Management 4220 Chapter 8
Compa-ratio meanings for pay structures
Compa-ratio meanings 1 = market match rate < 1 = market lag rate > 1 = market lead rate Divide pay rates by midpoint
5 steps of pay structure
1. Decide how many pay structures to construct 2. Determine a market pay line 3. Define pay grades 4. Calculate pay ranges 5. Evaluate the results
Three types of pay structures
1. Traditional 2. Broadband 3. Market-Based
Considerations for merit pay
Considerations - Communicate link between pay and performance - Use effective appraisal methods - Establish increase amounts and types - Settle on base pay level
Green-circle rates
Situations in which an employee's pay is below the minimum of the range. Can be the result of someone not meeting the minimum requirements for the job
Traditional pay structure
Traditional salary structures are divided into numerous pay grades. Salary increases are relatively small jumps between pay grades. Employers can use traditional structures to prevent employees from capping out at the maximum salary too quickly.
merit pay
a system of linking pay increases to ratings on performance appraisals
Pay compression
occurs when individuals with substantially different levels of experience, or performance abilities are paid wages or salaries that are relatively equal. Caused by the scarcity of qualified candidates and a lack of increase in pay range minimum and maximum wage
Red-circle rates
payment rates above the maximum of the pay range Results from a failure to raise pay range maximums
pay grades
sets of jobs having similar worth or content, grouped together to establish rates of pay. Human resource (HR) professionals typically group jobs into pay grades based on similar compensable factors and value.