Chapter Eleven Compensation System Development Chapter Outline Employee

Chapter Outline • Employee Satisfaction and Motivation Issues in Compensation Design • Establishing Internal

Figure 11. 1 Components of the Compensation System Copyright © Houghton Mifflin Company. All

Employee Satisfaction and Motivation Issues in Compensation Design • Equity Theory • Satisfaction with

Types of Equity • Internal Equity: Relationship among jobs within a single organization •

Establishing Internal Equity: Job Evaluation Methods • Job Ranking Copyright © Houghton Mifflin Company.

Establishing Internal Equity: Job Evaluation Methods (cont’d) • Job Grading or Classification • Point

Table 11. 4 A Typical Point Plan Source: Richard Henderson, Compensation Management: Rewarding Performance,

Establishing External Equity • Wage and Salary Surveys – Identifying Key Jobs – Selecting

Establishing Individual Equity • Designing Pay Ranges – Establishing Pay Ranges • Wage Ranges

Administering Compensation Systems • • • Pay Secrecy Employee Participation Wage Compression Impact of

The Issue of Comparable Worth • • • The Earnings Gap Legal and Judicial

Review • Employee Satisfaction and Motivation Issues in Compensation Design • Establishing Internal Equity:

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Chapter Eleven Compensation System Development

Chapter Outline • Employee Satisfaction and Motivation Issues in Compensation Design • Establishing Internal Equity: Job Evaluation Methods • Establishing External Equity • Establishing Individual Equity • Administering Compensation Systems • The Issue of Comparable Worth Copyright © Houghton Mifflin Company. All rights reserved. 2

Employee Satisfaction and Motivation Issues in Compensation Design • Equity Theory • Satisfaction with Pay • Designing Equitable Compensation Systems – Internal Equity – External Equity – Individual Equity Copyright © Houghton Mifflin Company. All rights reserved. 4

Types of Equity • Internal Equity: Relationship among jobs within a single organization • External Equity: Comparisons of similar jobs in different organizations • Individual Equity: Comparisons among individuals in the same job within the same organization Copyright © Houghton Mifflin Company. All rights reserved. 5

Table 11. 4 A Typical Point Plan Source: Richard Henderson, Compensation Management: Rewarding Performance, 5 th ed. , © 1989, p. 204. Adapted by permission of Prentice-Hall, Inc. , Englewood Cliffs, New Jersey. Copyright © Houghton Mifflin Company. All rights reserved. 8

Establishing External Equity • Wage and Salary Surveys – Identifying Key Jobs – Selecting Organizations to Survey – Collecting Data • • Self-Surveys Online Surveys Government Surveys Interpreting the Data • Pay Level Policy – Matching the Competition – Adapting a Lead Policy – Following a Lag Approach Copyright © Houghton Mifflin Company. All rights reserved. 9

Establishing Individual Equity • Designing Pay Ranges – Establishing Pay Ranges • Wage Ranges – Broadbanding – Above- and Below-Range Employees • Setting Individual Pay – Seniority – Merit Pay – Skill Based Pay Copyright © Houghton Mifflin Company. All rights reserved. 10

The Issue of Comparable Worth • • • The Earnings Gap Legal and Judicial Developments Comparable Worth and Job Evaluation Alternatives Prospects for the Future Copyright © Houghton Mifflin Company. All rights reserved. 12

Review • Employee Satisfaction and Motivation Issues in Compensation Design • Establishing Internal Equity: Job Evaluation Methods • Establishing External Equity • Establishing Individual Equity • The Issue of Comparable Worth Copyright © Houghton Mifflin Company. All rights reserved. 13