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Establishing Strategic Pay Plans

Chapter 11. Part 4 | Compensation. Establishing Strategic Pay Plans. After studying this chapter, you should be able to:. List the basic factors in determining pay rates. Explain in detail how to establish pay rates. Explain how to price managerial and professional jobs.

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Establishing Strategic Pay Plans

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  1. Chapter 11 Part 4 | Compensation Establishing Strategic Pay Plans © 2008 Prentice Hall, Inc. All rights reserved.

  2. After studying this chapter, you should be able to: • List the basic factors in determining pay rates. • Explain in detail how to establish pay rates. • Explain how to price managerial and professional jobs. • Discuss competency-based pay and other current trends in compensation. © 2008 Prentice Hall, Inc. All rights reserved.

  3. Employee Compensation Direct Financial Payments Indirect Financial Payments Basic Factors in Determining Pay Rates © 2008 Prentice Hall, Inc. All rights reserved.

  4. Davis-Bacon Act (1931) Equal Pay Act (1963) Walsh-Healey Public Contract Act (1936) Employee Retirement Income Security Act (ERISA) Employee Compensation Title VII of the 1964 Civil Rights Act Age Discrimination in Employment Act Fair Labor Standards Act (1938) Americans with Disabilities Act The Family and Medical Leave Act The Social Security Act of 1935 (as amended) Workers’ Compensation Legal Considerations in Compensation © 2008 Prentice Hall, Inc. All rights reserved.

  5. Forms of Equity External Equity Internal Equity Individual Equity Procedural Equity Equity and Its Impact on Pay Rates © 2008 Prentice Hall, Inc. All rights reserved.

  6. Salary Surveys Job Analysis and Job Evaluation Methods to Address Equity Issues Performance Appraisal and Incentive Pay Communications, Grievance Mechanisms, and Employees’ Participation Addressing Equity Issues © 2008 Prentice Hall, Inc. All rights reserved.

  7. Step 1. The Wage Survey:Uses for Salary Surveys To market-price wages for jobs To make decisions about benefits To price benchmark jobs The Salary Survey © 2008 Prentice Hall, Inc. All rights reserved.

  8. Sources of Wage and Salary Information Employer Self-Conducted Surveys Consulting Firms Professional Associations Government Agencies The Internet Sources for Salary Surveys © 2008 Prentice Hall, Inc. All rights reserved.

  9. Skills Effort Step 2. Job Evaluation:Identifying Compensable Factors Responsibility Working Conditions Establishing Pay Rates (cont’d) © 2008 Prentice Hall, Inc. All rights reserved.

  10. Methods for Evaluating Jobs Ranking Job Classification Point Method Factor Comparison Establishing Pay Rates (cont’d) © 2008 Prentice Hall, Inc. All rights reserved.

  11. Point Method Step 3. Group Similar Jobs into Pay Grades Ranking Method Classification Methods Establishing Pay Rates (cont’d) © 2008 Prentice Hall, Inc. All rights reserved.

  12. Compensating Executives and Managers Base Pay Short-term Incentives Long-Term Incentives Executive Benefits and Perks Pricing Managerial and Professional Jobs © 2008 Prentice Hall, Inc. All rights reserved.

  13. Why Use Competency-Based Pay? Support Strategic Aims Support Performance Management Support High-Performance Work Systems Competency-Based Pay (cont’d) © 2008 Prentice Hall, Inc. All rights reserved.

  14. Other Compensation Trends • Broadbanding • Consolidating salary grades and ranges into just a few wide levels or “bands,” each of which contains a relatively wide range of jobs and salary levels. • Pro and Cons • More flexibility in assigning workers to different job grades. • Provides support for flatter hierarchies and teams. • Promotes skills learning and mobility. • Lack of permanence in job responsibilities can be unsettling to new employees. © 2008 Prentice Hall, Inc. All rights reserved.

  15. employee compensation direct financial payments indirect financial payments Davis-Bacon Act (1931) Walsh-Healey Public Contract Act (1936) Title VII of the 1964 Civil Rights Act Fair Labor Standards Act (1938) Equal Pay Act (1963) Employee Retirement Income Security Act (ERISA) salary compression salary survey benchmark job job evaluation compensable factor ranking method job classification (or grading) method classes grades grade definition point method factor comparison method pay grade wage curve pay ranges competency-based pay competencies broadbanding comparable worth K E Y T E R M S © 2008 Prentice Hall, Inc. All rights reserved.

  16. Appendix for Chapter 11 Part 4 | Compensation Quantitative Job Evaluation Methods © 2008 Prentice Hall, Inc. All rights reserved.

  17. Quantitative Job Evaluation Methods • Factor Comparison Job Evaluation Method Step 1. Obtain job information Step 2. Select key benchmark jobs Step 3. Rank key jobs by factor Step 4. Distribute wage rates by factors Step 5. Rank key jobs according to wages assigned to each factor Step 6. Compare the two sets of rankings to screen out unusable key jobs Step 7. Construct the job-comparison scale Step 8. Use the job-comparison scale © 2008 Prentice Hall, Inc. All rights reserved.

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