When determining what your organization will pay early childhood educators for wages and salaries, it is important to understand the economic conditions of your region, whether there is a labour shortage or surplus, and the legislative requirements in place. When determining what to pay, the first is to consider where the new employee falls within the organization, and the second consideration is the skill and experience of the new employee.

Note: If you are in a unionized environment, the collective bargaining process will determine wages or salaries.

In this Section:

• Deciding what to pay
• Approaches and techniques to determining base pay
• Part-time employees
• Purpose of minimum wage

Deciding what to pay

They are many situations in which you will be faced with deciding what to pay an employee:

• A new employee
• An existing employee due for an increase
• An existing employee moving into a new role
• A valuable employee who is considering leaving because of compensation

It is important to ensure that the approach taken is guided by the compensation philosophy and is applied consistently. Ensuring that established guidelines are followed will prevent offering a compensation package so tailored to a person that the organization is jeopardized by having too heavy a financial burden or that flexible arrangements actually hinder the critical work from being completed. It takes a carefully crafted balance between the organizational needs and individual considerations to arrive at the correct compensation structure.

Answering the questions below will help to formulate the appropriate balance.

From the organization’s perspective:

• Will you hire an employee or a contractor?
• What will the person be doing?
• How much responsibility will the person have?
• How specialized are the skills required to do the job?
• How much experience do they need to have?
• Are there others doing the same work?
• Are their title and responsibilities established? Is there alignment?
• How many people could potentially apply?
• Can you find a comparable job in a salary survey or on a job-posting website?
• How would not having this job filled impact your business?
• What is your range for this job? How does it compare to other jobs already in place?
• How critical is the job to the achievement of organizational goals?
• What is the cost of living in your region? What is minimum wage?
• Have these been considered in your compensation strategy?

About the new employee:

• How much responsibility will she or he have?
• How specialized are her or his skills?
• How much experience does she or he have?
• Are there others with the same experience? Are their titles and responsibilities similar?
• What benefits and incentives can you offer instead of cash compensation?
• Are you able to provide some special training or professional development?
• Are you able to assist the person in attaining accreditation or credentials?
• Can you offer flexible work arrangements?
• How generous are your benefits?
• What would the impact be on your organization if you did not have this person? How much is reducing that impact worth to you?

Approaches and techniques to determining base pay

Determining base pay is directly linked to your compensation philosophy. Having a clear understanding of what role the position plays in the organization, including the complexity of the required responsibilities and tasks, is factored into the equation along with data on market and sector comparatives. Organizations that take the time to ensure they have factored in all of the following components will be more effective in managing their competitiveness externally as well as their consistency and credibility internally.

Create job descriptions

Job descriptions define the requirements and responsibilities of the job. Job descriptions are an important element of your organization’s overall compensation philosophy when they are used to develop a consistent salary structure based on the relative level of duties, responsibility and qualifications of each position in the organization.

Conduct a job analysis

Conducting an analysis of each job by group/department to determine which tasks are being done and by who will help both to determine if you have the most effective alignment of tasks to jobs, and develop your job descriptions. This is important since compensation structures are built based on the level of skill and experience required for a certain role to perform core functions.

Should you find inconsistencies or inefficiencies, you should conduct a review to evaluate the appropriateness of the tasks assigned to that role. From there you determine if the job description and associated compensation warrants changing or not.

Perform job evaluations

Job evaluation is a process by which you rank individual jobs within and between groups/departments of your organization. The process usually consists of describing the skill level, competencies, tasks and responsibility/authority of a role. Roles that are of a similar discipline or field are often grouped together and referred to as a “job family”. From there, levels are usually used to delineate the skills and competencies required, progressing from a junior to more senior level. For some professions, academic credentials can delineate between levels as can registration in a technical field.

Example:

• Your organization requires employees with a diploma in early childhood education.
• You group the roles together into an “early childhood educator” job-family
• You then create an evaluation scale that starts with:
  • Entry level, then progresses to
  • Intermediate, then
  • Senior, then
  • Supervisory
• Once the levels are established, a written description is developed outlining the tasks, responsibilities, competencies, and authority for each level of Early Childhood Educator.
• When evaluating a specific role, you need to determine which level the skills and competencies are best aligned with. If the tasks align with a specific level, then the compensation for that role is applied. Compensation is based on the appropriate level of skill and responsibility versus being based on the potential or qualifications of the individuals alone.

Job Family and Competency Chart

For some organizations, the ranking is based on hierarchical responsibilities and for others the ranking is directly linked to market-based pay. Based on this analysis, a compensation matrix or comparative chart can be developed to track comparatives. With either approach, the goal is to identify what is required to ensure satisfactory performance and/or progression. Therefore, the same criteria should be used when hiring a new employee, during the establishment of goals and expectations, in recognizing achievement, or in promotion of an employee. Even if the factors used to differentiate between levels are based on academic or technical requirements, the importance is on actually achieving the target or receiving the credentials.

Review pay structures

Pay structures are helpful when standardizing your organization’s compensation practices. Typical pay structures can have several grades or levels, career bands, or job families with each having a minimum or maximum salary associated. These could be identified by hourly wages or annual salaries.

As in the previous example, a number of levels may exist for a role or types of roles linked together. A dollar value would be associated for each one. Creation of pay structures are based on internal and/or external data.

• Some scales are created with just one level and salary per role; all employees are started or placed at that one salary.
  • This is seen as somewhat limited as employees (or potential employees) come with a variety of experience and skill and may not have the comparable skills and abilities as outlined, yet show tremendous potential and seem to be a good fit with the culture of the organization.
• Other scales are created still with only one level per role but provide a range for the associated salary.
• Placement in the range is based on established criteria outlining experience, skill, potential and fit.
• The scale is usually created by evaluating the market comparative data. However, the placement of the person in the salary range is usually based on her or his skill and ability against other employees in the same role.
• Criteria for moving through a salary grade must align with the compensation philosophy and be identified at the time of development.

Building a matrix that identifies the hierarchy of the job family through levels as well as skills and competencies can assist in determining the appropriate placement of a position.

Example:  Job X against market data (numbers have been made up for purposes of this example)

Role evaluation for salary against external data

In this example, the intermediate and senior salary midpoints are consistent with the external market data. However, the supervisory midpoint is significantly below market averages. A supervisor in this organization would have to be receiving 110% of the salary scale to be consistent with the market’s average salary. In this case, the first salary the organization would want to address would be that of the supervisory staff.

Role evaluation for salary against internal data

Similarly in this example, the average salaries for the both the intermediate and senior staff are close to the organization’s salary midpoint, whereas the supervisory salaries are only 95% of the organization’s midpoint (which is $5,000 less than the midpoint of all the organizations who participated in the salary survey). This type of inequity, both internally and against the market, could result in increased difficultly keeping or finding the right people.

Tools and Resources

Be very careful referencing salary grids or wage scales. Salaries are affected by factors such as province, city, size of centre, resources, auspice (non-profit, public, for-profit), union or non-union, cost of living, and government subsidies or grants. The following example demonstrates what a salary grid could look like. It demonstrates the relativity of salaries – you should not focus on the absolute numbers.

This grid provided by a child care centre recognizes years of service as well as academic qualifications.

Participate in salary surveys

Salary surveys are conducted with numerous employers in the same labour market to determine pay levels for specific job categories. Generally, wage and salary surveys are conducted either by region, sector or job classification for the purposes of comparability. By participating in salary surveys, you’ll be have access to information that will allow you to benchmark your organization’s compensation practices – including wages, salaries, bonuses and benefit provisions – against other organizations in your region or sector.

Create policies and administrative procedures

Once the previous steps have been completed, it is important to document your organization’s compensation philosophy and policy.

• Once you have determined what criteria are being used for placing a person on a salary scale or in a pay range, this should be documented for consistent application across the organization.
• Once your organization determines how and when job descriptions can be updated, this should be documented for future reference.

You should also develop and document strategies for all compensation practices including merit raises, cost-of-living increases, performance reviews, bonuses and promotions.

Part-time employees

Compensation for part-time employees should be consistent with your overall compensation philosophy. In many cases, a regular part-time employee will participate in both salary and benefit programs on a pro-rated basis to that of a full-time employee. The most important consideration is that you provide the kind of fair and equitable compensation to a part-time person as you do to one working full-time.

Example: If you have an employee who works .6 of a full-time position or three days a week (22.5 hours) that employee would usually be eligible for the same benefits as a full-time employee. However, the benefits may look different and there are a few exceptions.

Vacation
If a full-time person earns 15 vacation days a year; then the part-time person should earn 15 days X .6 (the percentage of time they work part-time) or nine full-time vacation days per year. Therefore, a full-time person who takes a “week” of holidays must take five days away as per their normally scheduled days. When a part-time person takes a “week” of holiday, they are in fact only taking three days, or their normally scheduled days per week.

Statutory Holidays
A full-time person is entitled to a set number of statutory holidays a year (depending on the jurisdiction) whereas a part-time person, according to employment standards, only receives statutory holiday pay for those days that they are regularly scheduled to work. As the rules for each province differ, please consult the employment standards for your jurisdiction for further clarification on the treatment of statutory holidays for part-time employees.

Purpose of minimum wage

The minimum wage is designed to impose a broad and enforceable standard on employers that would guarantee a minimum level of income for unskilled, non-unionized workers. Minimum wage standards are also designed to stop these workers from trying to undercut each other by agreeing to work for less than someone else. Some exceptions exist for those who are student employees, self-employed, independent contracts and commissioned sales people. Each province or territory has its own minimum wage guidelines and exceptions.

Pay increases, bonus and incentive plans

Pay increases

Base pay is a fixed regular payment made to an employee in exchange for performance of the duties and responsibilities of their job. When an employee receives an increase to their base pay, it is considered a pay increase. There are various reasons and methods for determining an increase, but the common factor is that the increase changes the level of ongoing base pay.

An annual cost-of-living increase

• This is an annual increase offered to employees, regardless of performance, with the intention of increasing base pay for each job on the salary scale by a set percentage in order to combat increases in the cost of living. When this is offered regularly, employees can begin to see it as an entitlement.
• Cost-of-living increases are usually provided on an annual basis to all employees at a rate recommended by the executive director and approved by the board of directors, and is contingent on the overall financial stability of the organization.

A market adjustment following a compensation review against pre-established criteria

• Market adjustments are typically made following the receipt of market survey data. This data is usually received and evaluated towards the end of either your fiscal or calendar year. Organizations will evaluate their salaries against market data and, if required, adjust base salaries for roles that are below the range of market. Many organizations have predetermined the percent of market they want to be paying at (e.g., a decision to pay at the medium, or 75th percent).
• If a type of position in the organization is significantly overpaid compared to market, some companies will notify employees and either not provide an increase or actually reduce the midpoint for that role, which could cause an employee to become “red circled” (unable to qualify for any salary increases until the salary comes in line with market).
• This adjustment is usually implemented for all affected positions early in the fiscal or calendar year. Many small organizations are moving away from the standard cost-of-living increase and performing market adjustments instead.

A promotional increase

• A promotion is the advancement of an employee to a position that is evaluated at a higher grade level than the position to which the employee is currently assigned.
• An employee who is being promoted will receive a promotional increase at the time of the promotion aligned to the appropriate point in the new salary range considering performance, qualifications and market information.
• Promotion is usually based on availability and preparedness.

A merit increase

• Merit increases are awarded to recognize the outstanding contribution of employees and to compensate them for their high level of performance.
• Performance is the key factor in awarding a merit increase and can be the factor that moves a person through the salary scale towards midpoint or greater. Merit increases can be awarded on an employee’s anniversary date following a formal performance review or at the beginning of a calendar year, depending on your compensation structure and philosophy.

Bonus payments

Bonus pay is compensation over and above the amount of pay specified as wages or salary and it is only distributed as the organization is able to pay or as outlined in an employment contract.

Bonus pay is used by many organizations to improve employee morale, motivation and productivity or as a thank you to employees who achieve a significant goal.

As long as bonus pay is discretionary by the employer, it is not considered to be a contract. If the employer promises a bonus, they may be legally liable to pay it out.

Incentive plans

Incentive plans have not typically been popular in the ECEC sector. However, leaders are starting to see a change in perspective regarding the use of incentive plans. Providing incentive plans, especially to senior level staff, can enable organizations to compete for talent they would otherwise not have been able to pursue.

• Incentive plans are established to reward employees for improved commitment and performance, and as a means of motivation.
• An incentive plan is designed to supplement base pay and fringe benefits.
• A financial incentive plan may offer a percentage of base salary, stock options or a cash bonus, whereas a non-financial incentive plan offers benefits such as additional paid vacations or increased professional development.