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.