ASSIGNMENT COVER

REGION: HARARE SEMESTER: 2 YEAR: 2022

PROGRAMME: HUMAN RESOURCES INTAK E: 31

FULL NAME OF STUDEN T: TARIRO CHIBIRA PIN: P1863665C

EMAIL ADDRESS: tarychibira@gmail.com

CONTACT TELEPHONE/CELL: 0773996717 ID. NO.: 37 101479 T38

COURSE NAME: REWARD MANAGEMET COURSE CODE: BHIR405

ASSIGNMENT NO. e.g. 1 or 2: 1 STUDENT’S SIGNATURE

DUE DATE: 14 /02/22 SUBMISSION DATE: 14/02/22

ASSIGNMENT TITLE:(a) Explain how pay structures are set up. [25 marks]
b)Evaluate the necessity of having a pay structure in the organization. [25 marks]

MARK ER’S COMMEN TS:

OVERALL MARK: MARK ER’S NAME:

MARK ER’S SIGNATURE: DATE:
 (a) Explain how pay structures are set up. [25 marks]

Salary/pay is the core element of remuneration in any system and it is specific to a job grade
within a defined hierarchy where all employees are mapped. Pay structures set out the different
levels of pay for jobs, or groups of jobs, and these are determined by the relative internal value of
the job as established by job evaluation. The other factors that determine the pay structure
include external relativities which are assessed via market rate surveys. To design a pay
structure, there must be a formal way to value the work inside the organization so that pay is
awarded fairly and this formal way of valuing work is determined through the analysis of
different determinants of pay. The pay structure determinants can be analyzed in sequential steps
which include job analysis; job evaluation; pay survey analysis; pay policy development; and
pay structure formation (Martocchio 175-176) and these steps are explained in detail below.

Step 1: Job Analysis

Before setting up a pay structure, the first stage to be taken by human resources
professional/consultants is to conduct a job analysis. This is the process of studying jobs in an
organization to come up with a job description that includes the job title, a summary of the job
tasks, a list of the essential tasks and responsibilities, and a description of the work context. Job
description also include the knowledge, skills and abilities needed to perform the job. The
process of job evaluation identifies major aspects which are the main determinants of
compensation (wage/salary) allowed to an individual worker. The process also analyzes the
existing pay structure so establish if there is a need to review the current salary levels, policies,
procedures and problems surrounding pay within the organization. Job analysis is a critical
function in human resources (HR) functions which includes compensation, recruitment and
training. The HR personnel need to understand what tasks, duties and responsibilities various
jobs will entail before assigning fair and competitive pay rates.

Step 2: Job Evaluation

Job evaluation is known as the process of judging the relative worth of jobs in an organization.
The necessity of job evaluation is to develop an internal structure or hierarchical ranking of jobs.
The job evaluation process will help develop the internal work hierarchy as well as different
evaluation methods, pay strategies, and pay structures that can used for different job families in
the organization. The firm may decide to use a skills-based approach for information systems
and engineering job families, job-based evaluation approach for the operations, office support,
and HR job families (Martocchio 10). For the purpose of pay structure set up, job-based
evaluation is commonly used than person-based evaluation. Job-based evaluation is conducted
using three main methods which are: the point method; ranking; and classification. The process
of job evaluation helps to ensure that pay is internally aligned and perceived to be fair by
employees making it an important step in determining or setting up of aa pay structure. The job
evaluation system can have either grades or points which can be used to draw up a scatter
diagram. A scatter diagram is a graphical presentation that shows the points or grades on the
horizontal axis and the salaries on the vertical axis.

Step 3: Pay Policy (strategy) Identification

This is the process of determining whether the firm wants to lead, lag or meet the market in
compensation. The pay strategy is the one which will likely influence employee attraction and
retention. Pay policies can vary across job families for instance, groups of similar jobs, and job
levels if the top management feels that different strategies can be effective in different areas of
the organization.
Step 4: Pay Survey Analysis
Pay survey analysis refers to the process of analyzing compensation data gathered through
surveys from employers in the same industry (Martocchio 182). Collection of external pay data
such as base pay, bonuses, stock options and benefits are important in keeping the firm’s
compensation externally competitive within the industry. By maintaining externally aligned pay
structures, the firm’s level of employee attraction and retention can be improved. The process
takes into consideration benchmarking of jobs that are common and consistent across a wide
range of employers because they will be used to design the pay structure. The stage involves
obtaining information about current market rates, for instance, what other organizations are
paying certain key positions or benchmark jobs.

Step 5: Pay Structure Creation

A decision is to be made first on what type of pay structure is required to suit the needs of the
enterprise, for example, a broad band and narrow band structure. When the choice on the type of
par structure is finalised, then the actual work on developing the pay structure begins. Pay
structure creation combine the information obtained from job evaluation and pay survey analysis
to develop the pay structure. The pay structure can be designed utilizing the simple regression
analysis that can be used to develop a market pay line. The philosophy of the organization on
whether to lead, lag or meet the market can now be used to make some adjustments to the market
pay line either upward or downward. The pay structure formulation is completed by developing
pay grades and pay ranges.

The pay structure will establish a pay policy line, design pay grades using pay grade minimum
and maximum and desired spreads of the range. They also determine overlap between pay
grades, and whether the organization needs more than one pay structure and why. A pay
structure design is aimed at addressing issues such as the lowest rate of pay that can be offered,
the rate of pay necessary to retain employees, recognition of seniority and merit through the base
pay schedule, rate of pay to employees performing identical/similar jobs, sufficient difference in
base rates of pay and recognizing dangerous working conditions in its base pay schedule among
others.

After the completion of the proposed pay structure, the estimates costings are calculated based
on the new structure and these costings look at basic salaries, bonus, pension contributions and
any hidden costs. In line with the organizational philosophy, presentation is then made to
management recommending the new pay structure for approval.
 b) Evaluate the necessity of having a pay structure in the organization. [25 marks]

A pay structure id defined by Armstrong (2009, p. 796) as “consisting of an organization’s pay

levels or seals for single jobs or groups of jobs”. It defines the different levels of pay for jobs or
groups of jobs by reference to their relative internal value as determined by market rate surveys
and sometimes to negotiated rates for jobs. It is a collection of pay grades, levels or bands which
links related jobs within a hierarchy. A pay structure is meant to provide a framework that can be
used in implementing reward strategies and policies within a business entity. Pay structures are
designed to provide a fair and consistent basis for motivating and rewarding employees hence
satisfying the objectives of the firm through a logically designed framework within which
internally equitable and extremely competitive reward policies can be implemented. The essay is
aimed at evaluating the necessity of having a pay structure in an organization through Croco
Motors Zimbabwe Limited.

The pay structure is much needed in an organization because it provides a fair and consistent
basis for motivating and rewarding employees. The aim of a pay structure is to further the
objectives of the organisation by having a logically designed framework within which internally
equitable and extremely competitive reward policies can be implemented, although the difficulty
of reconciling often conflicting requirements for equity and competitiveness has to be
recognised. The pay structure is necessary because it help the firm in the management of
relativities and enable it to recognise and reward people appropriately according to their job role
size, performance, contribution, skill and competence. With the pay structure in an organization,
it is possible to communicate with the aid of the structure the pay opportunities available to all
employees.

Pay structures are an important factor in business entities such as Croco Motors because besides
indicating rates of pay for different jobs/people within an organization or developing clear
processes for managing pay, pay structures are also aimed at ensuring that organizations are
consistently paying their staff appropriately for what they do and to reflect their worth to the
business. Having pay structures enabled Croco Motors to have a logically-designed framework
within which equitable, fair and consistent reward policies are implemented hence enabling the
firm to encourage the desired behaviors and performance in its workforce to meet the firm’s end
goals. Operating with the right pay structure, that meets both the needs of the organization and
the workforce, can provide the business with all kinds of benefits such as those to be discussed
blow.

For Croco Motors, having an appropriate pay structure has facilitated the fair treatment of the
workforce. Each of the employees at Croco Motors generally understand exactly where their role
fits into the organization. The existence of the pay structure helps the firm to have motivated
staff as the fair process helps to determine both their job grade and pay which is free from
unlawful bias. Operating with a pay structure has resulted in Croco Motors abiding with the labor
and human rights legal frameworks such as eliminating discriminatory pay practices between
men and women in organizations, where an employer is under a duty to ensure equal pay for
equal work. Creating a pay structure ensures fair treatment of workers as well as fair process of
determining both job grade and pay.

With reference to Croco Motors, having a rational, fair and transparent pay structure in place
enabled the staff members to understand how pay is managed within the organization. This has
helped also in inspiring confidence in employees and potential recruits that the firm is committed
to fair working practices, including equality of pay based on objective factors like fair job
evaluations. Sharing of the pay structure, and the process of developing it, with employees and
potential employees inspires confidence hence creating an open and trusted conversation about
pay. It is highly motivational if workers understand the avenues open to career and pay
progression as this allows for open dialogue about what’s required to progress pay or grade
within the business. This entails prevents less productive discussions between employees and
line managers with no real focus. It can be argued that this allows for an adult-to-adult
conversation about what is required to progress pay or grade within the business.

Having a pay structure in an organization creates room for employee engagement resulting in
employees feeling fairly treated, understanding what steps can be taken to progress their career.
Not only that, but also employees get to know where they sit within the organisation and how
their contribution adds to the overall effort due to a clearly communicated pay structure. A clear
pay structure also provides clarity on how to manage pay, supporting better decision-making
around pay progression. In most cases pay related discussions are the most challenging
conversations that managers can have with their team or potential new hires, but with a robust
pay framework, that has market value and internal equity built in, managers find confidence and
make better decisions around pay.

A pay structure creates a basis for pay decisions and equitable allocation of financial resources.
This is because understanding where employees fit against the pay structure informs firm’s pay
decisions and allows for effective allocation of pay budgets. The structure helps Croco Motors
Zimbabwe LTD in the management of relativities and enable the firm to recognize and reward
people appropriately according to their job role size, performance, contribution, skill and
competence. With the aid of the pay structure, it is possible for Croco Motors to communicate
the pay opportunities available to all employees and to control the implementation of pay
policies and budgets.
REFERENCES AND ONLINE RESOURCES

Armstrong, M. (2009). A Handbook of Human Resources Management Practice. (11th Edition)

London: Kogan Page
Martocchio, Joseph J. Strategic Compensation-A Human Resource Management Approach. 8th
ed. 2014. Upper Saddle River: Pearson Education. Print.

http://www.dol.gov/whd/flsa/index.htm#.UPHgI-TxajM

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https://www.innecto.com/resources/insights/6_business_benefits_of_pay_structures

https://www.theindependent.co.zw/2021/09/03/why-organisations-need-a-pay-structure/

https://www.innecto.com/resources/insights/6_business_benefits_of_pay_structures