Compensation Insights: Understanding Benchmarked and Slotted Roles

Organizations often conduct compensation studies to ensure they are paying their employees competitively while maintaining internal equity. Two essential terms that frequently come up in the context of these studies are "benchmark positions" and "slot positions." These terms are integral to the process of determining fair, equitable, and competitive compensation packages for employees. In this guide, we will delve into the key differences between benchmark positions and slot positions in a compensation study.?

Benchmark Positions?

Benchmark positions are fundamental to the compensation study process. These are the positions within an organization that serve as the primary reference points for determining competitive market rates. Benchmark jobs are typically those that have broad representation across the organization, and they are also roles that can be found in other organizations. Let's break down the concept of benchmark positions:?

• Market Pricing: Benchmark positions are the jobs that organizations use to assess their compensation against external market data. In other words, they are the roles that are "market-priced" using salary surveys. The market price for these positions is determined based on the responsibilities, qualifications, and other relevant factors of the role.?
• External Focus: The primary focus of benchmark positions is external. They are used to understand how competitive an organization's compensation packages are in comparison to what other organizations offer for similar roles.?
• Wide Representation: Benchmark positions are carefully selected to represent a wide range of roles within the organization. They are often positions that are common and easily identifiable in various industries.?
• Comparative Data: Organizations use benchmark positions to compare their pay structures and compensation practices with industry standards, helping them make informed decisions about employee compensation.?
• Blending: Blending is a concept related to benchmark positions, and it involves using market data from two or more positions in a single survey to create a market rate for a hybrid or unique job within the organization. This is particularly useful when the organization has roles that do not have an exact match in external salary surveys.?

Slotted Positions?

Now, let's shift our focus to slotted positions. Slotted positions are the roles that are not necessarily benchmarked with external data but are placed within the organization's internal pay structure based on their internal equity with other positions. Here are the key characteristics of slotted positions:?

• Internal Equity: Slot positions are primarily concerned with maintaining internal equity within the organization. These positions are slotted into the organization's pay structure to ensure that they are compensated relative to other roles within the same company.?
• No External Benchmark: Unlike benchmark positions, slot positions do not rely on external market data for setting their compensation. Instead, their compensation is determined by how they fit in with the company's internal hierarchy.?
• Customized Approach: Slotting is a more customized approach to compensation. It considers the specific dynamics and needs of the organization rather than relying on industry standards.?
• Varied Roles: Slot positions can encompass a wide range of roles within the organization, from unique specialized jobs to roles with limited representation.?

Why should we distinguish between benchmark and slot position??

There are several reasons for determining which positions in your organization should be classified as a benchmark versus slotted position. The cost, from both the timeliness and monetary perspective, to benchmark all the positions within an organization, is usually not a feasible goal. Our NFP Total Rewards and Compensation Practice recommends identifying between 50-75% of the unique roles within your workforce to represent your benchmark position for a mid- to large-sized organization. For more intimate organizational sizes it may be appropriate to benchmark a higher percentage of your workforce. This group of benchmark roles should represent a variety of key functional areas, career levels, and the diversity within your workforce.??

Though there are many options for reliable and valid salary data survey sources, it is not always possible to find matches within these sources for the unique roles within your organization. It is important to remember, that the key to a successful foundation in your benchmarking work is to match your role against a survey source based upon the position’s responsibilities and not the job title. Job titles can vary in their meaning and representation of scope of work across organizations, industries and even geographic boundaries.??

Conclusion?

Benchmark positions and slot positions play distinct roles in the compensation study process. Benchmark positions are used to gauge an organization's competitiveness in the external job market, while slot positions focus on maintaining internal equity and ensuring that roles are compensated fairly within the organization’s pay structure. Understanding the differences between these two concepts is essential for organizations to strike the right balance between market competitiveness and internal fairness when it comes to employee compensation. By effectively utilizing both benchmark and slot positions, organizations can design compensation packages that attract and retain top talent while ensuring internal equity among their employees.?