Compensation Exam 2
Standard deviaton
(all terms squared and added together) - (number of terms x (average of terms squared)) / number of terms - 1. all of this square rooted
Steps in the job analysis process
-Determine a job analysis program. -Select and train analysts. -Direct job analyst orientation. -Conduct the study: data collection methods and sources of data. -Summarize the results: writing job descriptions.
O'Net
-a database. It is designed to describe jobs that evolved as the result of technological advances -it incorporates information about both jobs and workers. The content model lists six categories of job and worker information
Construct a pay structure- Step 1
-deciding on the number of pay structures -exempt and nonexempt pay structures -pay structures based on job family -based on geography
Compensation surveys-strategic considerations
-defining the relevant labor market -choosing benchmark jobs
designing person-focused programs
-first the company must develop job descriptions -second, individual jobs should be organized into job families, or groups of similar jobs such as clerical, technical, and accounting -third, skills should be grouped into blocks
Compensable factors
-job attributes that compensation professionals use to determine the value of jobs. Most companies consider skill, effort, responsibility, and working conditions. -compensation professionals should select compensable factors that further a company's strategies
Job evaluation techniques
-market-based evaluation -job-content evaluation
compensation surveys-published compensation survey data
-survey focus: core compensation or employee benefits -sources of published compensation surveys
Legal considerations of job analysis
-under the Equal pay act companies must justify pay differences between men and women who perform equal work. Different job titles do not suffice as justification. Instead, companies must demonstrate substantive differences in job functions.
compensation surveys-preliminary consideration
-what companies hope to gain from compensation surveys -custom development versus use of an existing compensation survey
Calculate the overlap between pay ranges
100% x (max. rate for A - min. rate for B) / (max. rate for A - min. rate for A)
Based on a Y-predicted, leading the market by 20 percent equals a predicted salary of
58,970 x (1 + 20%) = 70,764
Based on Y-predicted, lagging the market by 15 percent equals a predicted salary of _______
58,970 x (1 - 15%) = 50,124.50
salary only plans
Are specific types of sales compensation plans. Sales professionals receive fixed-base compensation, which does not vary with the level of units sold, increase in market share, or any other indicator of sales performance.
Benchmark jobs
Jobs used as reference points when setting up a job classification system and when designing or modifying a pay structure.
Pay level policies
Market Lead Market Lag Market Match
Determining single versus multiple job evaluation techniques
Must determine when a single job evaluation technique is sufficiently broad to assess a diverse set of jobs. They are differentiated based on sets of compensable factors that are common to one set of jobs, but different from others
Putting percentiles and quartiles into cells
Q4 = 20%, excellent = 10%... 20%x10% = 2% in spot
disadvantages of person-focused pay programs
They may not mesh well with existing incentive pay systems. When both systems are in operation, employees may not want to learn new skills when the pay increase associated with learning a new skill is less than some incentive awards employees could earn based on skills they already possess
Merit pay
a system of linking pay increases to ratings on performance appraisals
alternation ranking
a variation of simple ranking job evaluation plans, orders all jobs from lowest to highest, based on alternately identifying the jobs of lowest and highest worth
Competency
an individual's capability to orchestrate and apply combinations of knowledge and skills consistently over time to perform work successfully in the required work situations.
technological innovation
auto mechanics used to know how to manually assemble and disassemble carburetors. Now electronic fuel injection systems have replaced carburetors, so they now must be able to use computerized diagnostic systems
Advantages of person-focused pay programs
because person-focused pay programs create more flexible workers, these programs can represent better job demand, employees can perform a variety of jobs that draw on the skills they have attained through person-focused pay programs
compensation budgets
blueprints that describe the allocation of monetary resources to fund pay structures
pay structure variation
broad banning- a pay structure form that leads to the consolidation of existing pay grades and pay ranges into fewer, wider pay grades two-tier pay system- reward newly hired employees less than established employees on either a temporary or permanent basis
Construct a pay structure-step 4
calculating pay ranges for each pay grade
Job analysis techniques
choosing one established plan over another depends on two considerations: application and cost. Some job analysis techniques apply only to job families, but others can be applied more broadly.
Choosing the job evaluation committee
committees review job descriptions and analyses and then evaluate jobs. Committees help ensure commitment from employees throughout companies. They also provide a checks-and-balances system
timing
companies could establish a common review date or go off of an employee's anniversary date
communicating with employees
companies must formally communicate with employees throughout the job analysis and evaluation process to ensure employees' understanding and acceptance of the job evaluation process and results
increased global competition
companies must provide their employees with leading edge skills and encourage employees to apply their skills proficiently
disadvantages of person-focused pay programs
companies struggle with determining the monetary value of skill and knowledge set
Advantages of person-focused pay programs
companies that use person focused pay systems can usually rely on leaner staffing because multi-skilled employees are better able to cover for unexpected absenteeism, family or medical leave, and training sessions that take individual employees away from their work
Job-based pay
compensates employees for jobs they currently perform, and include seniority pay, merit pay, and incentive pay. HR establish a minimum and maximum acceptable amount of pay for each job
Construct a pay structure-step 3
defining pay grades-based on similar compensable factors and values
Sales compensation plans
derive their objectives directly from strategic marketing objectives, which, in turn, are derived from company strategy
Construct a pay structure-step 2
determining a market pay line
market lag
distinguishes a company from the competition but by compensating employees less than most competitors
Market lead
distinguishes a company from the competition by compensating employees more highly than most competitors
disadvantages of person-focused pay programs
effective person-focused pay programs depend, in large part, on well-designed training programs. Include costly programs, and award pay raises to employees who successfully complete training
Job content evaluation
emphasize company's internal value system by establishing a hierarchy of internal job worth based on each job's function in company strategy.
calculate the expected number of employees in each cell
employee population (800) x percent in respective box
skill blocks model
employees progress to increasingly complex jobs; however, skills do not necessarily build on each other
seniority pay
employees receive automatic increases over time based on the assumptions that they are further developing their capabilities which translates into higher job performance
Job-point accrual model
encourages employees to develop skills and learn to perform jobs from different families. Companies limit the number of jobs employees are allowed to learn to avoid having them become "jacks-of-all-trades". Encourages employees to learn skills and acquire knowledge that bear directly on companies' attainment of competitive advantage
Construct a pay structure-step 5
evaluating the results
Training employees to conduct job evaluations
evaluators should practice using the chosen job evaluation criteria before applying them to actual jobs
disadvantages of person-focused pay programs
hourly labor costs, training costs, and overhead costs can all increase. Hourly labor costs increase because greater skills should translate into higher pay levels for most workers
sales compensation plans
improve sales productivity improve sales coverage of current customers grow sales overall
merit pay
increases should reflect prior job performance levels and motivate employees to perform their best
Incentive pay
managers award one-time additions to base pay. Pay raise amounts are based on the attainment of work goals, which managers communicate to employees in advance
merit pay
managers evaluate employees based on how well they fulfilled their designated roles as specified by their job descriptions and periodic objectives
what is the sum of the expected merit pay increase?
median for quartile (70,000) x percent given in box (4%) x how many employees are expected to fall in each of the cells (16) = 44,800. do for all and get sum
Pay range minimum
midpoint/ 100% + (range spread/2)
Pay range maximum
minimum + (range spread x minimum)
Nonrecurring merit increases
monetary awards based on employee's past job performances
Market match
most closely follows the typical market pay rates because companies pay according to the market pay line
simple ranking plans
order all jobs from lowest to highest according to a single criterion
setting up the appeals process
permits reviews on a case-by-case basis to provide a check on the process through reexamination. This reduces charges of illegal discrimination that would be more likely to occur if employees were not given a voice
classification plans
place jobs into categories based on compensable factors
Cross-departmental models
promotes staffing flexibility by training employees in one department with critical skills they would need to perform effectively in other departments. Can help production environments manage sporadic, short-term staffing shortages
Advantages of person-focused pay programs
provide companies with greater flexibility in meeting staffing demands at any time
Depth of Skills
refers to the level of specialization or expertise an employee brings to a job. Some person-focused pay plans reward employees for increasing their depth of skills or knowledge.
Introduction of Market-competitive pay systems
represent companies' compensation policies that fit the imperatives of competitive advantage
horizontal skills
similar skills or knowledge. For example, assembly skills applied to lawn mowers and assembly skills applied to snow blowers
Reasons to adopt
technological innovation and increased global competition
stair-step model
the steps represent jobs from a job family that differ in terms of complexity. Assembly technician 1, assembly technician 2, (example in class with core required and core electives and optional electives)
vertical skills
these skills are emphasized in person-focused pay plans designed for self-managed work teams because team members often need to learn how to manage one another
Legal considerations of job analysis
they can perform job analyses to see if they comply with the Americans with Disabilities Act
Advantages of person-focused pay programs
they can provide employees with both job enrichment and job security. Job enrichment is a job design approach that creates more intrinsically motivating and interesting work environments
vertical skills
traditionally considered supervisory skills. For example, scheduling, coordinating, training, and leading others.
documenting the job evaluation plan
useful for legal and training purposes. A well-documented evaluation plan clearly specifies job-and business-related criteria against which jobs are evaluated. Well-documented plans can allow employees to understand clearly how their jobs were evaluated and the outcome of the process. Well-documented plans provide guidelines for clarifying ambiguities in the event of employee appeals or legal challenges
Paired comparison
useful if there are many jobs to rate, usually more than 20
Market-based evaluation
uses market data to determine differences in job worth. Companies choose this because they wish to assign job pay rates that are neither too low nor too high relative to the market
Point method
uses quantitative methodology (what we did on our project where we assign values and percentages to each job structure)
If we assume the y-intercept is $50,000 and the slope is $15.60, the predicted annual salary for a job that is worth 575 job evaluation points is __________.
y = 15.60 (575) + 50,000 = 58,970
