Ch. 8 Comp & Benefits

Purpose of a Survey

(1) to adjust the pay level in response to changing rates paid by competitors, (2) to set or adjust the mix of pay forms relative to that paid by competitors, (3) to establish or price a pay structure, (4) to analyze pay related problems, and/or (5) to estimate the labor costs of product/service market competitors.

Major Decisions in setting Pay Level

(1)Specify pay level policy, (2) Define purpose of survey, (3) Specify Relevant Market, (4) Design and conduct survey, (5) Interpret and apply result, and (6) Design grades and ranges or bands.

Relevant Competitors

(1)compete for the same products/services, (2)compete for employees in the same geographic area, and (3)compete for the same occupations and skills.

Total Cash

(base+bonuses) Tells how competitors are valuing work; also tells the cash pay for performance opportunity in the job. It reveals competitor's use of performance based cash payments. Negatives to ___: all eees may not receive incentives, so it may overstate that competitors pay; plus it does not include LT incentives.

Total Compensation

(base+bonuses+stock options+benefits) tells the total value competitors place on this work. This reflects the total overall value of the employee (performance, experience, skills, etc.) plus the value of the work itself. Negative: all eees may not receive all the forms. Be careful: don't set base pay equal to competitors' total compensation. Risks high fixed costs.

Broad Branding

consolidates as many as four or five traditional grades into a single band with one minimum and one maximum. Because the band encompasses so many jobs of differing values, a range midpoint is usually not used.

Variation

distribution of rates around a measure of central tendency is called ___. Standard Deviation is the most common statistical measure of ___, although its use in salary surveys are rare. Quartiles and Percentiles are more common measures in salary survey analysis.

Pay Ranges

establish upper, mid, and lower pay limit for all jobs in a pay grade. It exists whenever two or more rates are paid to eees in the same job. So it provides managers the opportunity to (1)recognize individual performance differences with pay. (2)Meet eee's expectations that their pay will increase over time, even in the same job. And (3) encourage eees to remain within the organization.

Pay Grades

group JE points on the horizontal axis. All jobs considered substantially similar for pay purposes (of similar value, JE points) are placed in same ___. All jobs in a ____ have the same range! The # of ___ depends of # of jobs and organization hierarchy.

Leveling

in cases where the content (job description) of an organization's jobs does not sufficiently match that of jobs in the salary survey, an effort can be made to quantify the difference via ___. If the organization uses JE then its JE system can be applied to the survey jobs and the magnitude of difference between job evaluation points for internal jobs and survey jobs provides an estimate of their relative value and thus guidance for adjusting the market data.

Pay Policy Line

is positioned as a percent of the regression line. Moves pay line up the Y axis; slope remains the same. Other options include lead for some job families and lag others (would affect the slope).

Price Fixing

outside consulting firms are typically used as third party protection from possible ____ lawsuits. Survey participants may be guilty of ___ if the overall effect of the information exchanges is to interfere with competitive prices and artificially hold down wages. Identifying participant's data by company name is considered ____. They can buy these data at blr.com, salary.com, SHRM, professional/industry associations, or Compensation consulting firms. Note that publicly generated data may be too generic. (BLS, Chamber of Commerce, and State DOL).

Advantages of Broad Banding

provide flexibility to define job responsibilities more broadly. They support redesigned, downsized, or boundary less organizations that have eliminated layers of managerial jobs. They foster cross functional growth and development in these new organizations. Employees can move laterally across functions within a band in order to gain depth of experience. Also, it gives managers more freedom to manage pay and accommodate for flatter organizational structures.

Surveys

provides the data for translating that policy into pay levels, pay mix, and structures. It is a process of collecting and making judgments about compensation paid by other employers. Provides valuable data for setting your firm's pay policy relative to competition.

Weighted Mean

the rate of each company is multiplied by the # of eees in that company. Total of all rates is divided by total # of employees. It gives equal weight to each individual employees wage. Captures size of supply and demand in market. Since just using the mean is not enough or accurate to reflect actual labor market conditions, since the base wage of the largest employer is given the same weight as that of the smallest employer.

Market Pricing

this approach sets pay structures almost exclusively on external market rates. Sets pay structures almost exclusively by relying on external market rates; ignores internal alignment. Step (1) Job Analysis/Descriptions, (2) Market pricing for as many BM jobs as possible, (3)Remaining Jobs are "blended in".

Benchmark Jobs

chose from as many levels in each job family as can be matched with jobs in survey. They have stable job content, are common across different employers, and include a sizable numbers of employees. If the purpose of the survey is to price the entire structure, then ____ can be selected to include the entire job structure, all key functions and all levels just like as in job evaluation.

Mkt Pay Line

merges a company's benchmark jobs on the horizontal axis (job evaluation points) with external market rates paid by competitors (pay survey) on the vertical axis. Or it links a company's benchmark jobs on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis. It summarizes the distribution of going rates paid by competitors in the market. Regression analysis creates "line of best fit" so you can predict salaries of BM jobs.

Organization Data

this information reflects the similarities and differences among the organizations in the survey. Surveys of executive and upper level positions include financial and reporting relationships data since compensation for these jobs is more directly related to the organization's financial performance. Financial data are simply used to group firms by size, expressed in terms of sales or revenues, rather than to analyze competitors performance.

Base Pay

this is the amount of cash the competitors decided on each job and incumbent is worth. A company might use this information for its initial observations of how "good" the data appear to fit a range of jobs. Tells how competitors are valuing the work in similar jobs. Negatives to ____: fails to include performance incentives and other forms so will not give true picture if competitors offer low base but high incentives.