Professional Documents
Culture Documents
Compensation
Compensation
Compensation
Chapter 11
Establishing Pay Plans
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Outline of Chapter 11
Determining pay rates
1938 Fair Labor Standards Act 1963 Equal Pay Act 1974 Employee Retirement Income Security Act (ERISA) Other legislation affecting compensation
Union influences on compensation decisions Corporate policies and competitive strategy Compensating expatriate employees Equity and its impact on pay rates
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Outline of Chapter 11
Establishing pay rates
Using the internet to do compensation surveys HR.Net Compensable factors Preparing for the job evaluation Job evaluation methods: Ranking Job evaluation methods: Job classification Job evaluation methods: Point method Job evaluation methods: Factor comparison Computerized job evaluations
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Outline of Chapter 11
Establishing pay rates
Step 3. Group similar jobs into pay grades Step 4. Price each pay gradewage curves Step 5. Fine-tune pay rates
Developing pay ranges Correcting out-of-line rates Developing a workable pay plan
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Outline of Chapter 11
Pricing managerial and professional jobs
Compensating managers
Compensation trends
Skill-based pay
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Outline of Chapter 11
Compensation trends
Broadbanding IBMs pay plan supports its new strategy Compensation plans in practice Compensation plans for dot-com companies
Research insight
Comparable worth
Summary
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Strategic Overview
Chapter purposes:
Job evaluation techniques Conducting on and offline salary surveys Pricing the jobs in your firm Focus on pay for performance and incentive plans
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Employee Compensation
Direct or Indirect compensation is given based on:
Increments of time
Hourly Salaried
Performance
Piecework Commission
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Legal Considerations
The 1931 Davis-Bacon Act sets wages for laborers working for contractors federally employed contractors The 1936 Walsh-Healy Public Contract Act set
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Legal Considerations
Title VII of the 1964 Civil Rights Act makes it unlawful for employers to discriminate against any individual The 1938 Fair Labor Standards Act provides for minimum wages, maximum hours, overtime pay and child labor protection
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Legal Considerations
The 1963 Equal Pay Act establishes equity between employees of different sex doing the same work The 1974 Employee Retirement Income Security Act (ERISA) protects employees against the failure of their employers pension plan
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24%
49%
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Overseas employees have special compensation needs Use home-based and host-based plans Home based - salary reflects his or her home countrys salary with COLAs good short term solution Host based - salary tied to the host countrys salary structure with COLAs better long term solution
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Salary Inequities
How satisfied are you with your pay? What criteria were used for your recent pay increase? What factors do you believe are used when your pay is determined?
Sssssssshhhhh!! Keep this raise quiet please!
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Formal Informal
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Job Evaluation
Job evaluation is the formal and systematic comparison of jobs in order to determine the worth of one job relative to another
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Compensable Factors
Two approaches in comparing jobs Intuitive or via compensable factors Intuitive based on decision that one job is more important than another Compensability determined arbitrarily but some metrics include:
Equal Pay Act factors
Hay Consulting
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Identifies 10-15 key benchmarks Selects some compensable factors Evaluate the worth of each job via one of the methods on the following slides
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General Schedule grading used by the U.S. government GS-10 might grade both a dog catcher and the President!
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Method 3: Point
The point method is more quantitative Identifies compensable factors The degree to which each of these factors is present Assume five degrees of responsibility Most widely used method
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Find the average pay for each pay grade Plot the pay rates for each pay grade Fit the line called a wage line through the points just plotted Price the jobs
Wage curve
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Compensating Managers
Top executives compensated by: Base pay + guaranteed bonus Short term incentives Long term incentives Perks
Can you name some incentives and perks?
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Compensating Professionals
Job emphasizes creativity and problem solving Job evaluation is useful Some disciplines result in 4-6 grades with a broad salary range
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Compensation Trends
Skill-based pay and broadbanding Skill-based programs pay for range, depth, and type of skills:
Define specific skills Training system Competency testing Flexible work assignments
Broadbanding combines salary grades into a few with wide salary ranges
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What about team organizations? To what extent do companies have different expectations for employees relative to multiple skill sets? What about overlapping jobs? Numbers of professionals in the company?
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Level 2 Level 1
Mixing
Level 2 Level 1
Filling
Level 2 Level 1
Packaging
Level 2 Level 1
Materials
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Broadbanding
Broadbanding - Consolidating salary grades and ranges
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The marketplace rules Fewer jobs, evaluated differently, in broadbands Managers manage Big stakes for stakeholders
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Comparable Worth
The concept by which women who are usually paid less than men can claim that men in comparable rather than strictly equal jobs are paid more The equal standard is becoming comparable County of Washington v. Gunther (1981)
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Chapter 11 Summary
Two pay bases time increments and production volume Establishing pay rates involves five steps Can you name them? Job evaluation determines the relative worth of a job Five-step ranking method of job evaluation is simple to use Can you name these steps?
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Chapter 11 Summary
Classification or grading groups similar jobs into classes Point method identifies compensable factors and the degree to which each of these is present in a job Factor comparison method decides which jobs have the most compensable factors
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Chapter 11 Summary
Most managers group similar jobs into wage or pay grades for pay purposes Compensation plan for executive, managerial, and professional personnel can be complex Trends in compensation include skillbased pay, broadbanding, and adjustments for comparable worth