Compensation

10753 Words Feb 17th, 2013 44 Pages
I NSTRUCTOR’S MANUAL

Designing A Pay Structure

CASe STUDy AND INTegRATeD APPLICATION exeRCISeS

Designing A Pay Structure
By Lisa A. Burke, Ph.D., SPHR

Instructor’s Manual

TOTAL REWARDS
©2008 SHRM Lisa Burke, Ph.D., SPHR

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I NSTRUCTOR’S MANUAL

Designing A Pay Structure

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©2008 SHRM Lisa Burke, Ph.D., SPHR

CASe STUDy AND INTegRATeD APPLICATION exeRCISeS

Designing A Pay Structure
Designing a Pay Structure
About this CAse

Learning Objectives

In this case, upper-level undergraduate or master’s level HR students

In this case, students will learn to design a pay structure. To do so, they will:

will learn how to design a pay structure using a case scenario and integrated application
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There are three methods of job-based evaluation: the point method
(which is the most commonly used); ranking; and classification. Job evaluation helps to ensure that pay is internally aligned and perceived to be fair by employees.
Step 3: Pay Policy Identification
Pay policy identification is the process of determining whether the organization wants to lead, lag or meet the market in compensation. The pay policy or strategy will likely influence employee attraction and retention. Pay policies can vary across job families (i.e., groups of similar jobs) and job levels if the top management feels that different strategies can be effective in different areas of the organization.
Step 4: Pay Survey Analysis
Pay survey analysis is the process of analyzing compensation data gathered from other employers in a survey of the relevant labor market. Gathering external pay data (e.g., base pay, bonuses, stock options and benefits) is essential to keep the organization’s compensation externally competitive within its industry. Employee attraction and retention can be improved by maintaining externally aligned pay structures.
Step 5: Pay Structure Creation
Pay structure creation is the final step, in which the internal structure (Step 2) is merged with the external market pay rates (Step
4) in a simple regression to develop a market pay line. Depending on whether the organization wants to lead, lag or meet the market, the market pay line can be adjusted up or

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