Major Decisions●Specify the employer’s 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 the use of ranges, flat rates,and or, bandsSpecify Competitive Pay Policy●Translate any external pay policy into practice requires information on the externalmarket●Surveys provide the data for translating that policy into pay levels, pay mix, andstructures●A survey is the systematic process of collecting and making judgments about thecompensation paid by other employersPurpose of a 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●Analyze pay related problems●Estimate the labor costs of product, or service market competitorsAdjust Pay Level-How much to Pay?●Most organizations adjust pay on a regular basis●Such adjustments can be based on-Overall movement of pay rates caused by competition for people in the market-Performance-Ability to pay-Terms specified in a contractAdjust Pay Mix-What Forms●Adjustments to the different forms of pay occur less frequently●It is unclear why changes occur less often-Perhaps the high costs of redesigning a mix creates a barrier-Perhaps inertia prevails-More likely, insufficient attention to paid to mix decisions-The mix used may have been based on external pressures●Some pay forms may affect employee behavior more than others●Good information on total compensation, the mix competitor’s use, and costs of variousforms is increasingly importantAdjust Pay Structure●Many employers use market surveys to validate their own job evaluation results-If evaluation place two jobs at the same rate of pay, yet the market showsdifferent pay rates, some will recheck the evaluation process-Some may establish a separate structure for different types of work Show
Compensation: Outline and DefinitionsCompensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. Chapter Highlights
How is compensation used?Compensation is a tool used by management for a variety of purposes to further the existance of the company. Compensation may be adjusted according the the business needs, goals, and available resources. Compensation may be used to:
Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertize those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool. Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary value the employer is willing to pay and the sentiments of worth felt be the employee. In an attempt to save money, employers may opt to freeze salaries or salary levels at the expence of satisfaction and morale. Conversely, an employer wishing to reduce employee turnover may seek to increase salaries and salary levels. Compensation may also be used as a reward for exceptional job performance. Examples of such plans include: bonuses, commissions, stock, profit sharing, gain sharing. What are the components of a compensation system?Compensation will be perceived by employees as fair if based on systematic components. Various compensation systems have developed to determine the value of positions. These systems utilize many similar components including job descriptions, salary ranges/structures, and written procedures. The components of a compensation system include
Compensation will be perceived as fair if it is comprised of a system of components developed to maintain internal and external equity What are different types of compensation?Different types of compensation include:
What are regulations affecting compensation?
Compensation PlansDevelop a program outline.
Designate an individual to oversee designing the compensation program.
Develop a compensation philosophy.
Conduct a job analysis of all positions.
Evaluate jobs.
Determine grades.
Establish grade pricing and salary range.
Determine an appropriate salary structure.
Develop a salary administration policy.
Obtain top executives' approval of the basic salary program.
Communicate the final program to employees and managers.
Monitor the program.
How do you design a pay range?☞ First, find the average pay for each pay grade, since each of the pay grades consists of several jobs. ☞ Next, plot the average pay rates for each pay grade. ☞ Then, fit a line, called salary or wage line, through the points just plotted.
What is the purpose of establishing pay ranges?Salary ranges help employers control their pay expenses and ensure pay equity among employees. It is critical that employers have rational explanations for why they pay their employees a certain rate, and defined salary ranges help accomplish that.
How do you do a salary analysis?Paying Employees: How to Do a Salary Competitive Analysis. Research compensation trends. ... . Conduct a job analysis. ... . Set a pay range for each position. ... . Know the legal requirements. ... . Be transparent about your pay scale. ... . Train your managers. ... . Re-evaluate frequently.. What are the steps are involved in determining pay levels and designing pay structures?There are several steps to designing a pay structure: job analysis; job evaluation; pay survey analysis; pay policy development; and pay structure formation.
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