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Copyright © 2013 Pearson Education
Establishing Strategic Pay Plans11
Chapter 6-1
Copyright © 2013 Pearson Education
Learning Objectives
1. List the basic factors determining pay rates.
2. Define and give an example of how to conduct a job evaluation.
3. Explain in detail how to establish a market-competitive pay plan.
Chapter 6-2
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Learning Objectives4. Explain how to price managerial
and professional jobs.
5. Explain the difference between competency-based and traditional pay plans.
6. List and explain six important trends in compensation management.
Chapter 6-3
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List the basic factors determining pay rates.
Chapter 6-4
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Basic Factors in Determining Pay Rates
• Aligning total rewards with strategy• Equity and its impact on pay rates• Equity theory of motivation• Addressing equity issues
Chapter 6-5
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Legal Considerations in Compensation
• Fair Labor Standards Act (1938)• Exempt/nonexempt• Equal Pay Act (1963)• Employee Retirement Income
Security Act (1974)• Other legislation
Chapter 6-6
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Other Factors• Union influences on compensation
decisions• Pay policies• Geography
Chapter 6-7
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Review• Alignment with strategy• Equity – external, internal• Legal Considerations• Union influences• Pay policies• Geography
Chapter 6-8
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Define and give an example of how to conduct a job evaluation.
Chapter 6-9
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Job Evaluation Methods
• Compensable factors
• Preparing for the job evaluation
Chapter 6-10
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Job Evaluation Methods: Ranking
1. Obtain job information
2. Select and group jobs
3. Select compensable factors
4. Rank jobs
5. Combine ratings
Chapter 6-11
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Job Evaluation Methods
• Job classification• Point methodo “Packaged” point
plans
• Computerized job evaluations
Chapter 6-12
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Review• Compensable factors• Preparation• Ranking• Classification• Point method• Computer-based
Chapter 6-13
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Explain in detail how to establish a market-
competitive pay plan.
Chapter 6-14
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How to Create a Market-Competitive Pay Plan
• Choose benchmark jobs• Select compensable factors• Assign weights • Convert percentages to points• Define each factor’s degrees• Determine degrees and assign points
for job factorsChapter 6-15
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How to Create a Market-Competitive Pay Plan
• Review job descriptions and specifications
• Evaluate the jobsoWhat is a market competitive pay plan?oWhat are wage curves?
Chapter 6-16
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How to Create a Market-Competitive Pay Plan
• Draw current (internal) wage curve• Conduct market analysis: salary
surveysoCommercial, professional, and
government
• Using internet to do compensation surveys
Chapter 6-17
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How to Create a Market-Competitive Pay Plan
• Draw market (external) wage curve• Compare and adjust • Develop pay grades• Establish rate ranges• Address remaining jobs• Correct out-of-line rates
Chapter 6-18
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Review
Chapter 6-19
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Explain how to price managerial and professional
jobs.
Chapter 6-20
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Pricing Managerial and Professional Jobs
• Compensating executives and managers
• What determines executive pay?oElements of executive payoManagerial job evaluation
• Compensating professional employees
Chapter 6-21
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Review
• Executives• Professionals• Pay
Chapter 6-22
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Explain the difference between competency-based
and traditional pay plans.
Chapter 6-23
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Contemporary Topics in Compensation
• Competency-based pay
• What is it?• Why use it?• In practice• The bottom line
Chapter 6-24
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Review
Chapter 6-25
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List and explain six important trends in compensation
management.
Chapter 6-26
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Trends
• Broadbanding• Actively managing• Comparable worthoThe pay gap
• Board oversight• Total rewards and tomorrow’s pay
programsChapter 6-27
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Review• Broadbanding• Management• Worth• Boards• Tomorrow
Chapter 6-28
Copyright © 2013 Pearson Education
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Chapter 6-29