establishing pay plan

Human Resource Management

© Prentice Hall, 2000 Chapter 11

Behavioral Objectives

Discuss four basic factors determining pay rates.

Explain in detail each of the five basic steps in establishing pay rates.

Present the pros and cons of job evaluation.

Define comparable worth and explain its importance today.

When you finish studying this chapter, you should be able to:

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Basic Factors in Determining Pay Rates

Legal

Union

Policy

Equity3Munif Ahmad


Five Step Process of Establishing Pay Rates

Conduct a salary survey of what other employees are paying for comparable jobs (to ensure external equity).

Determine the worth of each job in your organization through job valuation (to ensure internal equity).

Group similar jobs into pay grades.

Price each pay grade by using wage curves.

Fine-tune pay rates.

1.

2.

3.

4.

5.

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Job Evaluation

Job evaluation is aimed at determining a job’srelative worth. It is a formal and systematiccomparison of jobs to determine the worthof one job relative to another and eventuallyresults in a wage or survey hierarchy.

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Ranking Method of Job Evaluation

1. Obtain job information

2. Select raters and jobs to be rated

3. Select compensable factors

4. Rank jobs

5. Combine ratings6Munif Ahmad


Point Method of Job Evaluation

The point method is a more quantitative jobevaluation technique. It involves identifying(1) several compensable factors, each havingseveral degrees, as well as (2) the degree towhich each of these factors is present in thejob.

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Assigning Market Value

Market Value

JobA

JobB

JobC

JobD

JobE

JobF

$29.5 $34.5 $45.0 $47.3 $50.1 $59.1

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Positioning Jobs within a Band

SkillLevel

1

SkillLevel

2

SkillLevel3 & 4

SkillLevel

5

SkillLevel

6

Pay in Relation to Skills

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Comparable Worth

Comparable worth refers to the requirementto pay equal wages for jobs of comparable(rather than strictly equal) value to theemployer.

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establishing pay plan

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