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