Compensation Part 3

& Benefits Establish Market-

Management Competitive Pay Plan

Instructor
1 : Mostafa Adly
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Compensation
Administration
Process

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Establishing
Pay Structures

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Developing Pay Surveys

Select Employers with Comparable Jobs

Determine Jobs to be Surveyed

Decide What Information Is Needed

Conduct Survey

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Conduct market analysis: salary surveys.

Salary Surveys are tools used to determine

the average compensation paid to employees in

one or more jobs.

Compensation data, collected from several

employers, is analyzed to develop an understanding of the

amount of compensation paid. Prepared By : Mostafa Adly

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Compensation Quartile Strategies

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Current (internal) wage curve

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Compare and adjust

Combine both the current/internal and market/external wage

curves on one graph. Based on comparing the current/internal

wage curve and market/external wage curve you must

decide whether to adjust the current pay rates for your jobs,

and if so how and how much. Here, your policies, history and

current business strategy play a major part. Prepared By : Mostafa Adly

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Pay Scattergram
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Pay-Level Policies
Market lead
• Levels above market pay lines.
• Best for differentiation strategies.
Market match
• Pay according to market pay line.
• Appropriate with differentiation strategy.
Market lag
• Levels below market pay lines.
• Best for lowest-cost strategies. Prepared By : Mostafa Adly
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Pay Structures (cont’d)

 Pay Grades
A grouping of individual jobs having approximately the same job worth.

 Broadbanding
approach in which several grades are combined into one band with a
wide salary range.
Benefits
 Encourages horizontal movement of employees
 Is consistent with trend towards flatter organizations
 Creates a more flexible organization
 Encourages competency development
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 Emphasizes career development
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Market-Banded Pay Grades for Community Bank

*Computed by averaging the pay survey summary data for the jobs in each pay grade.
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Traditional Pay Structure vs. Broadbanding

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Develop Pay Grades

Assigning Points to Grades( Sample )

Job Evaluation Points Band

100-150 Business Support
( Grade 1,2,3)

151-200 Professionals ( Grade 4,5,6)

201-270 Managers ( Grade 7,8,9)
271-320 Directors( Grade 10,11,12)
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Example of Pay
Grades and Pay
Ranges
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Pay Rate Issues

 Rates Out of Range
 Red-Circled Employees
 An incumbent (current jobholder) who is paid above the range
set for the job.
 Green-Circled Employees
 An incumbent who is paid below the range set for the job.

 Pay Compression
A situation in which pay differences among individuals with
different levels of experience and performance in the
organization becomes small. Prepared By : Mostafa Adly
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Pay Range

Range = (Max –Min)/Minimum

Minimum Salary = Mid-Point Salary X ( 100% - Range ).

Maximum Salary = Mid-Point Salary X ( 100% + Range )

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Pay Structure ( Sample )

Band Min- Mid –Point Max-
Salary Salary Salary Range

AB
(Grade 1 & 2)

CDEF
(Grade 3,4&5)

GHIJK
(Grade 6 & 7)

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Typical Pay Range Widths

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Compa-Ratio
 Compa-ratios are indicators used to indicate wages level
with respect to company strategy.

$16.50 (current pay)

Employee R   100  Compa - ratio  110
15.00 (midpoint)

$13.05 (current pay)

Employee J   100  Compa - ratio  87
15.00 (midpoint)

Prepared By : Mostafa Adly