Compensation Chapter 8 ( TEST 3 )

Employment Costs Index (ECI)

Measures quarterly changes in employers costs for compensation.

Job structure

Orders jobs on the basis of internal factors

Competitive Intelligence

The ability in terms of compensation, to estimate competitors labor costs .

Who is responsible for surveys?

The compensation manager, and they should seek outside consulting firms to protect against lawsuits.

Low-high approach

Wages of lowest- and highest paid benchmark jobs used as anchors for skill-based structures

As the importance and complexity of the qualifications increase.....

the geographic limits also increase.

Two aspects of pay structure

1. Pay policy line 2. Pay ranges

The purpose of a survey

1. To adjust the pay level relative to competitors. 2. To set the mix of pay forms relative to competitors. 3. To establish or price a pay structure 4. To analyze pay related problems 5. To estimate the labor, costs of competitors

Market Line

A market line links a company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis (can be freehand or regression analysis)

Benchmark Job approach

Benchmark jobs have stable job content, are common and include sizable numbers of employees.

The pay-policy line

Choice of measure. The policy line as percent of market line. The company's pay line compared to the market line.

Benchmark conversion/survey leveling:

Differences are quantified when job content does not sufficiently match survey jobs

Relevant Labor Markets

Employers or companies that compete in one or more areas.

Pay Range

Exists whenever two or more rates are paid ti employees in the same job Allows managers to recognize individual performance differences with pay. Establish range mins, midpoints, and max

Vertical Axis of the total pay model

External competitive data

Bureau of Labor Statistics (BLS)

Publicly available data; ie: Online salary information(highly suspect), Many surveys but few are validated.

Grades

These are different jobs, but considered equal for pay purposes. All jobs within a single grade will have the same pay range.

Total Compensation

base + bonus + stock options + benefits

Total Cash (pay)

base pay + bonus pay

Pay structure

is anchored by the organization's external competitive position and reflected in its pay policy line

Market Pricing

some companies emphasize external competitiveness instead on internal alignment, which almost exclusively sets pay structures on the market rates. promotes fairness.

Horizontal Axis of the total pay model

Internally aligned structure

A Survey

Is the systematic process of collecting and making judgements about the compensation paid by other employers.

Fuzzy Markets

New organizations and unique jobs may fuse diverse factors making relevant markets fuzzy. Places more emphasis on external market data