Comp HR

Job based Plan

, a job-based plan pays employees for the job_, regardless of the skills they possess. A job-based approach pays only as much as the work is worth The logic underlying job-based pay structures flows from scientific management, championed by Frederick Taylor. Taylor sought the "one best way" to perform every element of the job

Pay Range

Designing pay grades_ and _pay ranges_ is usually done with base pay data, since this reflects the basic value of the work. Grades and ranges offer flexibility for: • Differences in quality among applicants. • Differences in productivity or value of quality variations. • Differences in the mix of pay forms used by competitors. A _pay range exists whenever two or more rates are paid to employees in the same job - allows managers to: • Recognize individual performance differences with pay. • Meet employees' expectations that their pay will increase over time. • Encourage employees to remain with the organization.

Issues involving the validity of job evaluation

Many studies report that when different evaluation plans are compared, they generate similar rankings but low hit rates. The definition of validity needs broadened to include the impact on pay decisions.

compensable factors

One study found compensable factors related to job content did reflect bias against work done predominantly by women. • Define the compensable factors and scales to include the content of jobs held predominantly by women. Competencies often morph into compensable factors

Issues involving the reliability of job evaluation

Reliability for job evaluation scores are higher than those for job analysis ratings. In efforts to reduce costs, job evaluation committees are disappearing.

Skill based plan

Supports the strategy and objectives. • In practice, the "line of sight" is difficult to make clear. Supports work flow. • A main advantage is matching people to changing workflow. Is fair to employees. • Skill-based plans may give workers more control over their work life but favoritism and bias may be a problem. • The legality of such plans have not been addressed in the courts. Motivates behavior toward organization objectives. • Fluid work assignments require less supervision, resulting in labor cost savings.

Marginal Revenue Product

The change in total revenue when an additional unit of a resource is employed, other things constant Diminishing marginal productivity results when each new worker has a progressively smaller share of production factors available. • Until fixed production factors change, each new hire produces less than the previous hire. • The amount each hire produces is the marginal product.

Lag, match, and lead pay policies

There are three pay-level policies. • To lead_. • To __meet or match__. To follow competition, or _lag

Bourse

eBay is an example of a bourse market, allows haggling.

Marginal product of labor:

the additional output a firm produces as a result of hiring one more worker : A single employer's demand for labor coincides with the __marginal product of labor_. • Which is the additional output associated with the employment of one additional person, with other production factors held constant.

Factors affecting perceptions of fairness in skill-based plans

• Skill-based plans may give workers more control over their work life but favoritism and bias may be a problem. • The legality of such plans have not been addressed in the courts.

What is the employment Cost Index (ECI)

• The Department of Labor regularly publishes the __Employment Cost Index__, one of four types of salary surveys. • The index allows comparisons. • They may have limited value if they do not reflect relevant competitors.

Market Pay lines

A market line: • Links __benchmark jobs_ on the horizontal axis (internal structure) with _rates paid by competitors (market survey) on the vertical axis. ---It summarizes the distribution of going rates paid by competitors in the market There are several ways to translate external competitiveness policy into practice. • Choice of measure_. • A company can use a specific percentile for base pay and another percentile for total compensation. • Updating. • If a company chooses a "match" policy, they will be lagging the market. • Aging the market data to a point halfway through the plan year is called _lead / lag__. • Policy line as percent of market line. • Specify a percent above or below the _regression line_ an employer intends to match and draw a new line at this level. • This _pay policy line_ carries a message.

Benchmark conversion and survey leveling

Benchmark Conversion / Survey Leveling. • When jobs do not match survey jobs, quantify the difference using _benchmark conversion_. • If an organization uses job evaluation, then apply that system to the survey jobs. Accuracy of Match_ (and Improving the Match). • If a company job is similar, but not identical, some use the benchmark conversion / survey leveling approach.

Observable behaviors that indicate competency level

Early conceptions of competencies focused on five areas: • Skills - demonstration of expertise. • Knowledge - accumulated information. • Self-concepts - attitudes, values, self-image. • Traits - general disposition to behave in a certain way. • Motives - recurrent thoughts that drive behaviors. Organizations are now emphasizing _business-related descriptions of behaviors__. Competencies are becoming a collection of observable behaviors requiring no inference, assumption or interpretation.

Lag polices

- Paying below market rates may hinder a firm's ability to attract potential employees. -If a _lag pay-level_ policy is coupled with the promise of higher future returns, this may increase employee commitment and foster teamwork, increasing productivity. • How long this promise works, is unknown and unmet expectations can have negative effects. It is possible to lag on pay-level but lead on other work returns.

Lead Polieces

-A _lead pay-level policy maximizes the ability to attract and retain quality employees and minimizes employee pay dissatisfaction. -An entire industry can pass high pay rates on to consumers is pay is a relatively low proportion of total operating expenses. -Research links high wages to ease of attraction, reduced vacancy rates and training time, and better-quality employees. -There is no simple relationship between pay-level and financial performance. A lead policy can have negative effects. • It may force the employer to increase wages of current employees too. • It may mask negative job attributes that contribute to high turnover.

Know the steps involved in developing competitive pay levels and structures

1. Specify the employer's competitive pay policy. 2. Define the purpose of the survey. 3. Select relevant market competitors. 4. Design the survey. 5. Interpret survey results and construct the market line. 6. Construct a pay policy line that reflects the external pay policy. 7. Balance competitiveness with internal alignment through the use of ranges, flat rates and, or bands.

The process of identifying competencies in person-based structures

A _competency-based stucture__ begins by looking at the work performed in the organization. • The underlying knowledge, skills, and behaviors that form success at any level or job are the core competencies. • Competency sets translate each core competency into action. • Competency indicators are observable behaviors. • They anchor the degree of a competency at each level of complexity of the work and sometimes include scales.

Pay Grades

Is a part of the pay structure The first step is to group different jobs considered _substantially equal_ for pay purposes into grades. • Grades allow people to move among jobs with no pay change. Reconsider the original _job evaluation_ results to decide which grade a job should be slotted into. • All the jobs within a single grade will have the same pay range. Though flexible, grades are difficult to design. • The objective is for all jobs similar for pay purposes to be in a grade. If evaluation points are close and fall on either side of grade boundaries, the difference in salary may be out of proportion to the difference in the value of the job content.

marginal revenue

Marginal revenue is the money generated by sale of the marginal product, the additional output from one additional person. • Employers will hire until marginal revenue equals the cost associated with employing that person. • The level of demand that maximizes profits is that level where marginal revenue is equal to the wage rate for that hire.

Competecy based plan

Organization Strategy. • The main appeal is the direct link to the organization's strategy. Work Flow. • Competencies may require more tacit knowledge. Fair to Employees. • Advocates say they can empower employees. • Critics worry about basing pay on personal characteristics. • Justifying pay differences may create risks that need managed. Motivate Behavior toward Organization Objectives. • Competencies provide guidelines and keep people focused. • They are a common means of communicating and working together. • Competency-based structures have relatively few levels_ and wide _differentials for increased flexibility.

Match policies

The most common policy is to match rates paid by competitors. A ___pay with competition policy_ tries to equal wage costs to those of its competitors. • Its ability to attract applicants will be approximately equal to its labor market competitors. Classical economic models predict that employers meet competitive wages. • While it avoids placing the employer at a disadvantage in pricing products, it may not provide a competitive advantage in its labor markets.

Who is responsible for managing pay surveys in most organizations

Usually the __compensation manager_ is responsible for the survey, but including managers and employees makes sense.

Competency sets

translate each core competency into action

Quoted price

• Amazon is a quoted price market, price is known.

The advantages of skill-based plans

• An advantage is a better match of people to flow of work, avoiding bottlenecks and idle hands. • Skill-based plans have very specific information on every aspect of the production process.

Skill Block

• Related skills can be grouped into a _skill block_ and skill blocks can be arranged by levels into a skill structure. • A process is needed to describe, certify, and value the skills.

Know the concept of the pay level and how it relates to employer costs

• Setting a pay level that is above, below, or equal to competitors. Pay level is the average of the array of rates an employer pays _Labor Costs__ = (pay level) X (number of employees). • The higher the pay level relative to competitors, the greater the relative costs to provide similar products or services.

Common sources of publicly available compensation data

• The __Bureau of Labor Statistics (BLS)__ is the major source.

Know the material of aging compensation data

• The pay data is usually updated, a process called _aging or trending_, to forecast rates for when pay decisions are implemented. The amount to update is based on several factors. • _Historical trends_ in the labor market. • Prospects for the _economy_ where the employer is operating. • The manager's judgment. • Various other factors.