CHAPTER 8 DESIGNING PAY LEVELS, MIX AND PAY STRUCTURES LEARNING OBJECTIVES 1. Identify the major decisions in establishing externally competitive pay. 2. Describe the purpose(s) of a salary survey. 3. Discuss the importance of defining the relevant market in a pay survey. 4. Explain the steps involved in designing a pay survey. 5. Describe the key issues involved in interpreting the results of a pay survey. 6. Explain how the market pay line combines the internal structure with external market rates. 7. Discuss the use of pay grades and pay ranges and their relationship to internal alignment and external competitiveness. 8. Discuss the pros and cons of the market pricing approach to establishing a pay structure. …show more content…
Adjust Pay Structure 1. survey information used for directly valuing jobs in some cases 2. in other instances, used to validate job evaluation results (see if market rates vary greatly from those obtained in the firm’s job evaluation) Study Special Situations 1. information used to review competitor pay scales in case of high turnover or to justify differentials between certain gender dominated jobs in legal situations 2. many special studies appraise the starting salary offers or current pay practices for targeted groups, such as patent attorneys, sales managers, or software engineers G. Estimate Competitors' Labor Costs 1. surveys allow for organizations to compare labor costs especially in a highly competitive industry, as input for decisions making, etc. 2. they may use salary survey data to benchmark against competitors’ product pricing and manufacturing practices IV. SELECT RELEVANT MARKET COMPETITORS A. To make decisions about pay level, mix, and structures, a relevant labor market must be defined that includes employers who compete in one or more of the following areas Relevant markets are expressed as: • employers who compete for the same occupations and skills required • the geographic distance employees are willing to commute/relocate • employers who compete with the same
Consider this excerpt from the Harvard Business Review’s Daily Blog: https://hbr.org/2015/03/setting-the-record-straight-on-negotiating-your-salary and answer the questions that follow in as much detail as possible
1. When it is difficult to determine the effect of a salesperson’s effort son sales rather than pay any incentive through commission it is better to use a bonus with salary as part of the compensation package
Correct :Pay compression is related to and affected by inflation. It is the narrowing of the ratios of pay between jobs or pay grades in a firm's pay structure.
Susan's initial thought of compensation is to match what her competitors are doing. By matching the compensation systems of organizations, she will be operating in the same pool of applicants as her competitors.
BV: explain the agreed ways of working with your employer in relation to the following areas.
2. Explain how the compensation, staffing, and training strategies were aligned or integrated with each other to create an overall HR strategy for the Oakland A's organization.
1. Describe the internal labor market of the company in terms of job stability (staying in the same job), promotion paths and rates, transfer paths and rates, demotion paths and rates, and turnover (exit) rates.
When making compensation decisions, whether it is internal or external, comparisons must be considered. However, employers must carefully balance pay structures, because internal and external comparisons may not converge. Therefore, employers may differ in the way they place priorities on internal and/or external comparison data when they are developing pay structures.
1.1 Describe 4 factors, 2 internal and 2 external, which impact on the employment relationship
i. Why was Dakota’s existing pricing system inadequate for its current operating environment? (Hint: Consider why ABC might be a good idea)
Some organizations are unwilling to show their reward systems and pay policies (Lawler, 1995). Many Human Resources professionals believe gender pay gaps to be resolvable through the monitoring of pay levels and communication (Report on Salary Surveys).Greater pay transparency has been a great benefit to the board, employees and managers as they now know what is happening across the business and they are able to confidently justify their actions (Commission Policy Report).All market-related supplements are recorded and reviewed separately from basic salary to ensure openness and transparency. Regular research market rates within the various labor markets in which they operate is undertaken improving transparency would also help to improve talent development, as employees would be able to see what they could earn if they wanted to move to another division and upgrade their skill set. (Commission Policy Report).
1. Assess the advantages and disadvantages of using a Web-based compensation tool verses a client-server based or stand-alone PC based system and then give your opinion on which system would provide the most value to an organization’s stakeholders. Include three (3) facts to support your opinion.
b. Instead of being a price follower, the system could guide the company make better pricing strategies.
b. Employers to pay more productive workers higher rate than others using a “scientifically correct “rate that would benefit both the company and workers.