Establishing pay rates

Step 1: the salary survey

- aimed at determining prevailing wage rates

- Formal written questionaire surveys are the most comprehensive, but telephone surveys and newspaper ads are also sources of information

Establishing pay rates

Step 2: Job Evaluation

- a systematic comparison done in order to determine the worth of one job relative to another

Compensable factor- a fundamental compensable element of a job, such as skilss, effort, responsibility, and working conditions

identifying the need for the job evaluation

getting the cooperation of employees

choosing an evaluation committee

performing the actual evaluation

- obtain job information

- select and group jobs

- select compensable factors

-rank jobs

- combine ratings

raters categorize jobs into groups or classes of jobs that are of roughly the same value for pay purposes

-classes contain similar jobs

- grades are jobs that are similar in difficulty but otherwise different

- jobs are classes by the amount or level of compensable factors they contain

a quantitative technique that involves:

- identifying the degree to which each compensable factors are present in the job

- awarding points for each degree of each factor

- calculating a total point value for the job by adding up the corresponding points for each factor

each job is ranked several times- once for each of the several compensable factors

- the rankings for each job are combined into an overall numerical rating for the job

- a computerized system that uses a structured questinnaire and statistical models to streamline the job evaluation process

Advantages to this include:

- simplify job analysis

- help keep job descriptions up to date

- increase evluation objectivity

- reduce time spent in committee meetings

- ease the burden of system maintenance

Establishing pay rates

Step 3: group similar jobs into pay grades

a pay grade is comprised of jobs of appx. equl difficulty or importance established by job evaluation

-point method

- ranking method

- classification method

Establishing Pay Rates

Step 4: Price each pay grade

wage curve

- shows the pay rates urrently paid for jobs in each pay grade, relative to the points or ranking assigned to each job or grade by the job evaluaton

- Shows the relationships between the value of the job as determined by one of the job evaluation methods and the current average pay rates for your grades

Establishing pay rates

Step 5: Fine-tune pay rates

developing pay ranges

- flexibility in meeting external job market rates

- easier for employees to move into higher pay grades

- allows for rewarding performance differences and seniority

Correcting out-of-line ranges

- raising underpaid jobs to the minimum of the rate range for their pay scale

- freezing rates or cutting pay rates for overpaid jobs to maximum in the pay range for their pay grade

- a system that defines specific skills, and a process for tying the persons pay to his or her skill

- A training system that lets employees seek and acquire skills

- a formal competency testing system

- a work design that lets employees move among jobs to permit work assignment flexibility

Pros:

- High Quality

- Lower absenteeism and fewer accidents

Cons:

-Pay program implementation problems

- cost implications of paying for unused knowledge, skills, and behaviors

- complexity of program

- uncertainty that the program improves productivity

1. obtain job information

2. select key benchmark jobs

3. rank key jobs by factor

4. distribute wage rates by factors

5. rank key jobs according to wages assigned o each factor

6. compare the two sets of rankings to screen out unusable key jobs

7. construct the job-comparison scale

8. use the job-comparison scale

1. determine clusters of jobs to be evaluated

2. collect job information

3. select compensable factors

4. define compensable factors

5. define factor degrees

6. determine relative vales of factors

-the fact that people differ in personality, abilities, values, and needs

- different people react in different incentives in different ways

- managers should be aware of employee needs and fine-tune the incentives offered to meet their needs

- money is not the only motivator

- physiological

- security

- social

- self-esteem

-self actualization

- lower needs must be satisfied before higher level needs can be addressed or become of interest to the individual

- hygienes (extrinsic job factors) inadequate working conditions, salary, and incentve pay can cause dissatisfaction and prevent satisfaction

- Motivators (intrinsic job factors) job enrichment (challenging job, feedback and recognition) addresses higher-level (achievement, self-actualization) needs

-behaviors are motivated by the underlying need for competence and self-determination

- Offering an extrinsic reward for an intrinsically motivatedact can conflict with the acting individuals internal sense of responsibility

- some behaviors are best motivated by job challenge and recognition, others by financial rewards

- a persons motivation to exert some level of effort is a function of three things:

-Expectancy- that effort will lead to performance

- instrumentality- that connection between performance and the appropriate reward

- Valence- the value the person places on the reward

- individual incentive/recognition programs

- sales compensation programs

- team/group-based variable pay programs

- organization wide incentive programs

- executive incentive compensation programs

- easily understandable, equitable, and powerful incentives

- employee resistance to changes in standards or work processes affecting output

- quality problems caused by overriding output focus

- possibility of violating minimum wage standards

- employee dissatisfaction when incentives either cannot be earned due to external factors or are withdrawn due to a lack of need for output

programs offered by online incentives firms that improve and expedite the awards process

- broader range of awards

- more immediate awards

pay is a combination of salary and commissions usual with a sizable salary component

- plan gives salespeople a floor to their earnings

- salary component covers company specified service activities

- plans tend to become complicated and misunderstandings can result

- pay is mostly based on commissions

- small bonuses are paid for directed activities like selling slow moving items

set work standards for each team member and then calculate each members output

members are paid no one of three formulas:

- all members receive the same pay earned by the highest producer

- all members receive the same pay earned by the lowest producer

- all members receive same pay equal to the average pay earned by the group

- a corporation annualy contributes its own stock or cash ( with a limit of 15% of compensation) to be used to purchase the stock- to a trust established for the employees

- the trust holds the stock in individual employee accounts and distributes it to employees upon seperation from the firm if the employee has worked long enough to earn ownership of the stock

- esop's help employees develop a sense of ownership in and commitment to the firm and help build teamwork

- no taxes on ESOP are due until employees receive a distribution from the trust, usually at retirement when their tax rate is lower

- a tax deductible equal to the fair market value of the shares transferred to the trustee

- an income tax deduction for dividends paid on ESOP owned stock

- the employee retirement income security act allows a firm to borrow against employee stock held in trust and then repay the loan in pre-tax rather than after tax dollars

- firms offering ESOP had higher shareholder returns than did those not offering ESOP's

-Philosophy of cooperation- no us and them attitudes that inhibit employees from developing a sense of ownership in the company

- Identity- employees understand the businesses mission and how it operates in terms of customers, prices, costs

- competence- the plan depends on a high level of competence from employees at all levels

- sharing of benefits formula- employees share 75% of the savings

- an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives

- cost savings gain are shared among employees and the company

1. establish general goals and objectives

2. choose specific performance measures

3. decide on a functioning formula

4. decide on a method for diving and distributing the employees share of the gains

5. choose the form of payment

6. decide how often to pay bonuses

7. develop the involvement system

8. implement the plan

put some portion of the employees weekly pay at risk

- if employees meet or exceed their goals they earn incentives

- if they fail to meet their goals they forgo some of the pay they would normally have earned