MGMT 472 Chap 8 Test 3

What are two approaches to constructing a market pay line?

- Can be drawn freehand by connecting the data points - Statistical techniques such as regression may be drawn

Two aspects of pay structure

- Pay-policy line (paying 10% above average) - Pay ranges

What are the issues of market pricing?

1. Validity of market data 2. Use of competitors'pay decisions as primary determinant of pay structure 3. Lack of Value added via internal alignment 4. Difficult to imitate aspects of pay structure are deemphasized 5. Fairness

Grades enhance:

An organization's ability to move people among jobs with no change in pay.

Pay Grades

Classes, levels, or groups into which jobs of the same or similar values are grouped for compensation purposes.

Why are ranges higher at top level manager levels?

Differences in performance really matter on higher level positions EX: bad CEO vs good CEO

Market Pay Line

Links a company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis. It summarizes the distribution of going rates paid by competitors in the market.

Market Pricing

The approach sets pay structure almost exclusively on external market rates

Pay Ranges

The range of pay rate from minimum to maximum set for a pay grade or class. - actual dollar value attached to the job in that pay grade - it puts limits on the rates an employer will pay for a particular job

Each grade has its own:

pay range