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UNIT-IV COMPENSATION MANAGEMENT

UNIT-IV COMPENSATION MANAGEMENT. INTRODUCTION.

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UNIT-IV COMPENSATION MANAGEMENT

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  1. UNIT-IVCOMPENSATION MANAGEMENT

  2. INTRODUCTION • It can be said that compensation is the “glue” that binds the employee and the employer together and in the organized sector, this is further codified in the form of a contract or a mutually binding legal document that spells out exactly how much should be paid to the employee and the components of the compensation package. • The provision of monetary value in exchange for work performed forms the basis of compensation and how this is managed using processes, procedures and systems of compensation management. • “compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship”. Compensation should be viewed as a strategic management of wages and salaries.

  3. Compensation is important both in attracting and retaining employees. An effective compensation system considers both internal fairness and external competitiveness. • Compensation systems in organizations must be linked to organizational objectives and strategies. But compensation also requires balancing the interests and costs of the employer with the expectations of employees. A compensation program in an organization has four objectives: • Legal compliance with all appropriate laws and regulations • Cost effectiveness for the organization • Internal, external, and individual equity for employees • Performance enhancement for the organization • Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals • Indirect financial compensation including all financial rewards that are not included in direct compensation and can be understood to form part of the social contract between the employer and employee such as benefits, leaves, retirement plans, education, and employee services • Non-financial compensation referring to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions.

  4. Types of Compensation and Benefits There are three types of Compensation and Benefits namely; • Base Compensation • Variable Compensation • Supplementary Compensation Base Compensation and Benefits Base Compensation is one type of Compensation. It refers to the basic salaries and wages given to he employees. It is normally constant at a given amount irrespective of the difference in work performance. Factors influencing Base Compensation and Benefits One factor that influences Base Compensation is demand and supply of labor in the market .Labor union pressure is also another factor influencing Base Compensation. This is because unions always try their best to fight for their members’ rights. Nature of job as determined by the job description, each employee deserves a different compensation package. • Size of the organization and its ability to pay its employees. • Product market compensation is yet another factor influencing Base Compensation. • Psychological and social factors like employee satisfaction and security. • Salaries paid by similar firms are also a factor affecting Base Compensation. • Government policies on wage determination • Cost of living of the employees. • When the employees’ cost of living is very high then they need a higher compensation benefit. • Increase in productivity of labor.Firms in general; whether competing firms or not.

  5. Variable Compensation and Benefits • This type of compensation as by its name is variable. It means that one gets compensation as per the work done. If one does a remarkable job then he or she deserves a higher compensation package than one whose work is of poor quality. Supplementary Compensation and Benefits • Supplementary Compensation is compensation given by an employer when he or she wishes to. It is not compulsory or a routine. once one is given the compensation that one will be awarded another time. In this type of Compensation the employer has a right to add, deduct or even withdraw the benefits when he or she wishes to.

  6. Types of compensation DIRECT INDIRECT CASHCOMPENSATION 1.base pay 2.dearness allowances 3 short term incentives 4 long term incentives 5 conveyance 6 leave travel allowance 7 medical reimbursement 8 bonus 9 special allowance BENEFITS COMPENSATION 1 training 2 flexible working hours 3 involvement in special projects 4 office space improvements 5 symbolic awards

  7. DETERMINING COMPENSATION-THE WAGE MIX • Employees may inquire of their managers, "How are the wages for my job determined?" In practice, a combination of internal and external factors can influence directly or indirectly, the rates at which employees are paid. Through their interaction these factors constitute the wage mix Factors Affecting the Wage Mix: • Internal Factors External Factors

  8. Wage And Salary Administration Establishing Internal Equity and External Competitiveness is a Critical Objective of a Wage and Salary Program • The overall goal of a wage and salary administration program is to attract, retain, and motivate employees and to help an organization achieve its management objectives. • Because employees represent a substantial investment in an organization and labor costs have a significant impact on the annual budget and profitability, it is critical for employers to have an effective wage and salary administration program. To achieve these objectives the responsibility for wage and salary administration usually lies with the top-management. Top-management develops policies and procedures regarding wages. In many organizations, this task is entrusted to wage and salary committee composed of line and staff executives. Base wages and salaries are defined as the hourly, weekly and monthly pay that employees receive for their work in an Organization

  9. The functions of a wage and salary committee or any other person connected with wage and salary administration are as follows:(1) To approve in a broad policy determining manner, the system of job-evaluation and job description.(2) To check all activities of the salary administration group against the company policies.(3) To recommend to top management the wage policies for the administration of the wage programme. .(4) To recommend changes in wage policies and in the wage level.(5) To review wage and salary schemes depart-wise.(6) To recommend to top management specific raises for executives above a specified limit. Principles Governing CompensationAdministration •Maintaining Equity  •Maintaining Competitiveness •Matching Employee Expectations •Reinforcing positive employee behavior •Eliminating any discrepancies •Devising a system that is most efficient •Optimization of management and employee interests •Maintaining good IR and harmony

  10. Wage and salary administration is establishment and implementation of sound policies and practices of employee compensations. • Some organizations pay minimum necessary to attract the required number and kind of labor, while some organizations pay well above the going rates in the labor market. • Remuneration provides more than a means of satisfying the physical needs-it provides recognition, a sense of accomplishment and determines social status. Hence formulation and administration of wage and salary to attract and retain right personnel in right position is the prime responsibility of the management in any organization. Generally sound wage and salary administration tries to achieve following objectives. • (1) To attract and retain the service of employee. • (2) To pay employees according to the content and difficulty of the job. • (3) To reward employees according to the effort and merit. • (4) To improve employee morale and productivity. • (5) To satisfy employee as to how and why they are paid. • (6) To facilitate pay roll administration, budgeting and wage and salary control. • (7) To simplify collective bargaining. • (8) To promote employee organizational flexibility promotion and transfer.

  11. The principles of wage and salary administration. Following are principles of wage administration i.e., wage administration should be guided by the following basic considerations:(1) Wage policies should be carefully developed having in mind the interests of management, the employees, the consumers and the community.(2) There should be a definite plan to ensure that differences in pay for jobs are based upon variations in job requirements such as skill, effort, responsibility or job or working conditions, mental and physical requirements.(3) The general level of wages and salaries should be reasonably in line with that prevailing in the labour market.(4) The plan should carefully distinguish between jobs and employees. A job carries a certain wage-rate and a person is assigned to fill it at that rate.(5) Wage policies should be clearly expressed in writing to ensure uniformity and stability.(6) Wage decisions should be checked against the carefully formulated policies.(7) Management should see to it that employees know and understand the wage policies.(8) Wage policies should be evaluated from time to time to make certain that they are adequate for current need.(9) Departmental performance should be checked periodical against the standards set in advance.(10) Job descriptions and performance ratings should be periodically checked to keep them up-to-date.

  12. Factors influencing compensation levels : The amount of compensation received by an employee should reflect the effort put in by the employee and also the degree of difficulty experienced while expending his energies. a)      Job needs: Jobs vary greatly in their difficulty, complexity and challenge b)      Ability to pay:   Projects determine the paying capacity of a firm c)      Cost of living: Inflation reduces the purchasing power of the employees d)      Prevailing wage rates : Competent firms within an industry are taken into account while fixing wages, otherwise it is difficult to attract and retain the talent e)      Unions : High unionized sectors can exert presence on management and obtain all sorts of benefits and concessions to workers. f)       Productivity :If your job performance is good you get good wages. g)      State regulation : The legal stipulations determine the wage structure in an industry. h)      Demand and supply of labor : The demand for and the supply of certain skills determine prevailing wage rates. i)        Wage Policy j)        A wage bill is an important part of the production cost. If the wage bill increases beyond the paying capacity of an employer, the very survival of the firm becomes difficult. K)       And from the employees point of view wages determines his standard of living, so its an important issue. m)     Recognizing this the constitution of India guaranteed equal pay for equal work for both men and women which ensure a decent standard of life.  

  13. Fair Wage : This is the wage which is above the minimum wage but below the living wage, lets see the factors, -   • The productivity of labor -      • The prevailing rates of wages in the same or similar occupations -      • The level of national income and its distribution -      • The place of industry in the economy of the country -      • The employers capacity to pay. Living Wage : Living wage is the highest among the three, it is dynamic concept and grows in line with growth of the national economy. It must provide, - • Basic amenities of life – • Efficiency of the worker – • Satisfy social needs of the workers such as, medical, education, retirement etc. Legislations regarding wages  : The Govt. has adopted various methods to regulate wages in India, following are the institutions involved in fixation of wages,   • Employer Collective bargaining Legislations      • Minimun Wages Act Wage boards                      • Payment of wages Act Pay Comissions • Adjudication Machinary • Wage Differentials • Ability of employers to pay, • Bargaining power • Skill needs

  14. FRINGE BENEFITS • Fringe benefits means, a collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are met. OBJECTIVES OF FRINGE BENEFITSTo supplement direct remuneration.To recruit and retain the employees.To protect employees.To create positive employees attitude. Loyalty creation.Organization Image creation in market.Trade union strength. According to Cockman, “ Employee benefits are those benefits which are supplied by an employer to or for the benefits of an employee and which are not in the form of wages, salaries and time rated payments". These are indirect compensation as they are extended condition of employment and are not related to performance directly.

  15. Kinds of Fringe Benefits The various organizations in India offers fringe benefits that may be categorized as follows: 1) Old Age and Retirement Benefits - these include provident fund schemes, pension schemes, gratuity and medical benefits which are provided to employee after their retirement and during old age as a sense of security about their old age. 2) Workman’s Compensation - these benefits are provided to employee if he is met with an accident or got injured or even in case of death . 3) Employee Security- Regular wage and salary is given to employee that gives a feeling of security. Other than this compensation is also given if there is lay-off or retrenchment in an organization. 4) Payment for Time Not Worked – Under this category of benefits, a worker is provided payment for the work that has been performed by him during holidays and also for the work done during odd shifts. Compensatory holidays for the same number in the same month are given if the worker has not availed weekly holidays. 5) Safety and Health – Under this benefit workers are provided conditions and requirements regarding working condition with a view to provide safe working environment. Safety and Health measures are also taken care of in order to protect the employees against unhealthy working conditions and accidents. 6) Health Benefits – Employees are also provided medical services like hospital facility, clinical facility by the organization

  16. The fringe benefits are categorized as follows:a)Payment for Time Not worked: Benefits under this category include: sick leave with pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time, bargaining time, travel time etc.b)Extra Pay for time Worked: This category covers the benefits such as: premium pay, incentive bonus, shift premium, old age insurance, profit sharing, unemployment compensation, Christmas bonus, Deewali or Pooja bonus, food cost subsidy, housing subsidy, recreation.  • C) Employee Security:Physical and job security to the employee should also be provided with a view to promoting security to the employee and his family members. The benefit of confirmation of the employee on the job creates a sense of job security. Further a minimum and continuous wage or salary gives a sense of security to the life.  D) Retrenchment Compensation:The Industrial Disputes Act, 1947 provides for the payment of compensation in case of lay-off and retrenchment. The non-seasonal industrial establishments employing 50 or more workers have to give one month’s notice or one month’s wages to all the workers who are retrenched after one year’s continuous service. The compensation is paid at the rate of 15 days wage for every completed year of service with a maximum of 45 days wage in a year. Workers are eligible for compensation as stated above even in case of closing down of undertakings. 

  17. E) Lay-off Compensation:In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of the total of the basic wage and dearness allowance for the period of their lay-off except for weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year. F)Safety and HealthEmployee’s safety and health should be taken care of in order to protect the employee against accidents, unhealthy working conditions and to protect worker’s capacity. In India, the Factories Act, 1948, stipulated certain requirements regarding working conditions with a view to provide safe working environment. These provisions relate to cleanliness, disposal of waste and effluents, ventilation and temperature, dust and fume, artificial humidification, over-crowding, lighting, drinking water, latrine urinals, and spittoons. Provisions relating to safety measures include fencing of machinery, work on or near machinery in motion, employment of young persons on dangerous machines, striking gear and devices for cutting off power, self-acting machines, easing of new machinery, probation of employment of women and children near cotton openers, hoists and lifts, lifting machines, chains ropes and lifting tackles, revolving machinery, pressure plant, floors, excessive weights, protection of eyes, precautions against dangerous fumes, explosive or inflammable dust, gas etc. Precautions in case of fire, power to require specifications of defective parts of test of stability, safety of buildings and machinery etc.

  18. What is Fringe Benefit Tax? Fringe benefit tax (FBT) is a tax on benefits that employees receive and enjoy as a result of their employment. Employees may be past employees, as well as present or future employees. For example, your liability continues if your employer status changes, but you continue providing a fringe benefit (for example, a low-interest loan) to a former employee. • Liable benefits include benefits that someone gives to employees or shareholder-employees on behalf of the employer. As an employer, you are liable to pay fringe benefit tax on the fringe benefits that you give to your employees or shareholder-employees.

  19. Incentives • Incentives are monetary benefits paid to workmen in lieu of their outstanding performance. Incentives vary from individual to individual and from period to period for the same individual. They are universal and are paid in every sector. It works as motivational force to work for their performance as incentive forms the part of total remuneration. • Incentives when added to salary increase the earning thus increase the standard of living. The advantage of incentive payment are reduced supervision, better utilization of equipment, reduced scrap, reduced lost time, reduced absenteeism and turnover & increased output. • According to Burack & Smith, “An incentive scheme is a plan or programme to motivate individual or group on performance. An incentive programme is most frequently built on monetary rewards ( incentive pay or monetary bonus ), but may also include a variety of non monetary rewards or prizes.” • Kinds of Incentives • Incentives can be classified under the following categories: • 1. Individual and Organizational Incentives • 2. Financial and Non-Financial Incentives • 3. Positive and Negative Incentives

  20. Four Forms of Incentive Compensation

  21. TYPES OF INCENTIVES I) Individual Incentive System is of two types: a) Time based System- It includes Halsey Plan, Rowan Plan, Emerson Plan and Bedeaux Plan b) Production based System- it includes Taylor’s Differential Piece Rate System, Gantt’s Task and Bonus Plan II) Group Incentive System is of following types a) Scanlon Plan b) Priest man's Plan c) Co-Partnership Plan d) Profit Sharing TIME BASED SYSTEM: 1. Halsey Plan- Under this plan a standard time is fixed in advance for completing a work. Bonus is rewarded to the worker who perform his work in less than the standard time and paid wages according to the time wage system for the saved time.

  22. The total earnings of the worker = wages for the actual time + bonus Bonus = 33.5% of the time saved (standard time set on past experience) Or 50% of the time saved (standard are scientifically set) 1. Halsey Premium PlanThis incentive plan was made by F.A. Halsey in 1891. It formula is given belowTotal Wage = Taken Time X Standard Rate + ( Saved Time X Standard Rate) X 50/100Calculate the wage with incentive of a worker from following information.Standard time to produce units 250 hrs.Time taken to produce the units 220 hrs.Hour rate of wages Rs. 4 /-Method of payment Halsey premium plansolution :Wage = Taken Time X Standard Rate = 220 X 4 = Rs. 880Incentive Wage or bonus = Time saved X Standard Rate X 50% = 30 X 4 X 50/100 = 60Total wage = Rs. 880 + Rs. 60 = Rs. 940

  23. 2. Rowan Plan 2) Rowan Plan – Under this method minimum wages are guaranteed given to worker at the ordinary rate for the time taken to complete the work. Bonus is that proportion of the wages of the time taken which the time saved bears to the standard time allowed. This incentive wage plan was made by James Rowan in 1901. Formula of this plan is below.Total Wage = Time taken X standard rate  + ( time taken X time saved X standard rate ) / standard timeFor ExampleA worker takes 12 hrs to complete a job to time wage and 9 hrs on a scheme of payment by result. The rate of payment is Rs. 5/- per hr. Calculate his earning if he is paid on the basis of Rowan plan.Solution :By analysis, we get the following facts :Standard time = 12 hrs.Time taken = 9 hrs.hourly rate = Rs. 5/-Wage = time taken X standard rate = 9 X 5 = Rs. 45Incentive wage or bonus = ( time taken X time saved X standard rate ) / standard time = 9 X 3 X 5 / 12 = Rs. 11.25Total Wage = 45 + 11.25 = 56.25

  24. PRODUCTION BASED SYSTEM 1. Taylor’s Differential Piece Rate System - F.W. Taylor, founder of the scientific management evolved this system of wage payment. Under this system, there is no guarantee of minimum wages. Standard time and standard work is determined on the basis of time study. The main characteristics of this system is that two rates of wage one lower and one higher are fixed. Those who fail in attaining the standard, are paid at a lower rate and those exceeding the standard or just attaining the standard get higher rate. Under this system, a serve penalty is imposed on the inefficient workers because they get the wages at lower rates. The basic idea underlying in this scheme is to induce the worker at least to attain the standard but at the same time if a worker is relatively less efficient, he will lose much. For example, the standard is fixed at 40 units per day and the piece rate are 40 P. and 50 P. per unit. If a worker produces 40 units or more in a day, he will get the wages at the rate of 50 P per unit and if he produces 39 units will get the wages at 40 paise per unit for the total output. 2. Gantt’s Task and Bonus Plan - In this, a minimum wage is guaranteed. Minimum wage is given to anybody, who completes the job in standard time. If the job is completed in less time, then there is a hike in wage-rate. This hike varies between 25% to 50% of the standard rate. 3. Profit Sharing – It is a method of remuneration under which an employer pay his employees a share in form of percentage from the net profits of an enterprise, in addition to regular wages at fixed intervals of time.

  25. There are different types of group incentive schemes. Important among them are as follows: • Priest man’s Plan— This system of wage payment was first used by Priest man's of Hull in 1917. It is applied to workers who work in groups. It provides for payment of group bonus in addition to the ordinary time rate to the individual workers. Thus if during a year, an enterprise is able to reach the predetermined standard output or exceed the previous year's output, workers are paid increased wages in the same ratio in which output has increased. For example, if in 1990, the output per worker-hour was 10 units and in 1991, it rises to 11 units per worker-hour, the wages in 1991 would be 10% higher than those in 1990.An advantage of the system is that it brings about team-spirit among the workers of a group. If the group as a whole works well, this is bound to add to overall output of the enterprise and in that case all the workers would stand to benefit.But its disadvantage is that it may be insufficient to motivate individual workers, particularly these who possess greater skills and experience. (2) Scanlon Plan— Named after Mr. Joseph Scanlon of United States, this plan is the most popular for shaving the gains from increase in productivity. It provides for payment of 10% participating bonus for every 10% increase in productivity. The benefit is extended to all employees except the members of top management.Under the plan, workers are not paid the entire amount of bonus earned by them in any month. One half of the first 15% of such bonus is set apart for the creation of a reserve fund. This fund is used to neutralize the effects of any fluctuations in labor costs. In case a part of such fund remains unused, it too is distributed among the workers in the last month of the year and then a new fund is a created for the New Year.

  26. (3) Productive Bargaining— Management and workers of an enterprise may reach an agreement under which workers agree to give up unproductive wasteful practices such as go-slow and work to rule and in return, the management agrees to link the wages and concessions of increase in productivity.For this, it is necessary that there should be a strong trade union to force the workers to honor the agreement. In case there are too many unions not cooperating with one another such agreement has little chance of succeeding. (4) Co-partnership— Under this certain employees are given the option of buying the shares of the enterprise at reduced price in installments. The employees are chosen on the basis of seniority or wage levels. Its assumption is that as a shareholder of the company. An employee is likely to show greater understanding of the company's viewpoint and behave more responsibly.As for management, it can cite such schemes as proof of its enlightened outlook and thus brighten the public image of the enterprise. (5) Profit sharing: It is an agreement (formal or informal) freely entered into, by which an employee receives a share fixed in advance of the profits

  27. 2) Financial and Non-financial Incentives- Individual or group performance can be measured in financial terms. It means that their performance is rewarded in money or cash as it has a great impact on motivation as a symbol of accomplishment. These incentives form visible and tangible rewards provided in recognition of accomplishment. Financial incentives include salary, premium, reward, dividend, income on investment etc. On the other hand, non-financial incentives are that social and psychological attraction which encourages people to do the work efficiently and effectively. Non-financial incentive can be delegation of responsibility, lack of fear, worker’s participation, title or promotion, constructive attitude, security of service, good leadership etc.. 3) Positive and Negative Incentives- Positive incentives are those agreeable factors related to work situation which prompt an individual to attain or excel the standards or objectives set for him, where as negative incentives are those disagreeable factors in a work situation which an individual wants to avoid and strives to accomplish the standards required on his or her part. Positive incentive may include expected promotion, worker’s preference, competition with fellow workers and own ‘s record etc. Negative incentives include fear of lay off, discharge, reduction of salary, disapproval by employer etc. • Negative incentive measures or disincentives are mechanisms designed to discourage actions that are harmful. Examples of this would be user fees or taxes.Postive incentive measures are mechanisms designed to encourage actions that are beneficial. Examples of this would be tax cuts, etc. 

  28. Social security measures • Social Security  is one of the key components of labour welfare. Labour welfare refers to all such services,amenities and facilities to the employees that improves their working conditions as well as standard of living. • Social security benefits provided by an enterprise should protect not only their employees but also their family members through financial security including health care. • Social security envisages that the employees shall be protected against all types of social risks that may cause undue hardships to them in fulfilling their basic needs. • In India, provision for social security to the workers occupies a very important place in the industrial set up. It is included in our Constitution under the Directive Principles of State Policy. It thus makes the 'State' bear the primary responsibility for developing an appropriate system for protecting and assisting its workforce. • Hence, a Social Security Division has been set up under the Ministry of Labour and Employment. The division deals with framing of social security policy for the workers, administration of all the legislations relating to social security and implementation of the various social security schemes. Social Security to the workers is provided through the five Central Acts:- (i) The Employees' State Insurance Act, 1948; (ii) Employees' Provident Funds & Miscellaneous Provisions Act, 1952; (iii) The Workmens' Compensation Act; (iv)The Maternity Benefit Act;and (v) The Payment of Gratuity Act.  In addition, there are a large number of welfare funds for certain specified segments of workers such as beedi workers, cine workers, construction workers etc.  • The social security package broadly covers two categories of labour welfare measures:- (i) those relating to the medical facilities, compensation benefits and insurance coverage to the employees; (ii) those relating to the provident fund and gratuity provisions. It thus consists of all types of preventive, promotional and protective measures for labour welfare.

  29. Job evaluation means systematically determining relative worth of jobs to create job structure. An attempt to identify inputs that are most valuable to the organization & to develop job hierarchy based on which jobs have more or less of those dimensions. Job Evaluation Methods: • The essence of compensation administration is job evaluation and the establishment of the pay structure.. By job evaluation we mean using the information in job analysis to systematically determine the value of each job in relation to all jobs with in the organization. In short, job evaluation seeks to rank all the jobs in the organization and place them in a hierarchy that will reflect the relative worth of each. There are four general job evaluation methods. • a. Ranking method: • Raters examine the description of each job being evaluated and arrange the jobs in order according to their value to the company. This method requires a committee – typically composed of both management and employee representative – to arrange job in a simple rank order from highest to lowest. No attempts are made to break down the jobs by specific weighted criteria. The committee members merely compare two jobs and judge which one is more important, or more difficult to perform. Then they compare the other job with the first two, and so on until all the jobs have been evaluated and ranked. • The most obvious limitation to the ranking method is its sheer inability to be managed when there are a large number of jobs. Other drawbacks to be considered are the subjectivity of the method- thereare no definite or consistent standards by which to justify the rankings- and the fact that because jobs areonly ranked in terms of order, we have no knowledge of the distance between the ranks.

  30. b. Classification method: • A job evaluation method by which a number of classes or grades are defined to describe a group of jobs is known as Classification method. The classifications are created by identifying some common denominator skills, knowledge, responsibilities –with the desired goal being the criterion of a number of distinct classes or grades of jobs. • Once the classifications are established, they are ranked in an overall order of importance according to the criteria chosen, and each job is placed in its appropriate classification. This later action is generally done by comparing each position’s job description against the classification description and benchmarked jobs. The classification method shares most of the disadvantages of the ranking approach, plus the difficulty of writing classification descriptions, judging which jobs go where, and dealing with jobs that appear to fall into more than one classification. c. Factor comparison method: • Raters need not keep the entire job in mind as they evaluate; instead, they make decisions on separate aspects, or factors, of the job. A basic underlying assumption is that there are five universal job factors: (1) Mental Requirements, (2) Skills, (3) Physical Requirements, (4) Responsibilities, and (5) Working Conditions. The committee first rank each of the selected benchmark jobs on the relative degree of difficulty for each of the five factors. Then, the committee allocates the total pay rates for each job to each factor based on the importance of the respective factor to the job. A job comparison scale, reflecting rankings and money allocations, is developed next. The raters compare each job, factor by factor, with those appearing on the job comparison scale. Then, they place the jobs on the chart in an appropriate position.

  31. d. Point method: • Raters assign numerical values to specific job components, and the sum of these values provides a quantitative assessment of a job’s relative worth. The point method requires selection of job factors according to the nature of the specific group of jobs being evaluated. After determining the group of jobs to be studied, analysts conduct job analysis and write job descriptions. • Next, the analysts select and define the factors to be used in measuring job value and which become the standards used for the evaluation of jobs. Education, experience, job knowledge, mental effort, physical effort, responsibility, and working conditions are examples of factors typically used. • The committee establishes factor weights according to their relative importance in the jobs being evaluated, and then determines the total number of points to be used in the plan. A distribution of the point values to job factor degrees is made, with the next step being the preparation of a job evaluation manual.

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