Establishing a Pay Structure

1
Chapter 11

• Establishing a Pay Structure

2
Decisions About Pay

• Job Structure
• Relative pay for different jobs within the
  organization
• Pay level
• Average amount the organization pays for a
  particular job
• Pay structure
• The pay policy resulting from job structure and
  pay-level decisions

3
Issues in Developing a Pay Structure
4
Legal Requirements

• Equal Employment Opportunity
• Differences in pay must be tied to
  business-related considerations
• Fair Labor Standards Act of 1938
• Establishes a minimum wage
• Requirements for overtime pay
• Child labor
• Exempt vs Non-exempt

5
Market Influences

• Product Markets
• Organizations that offer competing goods and
  services
• Labor costs per industry
• Salary compression
• Labor Markets
• Attracting the best employees
• Cost-of-Living

6
Judgments About Pay Fairness
7
Job Structure

• Job evaluation
• Measuring the relative internal worth of the
  organizations jobs
• Hay Guide-Chart Profile Method
• Creates a profile for each position
• Required know how
• Degree of problem solving
• Accountability

8
Pay Structure

• Pay rates
• Pay policy line
• Shows the mathematical relationship between job
  evaluation points and pay rate
• Pay grades
• Grouping sets of jobs having similar worth or
  content together to establish pay rates

9
Sample Pay Grade Structure
10
Alternatives to Job-Based Pay

• Delayering
• Reducing the number of levels
• Creates broad bands
• Skill-based pay systems
• Pay structures that set pay according to the
  employees skill level or knowledge
• Addresses capabilities as well

11
Pay Structure and Actual Pay

• HR is typically responsible for setting and
  monitoring the pay structure
• Compa-Ratio- ratio of average pay to the midpoint
  of the pay range

12
Chapter 12

• Recognizing Employee Contributions with Pay

13
Effective Incentive Pay Plans
14
Individual Incentives
15
Team or Group Incentives
16
Organizational Incentives
17
Balanced Scorecard

• A combination of performance measures directed
  toward the companys long- and short-term goals

18
Balanced Scorecard
19
Incentive Pay for Executives