Ch. 8- Designing pay levels, mix, and pay structures
grades and ranges offer flexibility to:
-deal with pressures from external markets
Pay grades
-grades enhance an organization's ability to move ppl among jobs with no change in pay -have their own pay range -jobs with single grade will have same pay range
pay structure
anchored by external competitive position: reflected in pay-policy line
broad banding
collapsing salary grades into only a few broad bands, each with a sizable range. consolidates as many as 4 or 5 traditional grades into single band with 1 minimum and 1 maximum. steps: 1- set number of bands 2- price the bands: reference market rates
pay range
exists whenever two or more rates are paid to employees in the same job
benchmark conversion/survey leveling
in cases where the content (job description) of an org's jobs does not sufficiently match that of jobs in the salary survey, an effort can be made to quantify the difference via benchmark conversion.
Relevant labor market
includes employers who compete: -For same occupations or skills -for employees in same geographic area -with same products/services
two parts of total pay model
internally aligned structure- horizontal axis external competitive data- vertical axis
median
order all data points from highest to lowest; one in middle is median minimizes distortion caused by outliers
job structure
orders jobs on basis of internal factors: reflected in job evaluation or skill certification
fuzzy markets
organizations with unique jobs and structures find it hard to get comparable market data -place more emphasis on external market data
weighted mean
rate for each company is multiplied by the number of employees in that company. total of all rates divided by total number of employees gives equal weight to each individual's wage. captures size of supply and demand in market.
market pricing
sets pay structures almost exclusively on external market rates. -competitive rates for jobs for which external market data are available are calculated -remaining jobs are blended into pay hierarchy objective: to base most internal pay structures on external rates and to break down boundaries between internal org and external market forces
market pay line
setting pay for benchmark and non-benchmark jobs approaches: -free hand -regression
mean
sum of all rates and divide by number of rates commonly called average
market line
summarizes the distribution of going rates paid by competitors in the market
survey
surveys provide data for translating that policy into pay levels, pay mix, and structures. a survey is the systematic process of collecting and making judgments about the compensation paid by other employers.