Exempt Pay Program Design

1. Exempt Pay Program Design Position Evaluation is the foundation of Pay Program Design

2. Job Evaluation Process Position Description Statement Job Responsibilities,KSA's and Qualifications  Position Evaluation Job content and/or Market pay rate analysis  Job Value $ Pay rate & grade assignment

3. Position Evaluation Goals • To establish an objective, orderly, and sequential pay grade structure based on the value of job/s. • To ensure development of a pay structure that provides for internal equity. • To assist in determining competitive pay rates. • To comply with Equal Pay Act and FLSA rules.

4. What is Job Evaluation ? • Job Evaluation is a process for assessing the value relationships between jobs. • Job Evaluation is a method (job content or market evaluation) to determine the relative level of jobs. • Job Evaluation is a formal methodology for setting wage rates and pay grades by a employer.

5. Compensable Factors • Compensable Factors are specific job content features, and requirements common to most jobs, such as Responsibility and Skill.

6. Universal Compensable Factors • Universal Compensable Factors are specified by the Equal Pay Act as : • SKILL – Ability to do, knowledge, etc, • EFFORT - measure of mental exertion • RESPONSIBILITY – job scope • WORKING CONDITIONS - physical surroundings and hazards of a job

7. BASS Skill Responsibility Accountability HAY and PURVES Know-How Problem-Solving Accountability Common Universal Factors Used by Pay Programs

8. NEMA - NMTA Skill Effort Responsibility Job Conditions EQUAL PAY ACT Skill Effort Responsibility Working Conditions Common Universal Factors Used by Pay Programs

9. Knowledge Supervisory Controls Guidelines Complexity Scope and Effect Personal Contacts Purpose of Contacts Physical Demands Work Environment Common Universal Factors Used by Pay Programs Factor Evaluation System

10. Compensable Factors Components It is normal practice to classify these factors into the three major categories below: • Universal Factors Defined by Equal Pay Act. • Sub Factors of Universal Factors key job content and requirement attributes of a particular Universal factor defined more precisely. • Levels on a objective measurement scale to identify the specific amount of a factor required for the job.

11. Hay System Factors and sub factors example Know How:This factor describes"Know-how is the sum total of knowledge and skill, however acquired, needed for acceptable performance." - Hay Group Professional Skills Managerial Human Relations Problem Solving:Problem solving is the original, self-starting thinking required by the job for analyzing, evaluating, creating, reasoning & arriving at and making conclusions. Thinking Challenge Thinking Environment Accountability:The opportunity a job has to bring about results and the importance of those results to the organization. Freedom to Act Impact Magnitude

12. Job Evaluation Methods • Whole Job Ranking • Position Classification / Predetermined Grading • Market Pricing • Point Factor and Market Pricing • Point Factor

13. Whole Job Ranking • Comparing the whole job by determining the overall value of specific jobs or classes as they compare with one another. • Works best when comparing jobs in the same occupation or the same organizational unit when evaluators are intimately familiar with all jobs being ranked.

14. WHOLE JOB RANKING • Whole Job Ranking Is The Quickest To Perform Of All The Methods, But It Has Three Significant Disadvantages: • A lack of substantiation data to justify the final results. • It provides no yardstick for measuring the relative value of jobs. • The personalities of incumbents tend to get in the way of the evaluators' judgement.

15. Classification System Jobs are classified into an existing grade structure hierarchy. Each level in the grade structure has a description and associated job titles. Each job is assigned to the grade/category providing the closest match to the job. To ensure equity in job grading and wage rates, a common set of job grading standards( Factors) and instructions are used to define each job classification.

16. Position Classification Advantages Simple. The grade definitions standard (factors) and structure exists independent of the jobs. New jobs can be classified more easily. Disadvantages Developing Classifications is time intensive. The standard (factors) may have biases. Some jobs may appear to fit within more than one grade/category.

17. Market Pricing Most organizations usually understand that they must offer market based competitive pay rates in order to attract and retain competent employees. There are two basic methods to recognize market wage rates. • Pure market pricing • Guide line Market pricing method

18. Market Pricing Pure Market Pricing Pay Survey • The organization develops brief narratives that describe job activities and incumbent requirements. • The organization conducts pay rate survey of other organizations having employees who perform similar work assignments in the same labor market. • This is the least costly method....It is easy to explain..…and judicially defensible.

19. Market Pricing Market Pricing Guide Line Method This approach permits the influences of internal equity to interact with existing market rates when determining the rate of pay for jobs of an organization.

20. Market PricingMarket Pricing Guide Line Method Steps • Step One: • Establish a GUIDE LINE SCALE of salary ranges that includes a series of salary grades and a minimum, mid-point, and maximum rate of pay for each using a 5% mid-point differential.

21. Market Pricing • Step Two: • Develop realistic job descriptions that include job scope data. • Identify benchmark jobs. (40% to 60% of jobs)

22. Market Pricing • Step Three: • Use comprehensive market pricing survey when matching benchmark jobs to other comparable employers jobs.

23. Market Pricing • Step Four: • Develop HORIZONAL GUIDE LINE displays that relate to job evaluations conducted in the third step. • Two or more vertical guide line displays to ensure internal equity within the pay structure. • Guideline Market pricing requires costly software

24. Market Pricing Tools College and University Professional Association (CUPA)- Current system. Customized Salary Surveys of Peer Institutions Performed by HR Salary data-on-demand software products including CUPA & Economic Research Institute BLS Professional Occupation surveys

25. Market Pricing Advantages & Disadvantages Advantages Include: • Measure college pay rates against the pay rates of similar organizations. • Selects benchmark positions by level from across the college for market pricing. • Ensures pay structure based on external market pay rates for equivalent positions. Major Disadvantage: • May under value jobs that are very important to the organization.

26. Point Factor Position Evaluation Point factoring evaluation systems evaluate jobs against commonfactors ( Universal and sub factors). The job content of each position is evaluated against the selected factors and then represented as a numeric value. These values are then compared to a pre-defined salary structure (grades) to determine the appropriate pay range assignment.

27. Point Factor Position Evaluation Systems • Lott's Point Method • Benge's Factor Comparison • Hay's Profile Method • NEMA Method • Factor Evaluation System

28. Point Method Factors A Point Factor Method uses a set of compensable factors to determine the value of jobs. Each factor has given numeric (point) values.Typically the compensable factors may include the major categories of: Skill –ability, knowledge Responsibilities – fiscal ,supervision Effort -mental Working Conditions

29. Compensable Factors Points • The total points assigned compensable factors are determined by the wage spread between the highest and the lowest paid position within an organization. The highest paid job is given the most points for each factor. The spread in total points between highest and lowest paid jobs is a recognition of the full point range between positions within the organization.

30. Factor Point Score Differences • The compensable factor weights and measurement scales determine job point-score differences and thereby result in an established structure of jobs with different pay rates or ranges for each job.

31. Point Determining Method

32. Calculating Total Points • Point Spread between highest and lowest paid positions Ex. $100,000/$20,000 =5 • Thus, according to normalizing chart on previous slide the highest paid position should receive 5 times more points than lowest paid position. Ex $100,000 = 3000 total points divides as follows: 999 points for Responsibility 831 points for Skill 831 points for Effort-mental 399 points for Work Conditions

33. Point Factoring Methods Advantages Statistically assigns position to a salary band. Legally Defendable Factors Disadvantages Requires consultant services or costly software for Regression Analysis to combine with market pricing. The pay for each factor is based on rater judgments. High training investment to develop a small team of job raters to manage the tool. Costly implementation and maintenance.

34. Selecting A Job Evaluation Method • The Job Evaluation method selected may use either market data or job content factor data to set up a pay range structure. Each of these evaluation methods may be used independently and still result in a equitable pay system. The position evaluation method selected may also use the more complex and costly approach of combining job content factor data with market pricing data to create a equitable,objective and uniform organizational pay structure.

35. Job Evaluation Steps The Fox Lawson consultant report has recommended selection of a “simplified classification system” which uses “broadly defined classes”. Step one is to select compensable factors. Step two is select “simplified” classification system and job evaluation process using either compensable factors and/or market pricing. Step three is to select benchmark jobs for evaluation. Step four is to construct pay grades based on the evaluation of benchmark jobs.