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