Developing Salary Structures: Determining Range Spread, Range Overlap, and Red or Green Circle Targe

1
Developing Salary StructuresDetermining Range
Spread, Range Overlap, and Red or Green Circle
Targets

• The Compensation Handbook
• Chapters 10

2
In this session

• Now that we have some basic pay structure, its
  time to tweak it
• The tweaking aspects are
• Making sure the range spread is what you want it
  to be
• Making sure that there is appropriate overlap
  between each adjacent grade
• Making sure that each job in its correct pay
  grade
• Identifying pay rates below the pay minimums and
  above the pay maximums

3
Look at Project III Guide

• Divide the positions into tentative groupings by
  looking for natural point breaks
• Look to see if the jobs placed together seem to
  be substantially equal for pay purposes and
  represent similar skill, effort, and
  responsibility.
• Look to see if any jobs that have been placed
  together include ones where one position usually
  supervises the other or would be considered a
  promotion from the other
• Develop the Grades by point spreads and try to
  even out the point spreads between grades

4
Example of Point Assignments for Benchmark Jobs
Regression Line
100 400 700
1000
Point Totals
5
Pay Structure
Grade Midpoints
PAY GRADE
5
4
3
PAY RANGE
2
1
PAY POLICY LINE
200 400 600 800 1000 1200
Job Evaluation Points
6
Putting It All Together

• Checkpoint Does the range spread increase
  progressively as grades increase or is there a
  constant range spread? (You probably want a
  progressive range spread)
• Checkpoint Are jobs grouped in natural
  groupings by points so that the range width makes
  sense? (This is arbitrary on your part)
• Checkpoint Have all jobs been placed according
  to their points in a job grade? (Make sure a
  supervisor is in a grade above those s/he
  supervises)

7
Putting It All Together

• Checkpoint Is there an appropriate amount of
  overlap between adjacent grades? (Shoot for
  70-75)
• Calculation Max Grade 1-Min Grade 2 X 100
• Max Grade 1-Min Grade 1
• Rule of thumb Shoot for an overlap of about a
  third into the next grade

8
Putting It All Together

• Checkpoint Are there now jobs that receive a
  rate of pay below the minimum of the grade or
  above the maximum of the grade? (If so, the job
  incumbents must receive a raise to the minimum or
  be frozen at the maximum, until such time as the
  grade catches up---BE WARYTHIS IS DEMOTIVATING
  FOR SOME PEOPLE!)

9
Pay Variations

• Red-circle rates
• Rates above the range maximum

• Green-circle rates
• Rates below the range minimum

• Pay compression
• Small differences in pay regardless of
  experience, skills, or seniority

10
A Compa-ratio is.....

• A useful approach for analyzing how people are
  paid within each pay range to control budgets and
  insure no discrimination between groups
• Indiv. Pay Rate X 100
• Midpoint of Range
• EXAMPLE
• 9/hr
  112.5
  
  

8/hr