GR17/C17 Market Pricing: conducting a competitive pay analysis AU
As a general rule, salary survey information is expected to reflect the marketplace to within plus or minus of what percent?
10%
What would be an appropriate distance between supervisor and subordinate jobs while considering the job relationships when job slotting?
15% - 20%
Calculate midpoint-to-midpoint differential, example: Grade 1 min 25000, Mid 27500, Max 30000. Grade 2 min 25700, Mid 28900, Max 32100
5%
At least what percentage should be benchmarked when using the market based job evaluation method?
50%
What is a percentage of job match that is considered as Weak?
70%
What is the percentage of job match data is considered good for benchmarking the jobs?
70%
What is a percentage of job match that is considered as Equal?
75%
What is a percentage of job match is generally accepted for strong match?
80% or higher
What is a percentage of job match that is considered as no match?
<70%
In market pricing, job rates are set based on what criterion?
A company's best estimate of typical wage rates in the external market
What is whole job comparison?
A job evaluation method in which jobs are compared in their entirety against one another, as opposed to breaking jobs down into their respective components and evaluating each component or factor.
What is a benchmark job?
A standard job used to make pay comparisons. The jobs selected should be easily defined and found in other organization. At least 50% jobs should be benchmarked and it is considered good when it matches 70% of job content.
Which practice is also known as "advancing" or "trending" the data?
Aging data
What is relevant labor market?
An organization from which it draws its employees and/or to which it loses employees
Where does compensation fit within the organization's business strategy?
An organization must first understand its compensation strategy and philosophy
How market pricing can assist an organization in meeting its business strategies?
By helping companies know what the prevailing rates for jobs are in the current market place
How company may offset if its lagging the market?
By providing benefits, company cultures, work flexibility or career development opportunities
What is pay competitiveness?
Collecting information of competitors, analyzing pay trends, identifying pay practices, programs, policies and procedures.
Which of the following best describes the statement of what the organization believes about how people should be paid?
Compensation Philosophy
Which survey data might be incur higher investment of time as well as the potential for antitrust violation?
Conducting own survey
Which of the survey data will be more clearly focused on the appropriate market while making decision to to use which survey data?
Conducting own survey and custom third-party
The total rewards design begins with which of the below process?
Corporate vision and mission
What is norm in displaying survey data format?
Data in aggregate values
In base pay structure design, what data does the job evaluation step provide?
Data that can be used to create a job worth hierarchy
What is midpoint-to-midpoint differential?
Difference in wage rates paid in the midpoints of two adjacent grades
What are the external rates?
Employer pays wages that correspond to prevailing, external market rates as determined by market pricing.
What are the factors that influence the compensation?
External competitiveness, Pay competitiveness, relevant labor market, organization must be willing and able to pay, in-demand employees, internal v.s external equity,
What does take priority in Market-Based approach to pay structure development?
External market pricing or competitiveness
Which strategy builds on the business strategy and serves as a guiding light in the designs of the all HR programs?
Human Resources Strategy
When building a job worth hierarchy using market data, what is the purpose of using job description?
Identify benchmark jobs and match to survey job descriptions
When employee can perceive an unfair situation?
If employee values a job more or less than the organization does.
What are the compensation program objectives?
Internally equitable, externally competitive, affordable, understandable, legal/defensible, efficient to administer, capable of being reshaped for the future, appropriate for the organization, attract, retain, and motivate employees, create alignment of employee efforts and business objectives
Why the job worth hierarchy is used?
It determines and ensure internal and or external equity both among positions and groups of positions.
Why is the job worth hierarchy is important?
It determines which jobs should be grouped together and it forms the foundation of the base pay system.
What are the base pay structure design required to complete the job evaluation process?
Job analysis and job documentation
Job analysis and job documentation provide the information needed to complete which process?
Job evaluation
Choose the market position that matches the following description: company will set its pay equal to current levels at the beginning of the year?
Lag
Choose the market position that matches the following description: The company's pay philosophy will stay ahead of the market the first half of the year, then fall behind the market?
Lead-lag
Which statement best describes the term relevant labor market?
Market from which an organization draws and loses its employees
Which survey format represent pay for time in a career or profession, not in a job or organization?
Maturity Curves
How many sources should you use for survey data?
More sources, larger database, avoiding bias, clustering data, muddying the water.
What is a formula of survey aging factor?
No. of months to age/12 months x annual aging factor =
How relevant labor market can be defined?
Organizational size (revenue, number of employees), geographic location (local, regional, national, international), industry (healthcare, retails manufacturing).
Which of the short-term variable pay program involves more measures than a single financial performance measure?
Performance sharing
Why are salary survey used?
Price jobs and determine market positions, analyze pay trends, document budget and structure movement, make informed decision, gather data on policies and procedures, diagnose compensation problems, defend current practices.
What is compensation Strategy?
Principles that guide the design, implementation, and administration of a compensation program. What programs will be used and how will the be administered.
What is one way market pricing supports an organization's business strategy?
Provides key competitive information on how the organization's compensation levels compare to the market.
What are the sources of survey data?
Published surveys and custom third-party surveys
Which survey format is used for scope-sensitive jobs or to establish base pay line?
Simple linear regression
An organization that is new with few or no formal policies or procedures would most likely be at what stage of the business life cycle?
Start-up
A compensation philosophy includes which of the following?
Statement of what the organization believes about how people should be rewarded.
A majority of surveys are reported in what format?
Summary statistics
What is slotting?
The act of placing a job into a job worth hierarchy established by some other job evaluation method.
Which of the following is a component of data integrity?
The extent to which the survey has been audited
How the design of compensation program can help to ensure program success?
The synergy created by the alignment with the other elements in the process.
How external equity can be achieved?
When employees believe their compensation is equal to what they would receive if they worked in a similar job at another company
What information does regression line provide?
a line of best fit of market pay levels for each grade based on the benchmarks jobs
What is model?
a representation of part of reality, used to understand relationships between data sets
Define Job Evaluation?
a structure process to determine the value of an organization's positions relative to each other
What information should be communicated when communicating compensation?
accurate information and specific messages
Which of the following is true when aging data over two calendar years?
age one year first, then age the second year
What is a primary objective of stock?
align the motivations of the employees to those of the owners
What are the forms of stocks?
appreciation vehicles and full-value vehicales
How is the value of stock awards typically shown in survey data?
as a monetary figure
When using market-based job evaluation, what percentage of jobs in the organization should be benchmarked?
at least 50%
What is the difference between awarded and target short-term incentives?
awarded represents what was actually paid, target represent what would be paid if the plan pays out at expected levels
What is a formula of total direct compensation?
base pay + short-term variable pay + Long-term Incentive
What is the definition of total cash compensation?
base pay plus short-term variable pay
What method can be used for market rate for two or more jobs form a single survey to establish a unique market rate for a hybrid job?
blending
Which of the following is a one of the purpose of communication from employee's perspective?
clarify expectations
How leading the market may help organization?
company may be in better position to attract and retain more experienced and/or higher performing employees by offering above market pay
What is lead the market?
company will set its pay at year-end anticipated market level, not at the current market levels
What is lag the market?
company will set its pay equal to current levels at the beginning of the year
What is lead-lag?
company will set tis pay at mid-year anticipated market level
What considerations should be reviewed for weighting market data?
compensation philosophy and strategy, quality of surveys, quality of job match, sample size.
Based on what ultimate determinants the organization may be willing and able to pay against what others are doing in the market?
compensation philosophy, culture, value system, competitive positioning, internal and external influences, including its relevant labor pool, and it financial resources.
What is the other term for midpoint in some structures?
control point
What are the tips for compensation communication?
convey a consistent message, align with mission, vision and business strategy, encourage feedback, follow-up on feedback,
Define Base Pay Structure?
created after job evaluation process and JWH and utilized as framework for pay decisions
If cost is a major factor, which of the following survey data sources would you least likely consider?
custom third-party survey
Which survey sources may be high in reliability?
custom third-party survey
What is the definition of regression analysis outliers?
data points in an array of data that are anomalies in comparison with other data points
What are the key considerations for slotting?
define the criteria for comparing jobs (skill, effort, responsibilities and working conditions), consider value (relative to other jobs within job family or function), supervisor/subordinate jobs (consider reporting relationship).
What does make compensation professional as a valuable contributor in the organization's mission to succeed?
determine the right mix of reward components that meet the goals of attracting the right talent while staying with in the budget
What are the considerations for aging the data?
different rates, market research, aging factor, salary increase movements, aging over two calendar years, lead or lag approach
What should be done if outliers are found still after the verification?
eliminate them
What is full-value vehicles?
employee is awarded full shares of stocks, given portions as they remain with the organization.
What does internal equity refers to?
employee perceptions and consistency, views of fairness
What is stock appreciation vehicles?
employee purchase the shares of stock at a fixed price and can sell at higher price after vesting period
When comparing awarded versus target data for incentive plan, and the awarded data is higher than target data, what does it mean?
employees exceeded their targets
Who are in-demand employees?
employees with certain or hot skills are in short supply
For which of the following would regression analysis be used?
estimating the change in market rates for jobs based on scope data
Who is best suited to communicate general compensation information to group of employees or all employees?
executive or HR
How do you measure the high-demand jobs?
focus on individual employee with specific skills
How many years of performance period is covered under long-term incentives?
greater than one year
For which jobs acquiring data more frequently is most critical?
high-demand/ hot-skills
When is it appropriate to practice open communications regarding pay decisions?
if the organizational culture supports open communication
Which of the following is true of job matching?
if your job matches 80% or higher, it is a strong match
Which of the following is a one of the purpose of communication from employer's perspective?
improve productivity
Define Job Documentation?
includes written info about the job content or functions of the job and required knowledge, skills and abilities (KSA's)
What is usually located in an HRIS?
information related to individual employees
Define profit sharing plan?
it is a short-term variable pay and includes a predetermined formula for allocating a share of the profits among participants and for distributing funds accumulated
What information should be documents in relation to documenting survey results?
job pricing worksheet, market index of competitiveness, graphic representation
How the job grades can be assigned to non-benchmarked jobs?
jobs which appear to be of similar overall job worth
What is included in total direct compensation?
long-term incentives
Who is best suited to communicate compensation information to individual employees?
managers and supevisors
At what salary range employee can be who are high performers or highly-qualified?
maximum
What are the disadvantages of market-based job evaluation and pay structure design?
may be difficult to obtain the sufficient data, any market inequities are built in, not defensible on job content basis, may not be aligned with internal equity
What are the key benefits of participating in salary surveys?
may provide a substantial discount, enhance survey value, provides easier job matching
Which of the statistical data points answers this question: what is the middle salary in a set of ranked salaries?
median
At what salary range employee can be who is fully competent to complete all the tasks required for the job?
midpoint
At what salary range employee can be who are new to the position or job responsibilities?
minimum
What can help answer the question, "how does the market pay practice match our pay policy?"
model
What are the reason of highs and lows of statistical data points?
pay philosophy, job tenure, variations in responsibility
Why would not an organization communicate the method it uses to determine employee compensation?
pay philosophy, survey sources, more questions might arise
What kind of bonuses are not included in the salary survey data?
provided on case-by-case basis, e.g. retention, spot or project completion
Define Job Analysis?
provides key information about the nature and level of work performed
What are the Characteristics of good survey?
sample size is large enough to be valid, no secrets - gives key elements. effective date of the data, term definitions, clarity of statistic, and position descriptions; sources identified
What are the factors impact the accuracy of survey data?
sample size, participant base, statistical analyses, survey methodology, job matching procedures
Which of the following is an advantage of market-based job evaluation and pay structure design?
simple to administer
What are the advantages of market-based job evaluation and pay structure design?
simple to administer and update for currency, easy to explain, not overly time consuming compared to other methods, responsive to the market, high degree of transparency
Which one of the following terms refers to the act of placing a job into a job worth hierarchy established by a method other than the organization's primary job evaluation method?
slotting
What information should be document in relation to sources and process used to price a job?
specific surveys used and why, measures of central tendency, method of aging the data, method of developing market rate composite
What are the data integrity components that may impact the survey quality?
submissions, data accuracy, survey vendor auditing
Which of the following is a characteristic of a good survey?
survey sources are identified
Which of the following is a consideration in determining if a survey should receive greater weight?
surveys with higher numbers of companies and/or incumbents reported
What information should documentation of sources and processes include?
the method of aging the data from multiple surveys to a common point in time
What is market rate?
the prevailing pay rate for a job
What is market pricing?
the process of analyzing external pay data to determine the prevailing rates of jobs in the market
What is job worth hierarchy?
the process of grouping or categorizing jobs relative to other jobs
Which of the following is the definition of blending?
the process of using market rates for two or more jobs to establish a market rate for a single hybrid job
What is market rate composite?
this results from combining market rates for the same jobs from multiple survey sources
In which of the statistical data points the middle of mean is used and extreme values are excluded?
trimmed mean
Which of the statistical data points answers this question: on average, what are the companies paying a particular job?
unweighted mean
Which of the following data is typically requested by surveys?
wage rate or salary
Which of the statistical data points answers this question: on average, what are incumbents in a particular job paid?
weighted mean
When slotting can be considered?
when market data are not available for a specific job
Which of the following is an advantage of a published survey?
you may receive a substantial discount if you participate in the survey
