewhere.
