Mod 9 chapter 8 vocab

Designing a survey requires answering the following questions

-Who should be involved in survey design? -How many employers should be included? -Which jobs should be included? -What information should be collected?

Central tendency

A midpoint in a group of measures

Variation

Distribution of rates around the central tendency

Relevant labor markets to include in a survey

Employees who compete in: -the same occupation or skills -hiring employees within the same geographic area - hiring the same product and services

Market line

Links a company's benchmark job evaluation points on the horizontal axis (internal structure) with market rates paid by competitors (market survey) in the vertical axis It summarizes the distribution of going rates paid by competitors in the market

Mean

Measure of central tendency, when pertaining to pay, is calculated by adding each company's base wage and dividing by the number of companies

Consumer Price Index (CPI)

Measure of the changes in prices in a fixed market basket of goods and services purchased by a hypothetical average family Not an absolute measure of living costs, rather, a measure of how fast costs are changing. Not advisable to use for updating pay data, as it measures the rate of change in prices not wages

Lead or lag

Method of updating survey data which involves aging the market data to a point halfway through the plan year

Pay grade

One of the classes, levels, or groups into which jobs of the same or similar values are grouped for compensation purposes. All jobs in a pay grade have the same pay range - maximum, minimum, and midpoint

Advantages of broad banding

Provides flexibility to broadly define job responsibilities Supports organizations that have eliminated layers of managerial jobs Foresters cross functional growth and development Helps manage the reality of fewer promotions in flat organizations Flexibility eases mergers and acquisitions

Major decisions involved in setting externally competitive pay and designing corresponding pay structures

Specify competitive pay policy Define the purpose of the survey Select relevant market competitors Design the survey Interpret survey results and construct the market line Construct a pay policy line that reflects the external pay policy Balance competitiveness with internal alignment through ranges, flat rates, and or bands

Pay structure

The array of pay rates for different jobs within a single organization; they focus attention on differential compensation paid for work of unequal worth.

competitive intelligence

The collection and analysis of information about external conditions and competitors that will enable an organization to be more competitive

Range maximums

The maximum values to be paid for a job grade, representing the top value the organization places on the output of the work

Range minimums

The minimum values to be paid for a job grade, representing the minimum value the organization places on the work

Pay ranges

The range of pay rates from minimum to maximum set for a pay grade or class. It puts limits on the rates an employer will pay for a particular job.

Range midpoint

The salary midway between the minimum and maximum rates of a salary range. The midpoint rate for each range is usually set to correspond to the pay-policy line and represents the rate paid for satisfactory performance on the job.

Survey

The systematic process of collecting and making judgements about the compensation paid by other employees

Purposes of a pay survey

To adjust the pay level in response to changing rates paid by competitors To set the mix of pay forms relative to that paid by competitors To establish or price a pay structure To analyze pay related problems To estimate the labor costs of product or service market competitors

Weighted mean

a measure of central tendency, when pertaining to pay, is calculated by adding base wages for all employees and divining by the number of employees

Market pricing

a pay strategy emphasizing external competitiveness and deemphasizing internal alignment

Broad banding

collapsing a number of salary grades into a smaller number of broad grades with wide ranges

benchmark conversion

process of matching survey jobs by applying the employer's plan to the external jobs and then comparing the worth of the external job with its internal "match"

Zones

ranges of pay used as controls or guidelines within pay bands that can keep the system more structurally intact. Maximums, midpoints, and minimums provide guides to appropriate pay for certain levels of work. Without zones employees may float to the maximum pay, which for many jobs in the band is higher than market value

Pay policy line

representation of the organization's pay-level policy relative to what competitors pay for similar jobs

Bureau of Labor Statistics (BLS)

the major source of publicly available compensation (cash, bonus, and benefits but not stock ownership) data. The BLS publishes extensive information on various occupations.

Regression

the statistical technique for relating present pay differentials to some criterion, that is, pay present rates for all jobs in the organization