base wage & salary system 18 matakuliah: j0124 – manajemen sumber daya manusia tahun : 2010

Base Wage & Salary System18

Matakuliah : J0124 – Manajemen Sumber Daya ManusiaTahun : 2010

Learning Outcomes

After studying this chapter, the students should be able to :

• Differentiate each of the major job evaluation system• Explain the purpose of a wage survey

Bina Nusantara University 3

CompensationCompensation

•Pay is a statement of an employee’s Pay is a statement of an employee’s worth by an employer.worth by an employer.

•Pay is a perception of worth by an Pay is a perception of worth by an employee.employee.

© 2010 South-Western, a part of Cengage Learning. All rights reserved

Total CompensationTotal Compensation

DirectDirect IndirectIndirect

BonusesBonuses

GainsharingGainsharingSecurity Plans• Pensions

Security Plans• Pensions

Employee Services• Educational assistance• Recreational programs

Employee Services• Educational assistance• Recreational programs

CommissionsCommissions

Wages / SalariesWages / Salaries

Insurance Plans• Medical• Dental• Life

Insurance Plans• Medical• Dental• Life

Time Not Worked• Vacations• Breaks• Holidays

Time Not Worked• Vacations• Breaks• Holidays


Compensation Management and Compensation Management and Other HRM FunctionsOther HRM Functions

Pay rates affect selectivityPay rates affect selectivity SelectionSelection Selection standards affect level of pay required

Selection standards affect level of pay required

Pay can motivate trainingPay can motivate training Training and Development

Training and Development

Increased knowledge leads to higher pay

Increased knowledge leads to higher pay

Training and development may lead to higher pay

Training and development may lead to higher pay

Compensation Management

Compensation Management

A basis for determining employee’s rate of pay

A basis for determining employee’s rate of pay

Aid or impair recruitmentAid or impair recruitment RecruitmentRecruitment Supply of applicants affects wage rates

Supply of applicants affects wage rates

Low pay encourages unionization

Low pay encourages unionization Labor RelationsLabor Relations Pay rates determined

through negotiation

Pay rates determined through negotiation


The Bases for CompensationThe Bases for Compensation

•Hourly WorkHourly Work Work paid on an hourly basis.Work paid on an hourly basis.

•PieceworkPiecework Work paid according to the number of units Work paid according to the number of units

produced.produced.

•Salary WorkersSalary Workers Employees whose compensation is computed Employees whose compensation is computed

on the basis of weekly, biweekly, or monthly on the basis of weekly, biweekly, or monthly pay periods.pay periods.


Factors Affecting the Wage Mix


The Wage Mix—Internal FactorsThe Wage Mix—Internal Factors

•Employer’s Compensation StrategyEmployer’s Compensation Strategy Establishes the internal wage relationship Establishes the internal wage relationship

among jobs and skill levelsamong jobs and skill levels

Sets organization compensation policy to lead, Sets organization compensation policy to lead, lag, or match competitors’ pay.lag, or match competitors’ pay.

Rewards employee performanceRewards employee performance

Guides administrative decisions concerning Guides administrative decisions concerning elements of the pay system such as overtime elements of the pay system such as overtime premiums, payment periods, and short-term or premiums, payment periods, and short-term or long-term incentives.long-term incentives.


The Wage Mix—Internal Factors (cont’d)The Wage Mix—Internal Factors (cont’d)

•Worth of a JobWorth of a Job Establishing the internal wage relationship Establishing the internal wage relationship

among jobs and skill levels.among jobs and skill levels.

•Employee’s Relative WorthEmployee’s Relative Worth Rewarding individual employee performanceRewarding individual employee performance

•Employer’s Ability-to-Pay Employer’s Ability-to-Pay Having the resources and profits to pay Having the resources and profits to pay

employees.employees.


The Wage Mix—External FactorsThe Wage Mix—External Factors

•Labor Market ConditionsLabor Market Conditions Availability and quality of potential employees Availability and quality of potential employees

is affected by economic conditions, is affected by economic conditions, government regulations and policies, and the government regulations and policies, and the presence of unions.presence of unions.

•Area Wage RatesArea Wage Rates A firm’s formal wage structure of rates is A firm’s formal wage structure of rates is

influenced by those being paid by other area influenced by those being paid by other area employers for comparable jobs.employers for comparable jobs.



•Cost of LivingCost of Living Local housing and environmental conditions Local housing and environmental conditions

can cause wide variations in the cost of living can cause wide variations in the cost of living for employees.for employees.

Inflation can require that compensation rates Inflation can require that compensation rates be adjusted upward periodically to help be adjusted upward periodically to help employees maintain their purchasing power.employees maintain their purchasing power.

Consumer Price Index (CPI)Consumer Price Index (CPI) A Bureau of Labor Statistics measure of the average change A Bureau of Labor Statistics measure of the average change

in prices over time in a fixed “market basket” of goods and in prices over time in a fixed “market basket” of goods and servicesservices



•Collective BargainingCollective Bargaining Escalator clauses in labor agreements provide Escalator clauses in labor agreements provide

for quarterly upward cost-of-living (COLA) wage for quarterly upward cost-of-living (COLA) wage adjustments for inflation to protect employees’ adjustments for inflation to protect employees’ purchasing power.purchasing power.

Unions bargain for real wage increases that Unions bargain for real wage increases that raise the standard of living for their members.raise the standard of living for their members.

Real wages are increases larger than rises in Real wages are increases larger than rises in the consumer price index; that is, the real the consumer price index; that is, the real earning power of wages.earning power of wages.


Job Evaluation SystemsJob Evaluation Systems

•Job EvaluationJob Evaluation The systematic process of determining the The systematic process of determining the

relative worth of jobs in order to establish relative worth of jobs in order to establish which jobs should be paid more than others which jobs should be paid more than others within an organization.within an organization.


Different Job Evaluation SystemsDifferent Job Evaluation Systems

JOB AS JOB PARTSBASIS FOR A WHOLE OR FACTORSCOMPARISON (NONQUANTITATIVE) (QUANTITATIVE)

Job vs. job Job ranking Factor comparison system system

Job vs. scale Job classification Point system system

SCOPE OF COMPARISON



•Job Ranking SystemJob Ranking System Oldest system of job evaluation by which jobs Oldest system of job evaluation by which jobs

are arrayed on the basis of their relative are arrayed on the basis of their relative worth.worth.

Disadvantages Disadvantages Does not provide a precise measure of each job’s worth.Does not provide a precise measure of each job’s worth.

Final job rankings indicate the relative importance of jobs, Final job rankings indicate the relative importance of jobs, not the extent of differences between jobs.not the extent of differences between jobs.

Method can used to consider only a reasonably small Method can used to consider only a reasonably small number of jobs.number of jobs.


Paired-Comparison Job Ranking TablePaired-Comparison Job Ranking Table

Directions: Place an X in the cell where the value of a row job is higher than that of a column job.



•Job Classification systemJob Classification system A system of job evaluation in which jobs are A system of job evaluation in which jobs are

classified and grouped according to a series of classified and grouped according to a series of predetermined wage grades.predetermined wage grades.

Successive grades require increasing amounts Successive grades require increasing amounts of job responsibility, skill, knowledge, ability, or of job responsibility, skill, knowledge, ability, or other factors selected to compare jobs.other factors selected to compare jobs.


Point SystemPoint System

•Point SystemPoint System A quantitative job evaluation procedure that A quantitative job evaluation procedure that

determines the relative value of a job by the determines the relative value of a job by the total points assigned to it.total points assigned to it.

Permits jobs to be evaluated quantitatively on Permits jobs to be evaluated quantitatively on the basis of factors or elements—the basis of factors or elements—compensable compensable factorsfactors—that constitute the job.—that constitute the job.

•The Point ManualThe Point Manual A handbook that contains a description of the A handbook that contains a description of the

compensable factors and the degrees to which compensable factors and the degrees to which these factors may exist within the jobs.these factors may exist within the jobs.


2Point Values for Job Factors of the American Association of Industrial Management


3Description of Education Factor and Degrees of the American Association of Industrial Management

1. EDUCATIONThis factor measures the basic trades training, knowledge or “scholastic contact” essential as background or training preliminary to learning the job duties. This job knowledge or background may have been acquired either by formal education or by training on jobs of lesser degree or by any combination of these approaches.

1st Degree 14 pointsRequires the use of simple writing, adding, subtracting, whole numbers and the carrying out of instructions; and the use of fixed gauges and direct reading instruments and devices in which interpretation is not required.

2nd Degree 28 pointsRequires the use of commercial English, grammar and arithmetic such as addition, subtraction, multiplication and division, including decimals and fractions; simple use of formulas, charts, tables, drawings, specifications, schedules, wiring diagrams, together with the use of adjustable measuring instruments, graduates and the like requiring interpretation in their various applications; or the posting, preparation, interpretation, use and checking of reports, forms, records and comparable data.

3rd Degree 42 pointsRequires the use of shop mathematics together with the use of complicated drawings, specifications, charts, tables, various types of adjustable measuring instruments and the training generally applicable in a particular or specialized occupation. Equivalent to 1 to 3 years applied trades training.

4th Degree 56 pointsRequires the use of advanced shop mathematics, together with the use of complicated drawings, specifications, charts, tables, handbook formulas, all varieties of adjustable measuring instruments and the uses of broad training in a recognized trade or craft. Equivalent to complete, accredited, indentured apprenticeship or equivalent to high school plus a 2-year technical college education.

5th Degree 70 pointsRequires the use of higher mathematics involved in the application of engineering principles and the performance of related, practical operations, together with a comprehensive knowledge of the theories and practices of mechanical, electrical, chemical, civil or like engineering field. Equivalent to complete 4 years of technical college or university education.


The Compensation StructureThe Compensation Structure

•Wage and Salary surveyWage and Salary survey A survey of the wages paid to employees of A survey of the wages paid to employees of

other employers in the surveying other employers in the surveying organization’s relevant labor market.organization’s relevant labor market.

Helps maintain internal and external pay Helps maintain internal and external pay equity for employees.equity for employees.

•Labor MarketLabor Market The area from which employers obtain certain The area from which employers obtain certain

types of workers.types of workers.


The Wage CurveThe Wage Curve

• Wage CurveWage Curve A curve in a scattergram representing the relationship A curve in a scattergram representing the relationship

between relative worth of jobs and wage rates.between relative worth of jobs and wage rates.

• Pay GradesPay Grades Groups of jobs within a particular class that are paid the Groups of jobs within a particular class that are paid the

same rate.same rate.

• Rate RangesRate Ranges A range of rates for each pay grade that may be the A range of rates for each pay grade that may be the

same for each grade or proportionately greater for each same for each grade or proportionately greater for each successive grade.successive grade.

• Red Circle RatesRed Circle Rates Payment rates above the maximum of the pay range.Payment rates above the maximum of the pay range.


Single Rate Structure


Wage Structure with Increasing Rate Ranges


The Wage Curve (cont’d)The Wage Curve (cont’d)

•Competence-based Pay, (also skill-based Competence-based Pay, (also skill-based pay or knowledge-based pay)pay or knowledge-based pay) Compensation for the different skills or Compensation for the different skills or

increased knowledge employees possess increased knowledge employees possess rather than for the job they hold in a rather than for the job they hold in a designated job category.designated job category. Greater productivity, increased employee learning and Greater productivity, increased employee learning and

commitment to work, improved staffing flexibility to meet commitment to work, improved staffing flexibility to meet production or service demands, and the reduced effects of production or service demands, and the reduced effects of absenteeism and turnover,absenteeism and turnover,

•BroadbandingBroadbanding Collapses many traditional salary grades into a Collapses many traditional salary grades into a

few wide salary bands.few wide salary bands.© 2010 South-Western, a part of Cengage Learning. All rights reserved

Significant Compensation IssuesSignificant Compensation Issues

•Equal Pay for Comparable WorthEqual Pay for Comparable Worth The concept that male and female jobs that The concept that male and female jobs that

are dissimilar, but equal in terms of value or are dissimilar, but equal in terms of value or worth to the employer, should be paid the worth to the employer, should be paid the same.same.

•Low-Salary BudgetsLow-Salary Budgets Current wage budgets reflect the general trend Current wage budgets reflect the general trend

toward tight compensation cost controls.toward tight compensation cost controls.


base wage & salary system 18 matakuliah: j0124 – manajemen sumber daya manusia tahun : 2010

Documents

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pay system

required pay

rights reserved slide

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cengage learning

higher pay training

monthly pay periods