Storyboard

8. Our Philosophy

7. Compa-Ratios

6. Pay Ranges

5. Internal Equity

4. Budget

3. Qualifications Experience Performance

2. Market Data

3/18/25

Jamie Paulsen

1. Introduction

Storyboard

Decoding Compensation

12. Scenarios

11. Communicating Compensation

10. Putting the Pieces Together

3/18/25

Jamie Paulsen

9. Best Practices

Storyboard

Decoding Compensation

Melanie: "Wow, okay, that's actually really interesting. I totally get it now. So, cost of living is about my expenses, what I need to survive and have a decent life where I live. Like, if rent goes up, or gas prices spike, that's cost of living. And the Consumer Price Index graph makes so much more sense now. I see how that tracks inflation."And cost of labor is about what the company pays for me and everyone else. It's not just my salary, it's all the other stuff, like benefits, taxes, and even training. I didn't realize how much went into that!"And it's smart that U.S. Engineering uses a third-party vendor to get more specific pay data. That explains why my salary might not just be based on the national average, but on what other companies in our industry and location are paying. It makes me feel like the company is trying to be fair and competitive. "So, if the cost of living goes up, it impacts my personal budget, and if the cost of labor goes up, it impacts the company's budget. And both of those things can affect my compensation. I get it now! I guess it's not just about 'getting a raise,' it's about all these different factors working together."

Melanie: I've heard these terms before, but they always seemed kind of interchangeable. Cost of living, cost of labor... aren't they basically the same thing? Like, how much it costs to live and how much it costs to pay someone? I'm not really seeing the difference. Why does it matter to me anyway?"

Content Many people think cost of labor and cost of living are one in the same, but they are not.

• Bureau of Labor Statistics collects and analyzed data on a monthly basis to determine both cost of labor and cost of living.

• Cost of Living

Definition: The cost of living is the minimum amount of money a person needs to afford a basic standard of living where they live.Factors:

• Housing, food, transportation, healthcare, utilities, clothing, education, childcare, etc.
• Bureau of Labor Statistics uses the Consumer Price Index on specific goods and services in an area to measure shifts over time - i.e. Inflation calculation
• Show graph example and brief explanation

• Cost of Labor

Definition: The cost of labor is the total amount that an organization spends on it's employees.Factors:

• Direct Labor Costs
• Wages - based on worker's skill level, experience, and location
• Time required for tasks: Estimated based on complexity of the task, size of project, and productivity of workers
• Overtime - Any hours worked beyond the standard work week (typically paid at a higher rate)
• Indirect Labor Costs (costs not related to production)
• Payroll taxes (social security, Medicare, unemployment taxes)
• Fringe benefits (health insurance, retirement contributions, PTO, etc.
• Workers' compensation insurance (medical expenses and lost wages for workers on the job)
• Training
• Misc Costs - uniforms, tools, safety equipment, etc.
• Bureau of Labor Statistics measures cost of labor by shifts in the hourly rate of pay nationally
• **U.S. Engineering takes it a step further and hires a 3rd party vendor to collect pay data specific to our positions, industry, company size, and location(s) to give a more accurate representation of our labor costs as an organization

**Delivery and Interactivity TBD

Introduction

1. Baseline Question/Text Answer List all the internal and external factors you believe go into making compensation decisions. 2.WIIFM The best practices / recommendations / guardrails exist for reasons. Just like applying best practices to avoid bad jobs, there are consequences to ignoring consistency in pay parameters that can lead to pay anomalies across the organization, pay compression, etc. making it difficult to move towards transparency. 3. Intoduce Persona Melanie is a manager. It's October/November and everyone has been given their merit increase and bonuses. Several people on her team have been approaching her with questions about their pay. She is unclear on exactly what goes into pay decisions, but she is curious and willing to understand more on how compensation works and how to make better informed pay decisions and answer her team members questions accurately adn confidently.

Introduction

1. Baseline Question/Text Answer List all the internal and external factors you believe go into making compensation decisions. 2.WIIFM The best practices / recommendations / guardrails exist for reasons. Just like applying best practices to avoid bad jobs, there are consequences to ignoring consistency in pay parameters that can lead to pay anomalies across the organization, pay compression, etc. making it difficult to move towards transparency. 3. Intoduce Persona Melanie is a manager. It's October/November and everyone has been given their merit increase and bonuses. Several people on her team have been approaching her with questions about their pay. She is unclear on exactly what goes into pay decisions, but she is curious and willing to understand more on how compensation works and how to make better informed pay decisions and answer her team members questions accurately adn confidently.

Melanie: "Wow, okay, that's actually really interesting. I totally get it now. So, cost of living is about my expenses, what I need to survive and have a decent life where I live. Like, if rent goes up, or gas prices spike, that's cost of living. And the Consumer Price Index graph makes so much more sense now. I see how that tracks inflation."And cost of labor is about what the company pays for me and everyone else. It's not just my salary, it's all the other stuff, like benefits, taxes, and even training. I didn't realize how much went into that!"And it's smart that U.S. Engineering uses a third-party vendor to get more specific pay data. That explains why my salary might not just be based on the national average, but on what other companies in our industry and location are paying. It makes me feel like the company is trying to be fair and competitive. "So, if the cost of living goes up, it impacts my personal budget, and if the cost of labor goes up, it impacts the company's budget. And both of those things can affect my compensation. I get it now! I guess it's not just about 'getting a raise,' it's about all these different factors working together."

Cost of Labor & Cost of Living

Cost of Labor & Cost of Living

Content

Cost of Labor & Cost of Living

Melanie: I've heard these terms before, but they always seemed kind of interchangeable. Cost of living, cost of labor... aren't they basically the same thing? Like, how much it costs to live and how much it costs to pay someone? I'm not really seeing the difference. Why does it matter to me anyway?"