Creating a Pay Base Structure

Your assignment for week 4 is to assume you are a compensation analyst at L & M Engineering, Inc. You have been assigned to create a simple base pay
structure. You will use the attached “Base Pay Structure Chart” to present your design to executives. Note that the first pay grade of the chart has been
completed for you. It may help to use the chart as a reference as you move through the parameters introduced below.

Guidelines
The CEO and VP Human Resources have given you these parameters.
 The pay structure does not include top executive compensation. The CEO is not on the pay grade chart.
 The minimum starting full-time pay is $25,000 per year or a little over $12 per hour. A 52-week year has 2,080 hours.
 The pay structure will consist of fifteen pay grades.
 Each grade represents a pay range of $20,000. Therefore, the pay range for Grade 1 will be 25,000-$45,000.
 There are five “steps” in each grade. Employees who stay in the same grade may progress up the steps until they reach the maximum end of the
range. For simplicity’s sake, each step up in pay within a grade is equal to $4000. Therefore, if an employee performs well and moves up a step
within Grade 1, he or she will then make $29,000 base pay. If the same employee performs well again and moves up another step within Grade
1, he or she will then make $33,000 base pay.
 For simplicity sake, the midpoint of one grade will become the starting point (point of overlap) for the next grade. So, given that the pay range
for Grade 1 is $25,000 - $45,000. The midpoint would be $37,000. The Grade 2 pay range would therefore begin with $37,000 and end $57,000.
Grade 3 would begin with the midpoint of Grade 2 ($49,000) and end with $69,000. You can calculate the rest.

Your Assignment
1—Complete the Base Pay Structure Chart.

2—Now, relate the organization chart of L & M Engineering Inc. to the pay grades on your chart. See the right-hand column on the Base Pay Structure
Chart. Use this column to list jobs on the organization charts that you believe would “fit” in this pay grade. Be sure to indicate whether the employee is
exempt or non-exempt. Obviously, you will be making assumptions and using your best judgment as well as following the legal guidelines.. You may
not have a title for every one of the grades. Be sure to give explanations and rationale for your decisions.
 L & M Engineering Inc. Pay Structure

Pay Exempt or Non-

Minimum Midpoint Maximum Step 1 Step 2 Step 3 Step 4 Step 5 Job Titles in This Grade
Grade Exempt
$25,00 $37,0 $45,0 $29,0 $33,0 $37,0 $41,0 $45,0 Non-Exempt Administrative Assistant Communications,
1
0 00 00 00 00 00 00 00 Administrative Assistant HR
$37,00 49,00 57,00 41,00 45,00 49,00 53,00 57,00 Exempt Administrative Assistant Project Management,
2
0 0 0 0 0 0 0 0 Administrative Assistant Design
Exempt Payroll Specialists, Editor, Entry Level
3 49,000 57,000 65,000 49,000 53,000 57,000 61,000 65,000
CAD Operators
Exempt Accounting Administrative Assistant, IT
4 57,000 65,000 73,000 57,000 61,000 65,000 69,000 73,000 Administrative Assistant, HR Generalist,
new hire technical editor
Exempt Contracts Administrative Assistant,
5 65,000 73,000 81,000 65,000 69,000 73,000 77,000 81,000
Network Administrator, Benefits Specialist,
Exempt Structural Engineers, Electrical and
Mechanical Engineers, Technical Editor,
Accounting Clerks, Senior Network
6 73,000 81,000 89,000 73,000 77,000 81,000 85,000 89,000 Administrator, Senior Benefits Specialist,
All new hire managers (design,
accounting, IT, projects, communications,
contracts, HR)
Exempt Senior Structural Engineers, Senior
Electrical and Mechanical Engineers,
7 81,000 89,000 97,000 81,000 85,000 89,000 93,000 97,000 Senior Editor, Programmer, all senior
managers (design, accounting, IT,
projects, communications, contracts, HR)
 Exempt
8 89,000 97,000 105,000 89,000 93,000 97,000 101,000 105,000

9 97,000 105,000 113,000 97,000 101,000 105,000 109,000 113,000

10 105,000 113,000 121,000 105,000 109,000 113,000 117,000 121,000

11 113,000 121,000 129,000 113,000 117,000 121,000 125,000 129,000

Exempt Vice Presidents (engineering, finance,

12 121,000 129,000 137,000 121,000 125,000 129,000 133,000 137,000
administration)
Exempt
13 129,000 137,000 145,000 129,000 133,000 137,000 141,000 145,000 Legal Counsel

14 137,000 145,000 153,000 137,000 141,000 145,000 149,000 153,000

15 145,000 153,000 161,000 145,000 149,000 153,000 157,000 161,000