1 chapter 11 pay structure decisions. 2 introduction what is the importance of pay from the employer...
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11
Chapter 11
Pay Structure Decisions
22
Introduction
What is the importance of pay from the employer point of view?
What is the importance of pay from the employee point of view?
33
Introduction
The relative pay of different jobs (job structure) and how much
they are paid (pay level).Pay Structure
The average pay in organizations, including wages, salaries, and bonuses.
Pay Level
The relative pay of jobs in organizations (i.e., the range of pay often expressed by salary grades).
Job Structure
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Equity Theory and Fairness
Pay StructureDecision Area
AdministrativeTool
Focus of Employee PayComparison
Consequences ofEquity Perceptions
Pay Level
Job Structure
Market pay surveys External equity
External employee
movement, labor
costs, employee
attitudes
Job evaluation Internal equity
Internal employee
movement,
cooperation,
employee attitudes
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Developing Pay Levels
Market Pressure
The challenge to sell goods and services at a quantity and price that will bring a return on investment.
Product Market Competition
The amount an organization must pay to compete against other organizations that hire similar employees.
Labor Market Competition
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Developing Pay Levels
Employees as A Resource
Employees are an investment
Deciding What to Pay?
Pay Leader As Others (Going Rate) Pay Follower
A theory stating that wages influence worker productivity.Efficiency Wage Theory
77
Developing Pay Levels
Market Pay Surveys
Comparing an organization’s practices against those of the competition
Benchmarking (Salary Survey)
Different employees in the same job that may have different pay rates.
Rate Ranges
Benchmark jobs, used in pay surveys, that have relatively stable content and are common to many organizations
Key Jobs
Jobs that are unique to organizations and cannot be directly valued or compared through the use of market surveys
Non-key Jobs
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Developing Pay Levels
Developing A Job Structure
An administrative procedure that measures a job's worth to the organization
Job Evaluation
the characteristics of jobs that an organization values and chooses to pay for
Compensable Factors
Job evaluators often apply a weighting scheme to account for the differing importance of the compensable factors to the organization
The Point – Factor System
The relative worth of various jobs in the organization, based on internal comparison
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Developing Pay Levels
Developing A Pay Structure
Emphasize on external comparisons as it bases pay on market surveys that cover as many key jobs as possible
Market Survey Data
A mathematical expression that describes the relationship between a job’s pay and its job evaluation points
Pay Policy Line
Jobs of similar worth or content grouped together for pay administration purposes
Pay Grades
The distance between the minimum and maximum amounts in a pay grade
Range Spread
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Developing Pay Levels
Conflicts Between Market Pay Surveys and Job Evaluation
Differences in values obtained by market pay survey and job evaluation
What Does it Mean?
Emphasizing the internal data (job evaluation) or emphasizing the external data (market pay survey)
What are the Scenarios?
If jobs are paid higher (Increase in labor costs and creates product-market problems)
What are the Consequences?
If jobs are paid Lower (Increase in employees dissatisfaction)
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Developing Pay Levels
Monitoring Compensation Costs
An index of the correspondence between actual and intended pay
Compa-Ratio
Grade Compa-Ratio = Actual average pay for grade / Pay midpoint for grade
Globalization, Geographic Region, and Pay Structure
Why pay structures might differ substantially across countries?
Why expatriate pay and benefits continue to be linked more closely to the home country?
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The Importance of Process: Participation and Communication
Participation
Communication
1313
Current Challenges
Problems with Job Based Pay Structures
Encourage bureaucracy
Reinforce top-down decision
Can become a barrier to change
May not reward desired behaviors
Encourage promotion-seeking behavior
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Current Challenges
Responses to Problems with Job-Based Pay Structures
Reducing the number of job levels within an organizationDelaying and Banding
Paying individuals for the skills they are capable of usingSkill-Based Pay
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Current Challenges
Can the US Labor Force Compete?
Instability of country differences in labor cost
Skill level
Productivity
Non labor considerations
Executive Pay