A Pay Structure

melding of internal & external equity

© Nancy Brown Johnson, 2000

Develop a Pay Policy

• Above market: Lead– Increases ability to attract & retain

employees– Can be more selective in hiring

• Market– Reduces ability to select – Reduces labor expenses

Pay Ranges

• Productivity differences

• Employee performance differences

• Recognizes impreciseness of job evaluation

• Allows for seniority pay differentials

Construct Grades

• Pay grades are jobs that are similar in their worth to the organization

• Grouping of jobs

• Each grade will have its own pay range: minimum, maximum & midpoint

• Midpoint represents a fully trained employee, performing satisfactorily

PAY

Job Evaluation Points

©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997

IRWIN

80 120 160 200 240 280 320

monthlysalary($000)

8

7

6

5

4

3

2

1

40

Job Evaluation Points = 315

Predicted Salary = $6,486

Pay Policy Line

PAY

©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997

IRWIN

monthlysalary(000)

8

7

6

5

4

3

2

1

Pay Structure

Job Evaluation Points100 150 200 250 300 350

Number of Ranges

• Judgment about career paths & promotions– number of jobs– hierarchical level– reporting relationships– flexibility– pay differentials

• Broadbanding– Flexibility– Simplicity– Potential for favoritism

More on Ranges

• Range Parameters - distance between midpoints

• Range Spread– market rate, percentage spread

• Range Overlap– inducing promotions– not restricting salaries artificially– great overlap does not recognize differentials

Issues

• Reconciling internal & external equity– potential for two structures– managers weigh external data more

• Pay compression– Wages filled outside pay rises faster than

those filled within