Industrys Compensation Policy

Objectives
Insight into micro concept of compensation.
To provide details about internal consistency
& external parity.
To appraise students of job pricing, job ranges
& job broad banding,etc

Compensation policies need to be evolved

in every enterprise taking the following
aspects in to consideration

1.
2.
3.
4.
5.
6.
7.
8.
9.

Attraction & Retention

Internal consistency
External parity
Capacity to Pay
Pay for Performance
Labor cost & productivity
Cost of living
Merit & Seniority Progression
Motivation

Compensation Strategy at
MICRO(COMPANY) LEVEL
Industries & Corporations develop their
compensation model based on three building
blocks
1. Compensation Objectives
2. Strategic Policies that from the foundation of
compensation system
3. The techniques of compensation

Compensation Objectives
Compensation systems are designed &
Managed to achieve certain objectives1. Improving Performance,quality,delighting
customers &,
2. Controlling labour Costs.

Strategic Compensation Policies

Strategic Compensation Policy decisions likeInternal Consistency

External Competitiveness
Employee contribution,&
Administration of pay system

JOB EVALUATION

Job Evaluation Consist of the followings:

Job analysis
Job Description
Job specification
Job grading
Job classification
Job Assessment/job Pricing

Determinining an internally consistent

Job Structure

Job Analysis

Job
Description

Job
evaluation

Some Major Decisions in job

Evaluation
Establish Purpose of Evaluation

Decide whether to use single or multiple

plans
Choose among alternative approaches
Obtain involvement of relevant
stakeholders
Evaluate Plans usefulness

Job
Structure

Methods & System of job evaluation

Ranking Method
Classification Method
Point Rating Method
Factor Comparison Method
The Urwick Orr Profile Method
Time Span of Discretion Method
Decision Band Method
Direct Consensus
Guide Chart Profile Method

External Parity
The structure should be built by comparing the
prevailing wages in the area of the
industry.Such comparison of internal wage
structure with the external system is known as
establishing External equity

Determining Externally Competitive

Pay Level & Structure
Specify
Policy

Select
Market

Design
Survey

Draw
Policy
Lines

Some Major Decision in Pay-Level

Determination
Specify Pay-Level Policy
Define Purpose of surveys
Specify relevant market
Design & conduct survey
Interpret & apply result
Design grades & ranges or bands

Merge
internal &
External
Pressure

Competiti
ve Pay
Level

Pay Surveys
Why Conduct a Survey?
1. Hiring & retaining Competent Employees:
2. Recognizing Pay Trends in the Marketplace
3. Defining Pay Practices in a court of Law

Pay Surveys

Data Collection Techniques

Telephone
Mailed questionnaire
Online
Face to face interview
Confrence

Types of Pay Surveys

Informal Surveys
External Survey Method
Job Title Method
Job Description Method
Job Evaluation Method
Selection of jobs for wage survey
Organization to be included
Information to be collected

PRICING JOBS
In Pricing jobs, the job is matched with the
labour market worth.
These two activities are required to be
confirmed
(i) To establish appropriate pay level for each
job
(ii) To group the different pay level in to pay
grades

Pay Levels
The appropriate pay levels for any job reflects its worthA Jobs relative worth is determined by its ranking through the
job evaluation process & by what the labour market pays
for a similar job.
A set of right Pay Level, the internal ranking & the survey
wage rates are combined through the use of graph called a
scatter gram.
A vertical axis is pay rates. If the point system is used ,the
horizontal axis is for point.

Pay Levels
The development of a wage-trend lineEach dot in this graph represents the
intersection of the point value & the market
determined wage rate for particular key job
The wage trend line helps in determining the
wage rates for key jobs & non-key jobs

Pay Levels
The Compensation Structure: Compensation
analyst find more convenient to lump job
together into job classes.
In this approach jobs are already grouped in to
predetermined category.

Designing Pay Rates & Bands

Constructing Ranges :From internal
consistency perspective the range reflects the
approximate differences in performance or
experience the employer wishes to pay for a
given level of work. From an external
competitiveness perspective, the range also
act as an control device. A range maximum
sets the lead on what the employer is willing
to pay for work.

Designing Pay Rates & Bands

Banding: It consolidates as many as 4 or 5
traditional grades into single band, with one
minimum & other maximum.Because band
encompasses so many jobs in different values.

Contrast B/W Ranges & Bands

Ranges Support

Bands Support

Some flexibility within controls

Emphasis on flexibility within guidelines

Relative stable organization design

Delayered Organization

Recognition via Titles

Cross functional experience

Mid Point controls,Comaratives

Reference Market rates

Controls designed in to systems

Control in budget

Give Managers Freedom with guidelines Give Manager Freedom to manage Pay.