In today’s competitive job market, it’s critical to pay your employees at or above market salaries. If you offer low wages, you risk losing key talent to competitors, while if you pay too much, your bottom line may suffer. An effective way to assess your salary structure is to see what your competitors pay. Job Pricing allows you to see whether you undercompensate or overcompensate by seeing how your salary structure matches up to market figures. SAP Job Pricing functionality, a new module in Enterprise Compensation Management (PA-EC), is available as of SAP Enterprise 4.7 Extension Set 2.0.

Once you’ve set up the foundational components of Job Pricing in your system (which I explained in part 1 of this series), you need to match your internal jobs to survey jobs and then age your data. I’ll explain that process and describe how to create a job composite. Lastly, I’ll discuss how to compare your internal salary structures to market salary structures.

Matching internal jobs to jobs out in the market provides you with the ability to determine how competitive your compensation is and enables you to proactively recruit and retain key talent in your organization. If, for example, your company wants to lure IT professionals, it might sweeten compensation deals for these positions (including their base salary).

Creating a job composite allows you to create job hybrids to assist in your benchmarking analysis. Comparing your internal salaries to market rates gives you an overall view of how you pay your employees (from administrative assistants to executives) and provides you a basis on which to adjust your pay ranges if warranted based on market conditions.

Match Internal Jobs to Survey Jobs

Matching internal jobs to survey jobs is one of the most subjective tasks within the market pricing process. The most important tip I can give to guide you is to map based on true business function, rather than on title alone. You can get yourself in trouble if you rely too heavily on job titles. A general manager in one company could have totally different responsibilities in another. Be sure to use internal job descriptions and requirements against survey job descriptions.

To begin job matching, access Job Pricing in your system via transaction PECM_START_JPR_BSP. This launches a Web page with the Job Pricing home page. Select the Job Matching link. Another Web page that houses the job matching functionality appears with two tables. The table on the left searches against your internal jobs, and the one on the right searches imported survey jobs. For your internal jobs, available search criteria include job title, job group, job group name, position title, employee name, and employee number. For survey jobs, available search criteria include job title, job family code, job family name, job code, survey code, survey name, survey provider code, and survey provider name.

As you perform searches, remember that wildcards are acceptable. For example, the phrase *HRIS* returns all jobs (or survey jobs) with HRIS somewhere in the title. Note that, regardless of your search criteria, the resulting output always returns with job name, job group, and end date for your internal jobs (on the left side) and provider name, survey job name, level, and job family for the survey jobs (on the right side). See Figure 1.

Figure 1

Job matching with internal jobs on the left, survey jobs on the right, and matched survey jobs at the bottom of the screen

Match as many survey jobs to your internal job as necessary by selecting your internal job on the left and the survey job on the right. For each match, select the Match selected jobs button in the middle of Figure 1. You can only match one at a time, but all matches appear in the bottom of the screen. You then can edit some important job matching properties, such as a new start and end date, weight factor (i.e., weighting), and matching percentage for each survey job. You also can remove a matched survey job if you later believe the match is not correct. To do so, highlight the row of the survey job in the Job Matches section at the bottom of the screen and select the Remove Job Match button.

Age the Data

In most cases, you need to age your imported market data to a common point in time. This is because you want to account for market movement from the time researchers conducted the survey to the date you want your changes to be effective. You can access aging functionality from the main job pricing Web page (transaction PECM_START_JPR_BSP) by clicking on the Aging link. You can age by survey, by job, and by the scope of market data (e.g., country or industry). To do so, first select the survey you want to age. The job catalog of the selected survey appears on the bottom on the screen (Figure 2).

Figure 2

Age market data using data cuts with an age factor of 2.4 percent until 12/31/2006

In this example, I age market data using an industry data cut of Telecom with an age factor of 2.4 percent until 12/31/2006. A data cut affords you the ability to filter market data for your aging. The age factor represents a movement rate of the market, typically quite similar to inflation. In the example provided, 2.4 percent was assumed to be the inflation for the given aging period. This percentage is available within the compensation community, based on government and financial statistics.

In the section at the top of Figure 2 entitled Aging Parameters, you can choose to age the market data by a given percentage by either a Market Movement Rate or an Age Factor. You also must choose a date to age to. You must select at least one survey job to include in your aging. You can age all jobs at one time by clicking on the Select All button. In my example in Figure 2, I increased the market data by an age factor of 2.4 percent. Over this aging period, the system calculates the new price points (such as 25 percent, 50 percent, 75 percent, and median) based on this percentage increase. Figures 3 and 4 show the market data before aging (the Market Data tab) and after (the Results of Aging tab). Save the aged data to your aging date by clicking on the Save button.

Figure 3

Market Data tab displays unaltered market data

Figure 4

Results of aging market data

Create Job Composite

Creating a job composite is an optional step. Creating job composites allows you to create job hybrids to assist you in your benchmarking analysis. The purpose of a job composite is to build a compound based on multiple job matches (and selected market data cuts) to compare against internal jobs (object type C), positions (object type S), and employee data. By comparing internal data to market data (using composites), compensation specialists should see trending and data points in ways that otherwise would be tedious. Comparing individual market data results to each employee or job within your company would be an arduous and sometimes unachievable task.

You may decide not to create job composites in your organization. Some corporations are content with market data analysis that consists solely of survey job catalog and market data import for the purpose of job matching. This provides the benchmarking needed for internal to external comparisons. The additional step of creating composites allows compensation professionals to take this analysis further by permitting blended jobs from various external sources to compare against internal jobs or individual employees.

To create a composite job, click on the link entitled Composite Result by Internal Job from the main job pricing Web page (transaction PECM_START_JPR_BSP). Search for your market data based on a specific job by using the search criteria. These are the internal jobs in your organization (that Organizational Management stores) and not the survey jobs. You can search by job title, job group, job group name, position title, employee name, and employee number. After you have selected your internal job from the available list, the results of your matching appear in the Job Matches section (Figure 5). The section lists the job matches for the given internal job and appears automatically.

Figure 5

Select your market criteria to create a job composite screen

To build a composite job, select the cut of data you want to use to build the composite under the Market Criteria Selection section. Select the default drop-down option All Values to bring over all provider data regardless of survey or data cut.

After you have selected the market data you wish to include in the composite job, the correct cut of market data appears in the Build Composite Result tab (Figure 6). You can use the market data presented here to build the composite job.

Figure 6

Initial screen for building the composite screen

To create the composite, select the market data that you want to include in the composite and select the Build Composite button in Figure 7. I have chosen to build a composite for job Sr HRIS Analyst. By selecting both rows of market data (one from Vendor A and one Vendor B), I am blending the market results from two disparate surveys.

Figure 7

Composite created

To review the data of the composite, you can click on the Show All Columns button to see all data points. Next, save the composite by clicking on the Save as button. This adds another part to the bottom of your screen (Figure 8). To save the composite information, enter a Composite Result Name, Country Grouping, and a Valid From date. Leave the Composite Result field blank, as the system creates this for you.

Figure 8

Save composite job

At any point after building the composite, you can overwrite composite information such as the percentiles. You might do this if you want to alter survey information manually or if your market data vendor reported this information incorrectly. Once you save the information, your system stores it in infotype 1271 (composite survey result) on the internal job (object type C) to which the market data is matched (Figure 9). You can view and edit this information anytime via transaction PP01. Manager Self-Service (MSS) provides a standard iView called Salary Data. You can give this to managers so they can view composite information. The iView has a bar chart with percentile information for the relevant composite attached to an employee’s job.

Figure 9

Infotype 1271 (composite survey result) for an SAP HR job

Lastly, you can compare the composite job you created with your own internal data, including the meaning of your internal data, the positions tied to that job, and the employees who have that job. Click on the Compare Market vs. Internal Data tab after saving your composite description. This enables you to perform any comparisons between the composite market data and your company’s position, job, or employee information.

In addition to comparing the composite to a job, position, or employee, you can look at a variety of different slices of data, including percentile, frequency, pay category (e.g., base salary or total compensation), and currency. You can look at the data from different angles, whether from a frequency perspective (annually, biweekly, or hourly), percentile perspective (tenth, twenty-fifth, or fiftieth), or pay category perspective (such as base pay or total compensation). This lets you conduct a more thorough analysis of your company’s competitive compensation data.

It is important to maintain infotype 1005 (planned compensation) on your position and job objects if you wish the comparison to work for the jobs and positions, though this might not be your standard business practice. The system retrieves the internal value, the market value, the absolute difference, and the percentage difference. From this point, you can see how your company stacks up against your custom-blended composite: the composite of jobs created from the most meaningful market data to your business.

You can create composite jobs en masse by clicking on the Create Mass Composite Result link. That process is outside the scope of this article.

Compare Internal and Market Structures

This optional step of the process allows you to compare your internal salary structures (pay grades) to market salary structures based on market composite results. You can create one or more planned salary structures based on the market data you have obtained and massaged during your analysis and then update your current structure based on these results.

To use this functionality, click on the Salary Structure Adjustment link on the main job pricing Web page (transaction PECM_START_JPR_BSP). Search for your current pay grade structure by country grouping, salary type, or salary area (Figure 11). You only can update pay grades (and not pay scales), which means table T710 entries but not table T510 entries. Pay grades are typically used for salaried and non-pay-scale hourly employees, whereas pay scales typically are used for hourly employees on a set step progression (such as a unionized employee).

Figure 10

Compare the composite job to your internal job

Figure 11

Select a current salary structure

Once you have selected a current salary structure (i.e., country grouping, pay grade type, and pay grade area), you can view the composite results by selecting the Market Data tab (Figure 12). This tab displays information such as the composite’s Market Minimum, Market Average, Market Maximum, Market Median, Difference % Market Minimum, Market Average Difference, and Market Median Difference with respect to the selected pay grade.

Figure 12

Composite result compared to current salary structure

You can view different cuts of information such as percentiles, pay category, and aggregation type (pay grade, pay grade and level, and pay grade and job group). You may, for example, want to understand how your Sr. HRIS Analyst composite would integrate into your existing pay structure. To do this, you would select the composite from the drop-down menu and use the various slices of data for your analysis.

When you select the Planned Salary Structure tab, your system merges the composite information to fit within your existing salary structure of the selected pay grade. In Figure 12, I selected the pay grade USA under Country Grouping, the Salary Type is Salaried Exempt, and the Salary Area is Northeast. Clicking on the Show All Columns button displays all current and planned values for market minimum, average, maximum, and median as well as the differentials between the market and current range information (Figure 13).

Figure 13

Display all current and planned values as well as the differentials

When you are satisfied with the planned salary structure, click on the Save as button and name your planned salary structure.

Salary Adjustment

Once you are ready to revise your pay structure, you can update your pay grades based on market data by following the IMG menu path Personnel Management>Enterprise Compensation Management>Job Pricing>Pay Grades and Levels>Update Pay Grade Amounts from Market Data (Figure 14).

Figure 14

Update your pay grades based on market data

Be aware that changing pay structures is a decision that the entire organization must discuss and approve. This salary adjustment process can revise your pay structures through an automated upload procedure. Most organizations already have developed complex processes for analyzing and seeking approval for changes to salary grades and ranges. Though not currently popular, this salary adjustment functionality provides an alternative for those companies seeking more automation updates to their salary structures based on market data.

Jeremy Masters

Jeremy Masters is an author, speaker, and SAP ERP HCM subject matter expert with more than 12 years of experience. Jeremy is also the co-founder and managing partner of Worklogix, which provides SAP ERP HCM professional services and software solutions to Fortune 1000 companies. Jeremy has been involved in more than 20 projects, many of them global in scope. In addition to ECM, Jeremy has worked with the talent management functionality, including performance management, succession planning, and e-recruiting as well as the employee and manager portals in SAP ERP. For more information on Enterprise Compensation Management, you can reference his book Enterprise Compensation Management with SAP ERP HCM.

You may contact the author at jmasters@worklogix.com.

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