Establishing Strategic Pay Plans Basic Factors in Determining
Establishing Strategic Pay Plans
Basic Factors in Determining Pay Rates Employee Compensation Direct Financial Payments Indirect Financial Payments 11– 2
Legal Considerations in Compensation Davis-Bacon Act (1931) Equal Pay Act (1963) Walsh-Healey Public Contract Act (1936) Employee Retirement Income Security Act (ERISA) Title VII of the 1964 Civil Rights Act Employee Compensation Age Discrimination in Employment Act Fair Labor Standards Act (1938) Americans with Disabilities Act The Family and Medical Leave Act The Social Security Act of 1935 (as amended) Workers’ Compensation 11– 3
Equity and Its Impact on Pay Rates Forms of Equity External Equity Individual Equity Procedural Equity 11– 4
Addressing Equity Issues Salary Surveys Methods to Address Equity Issues Job Analysis and Job Evaluation Performance Appraisal and Incentive Pay Communications, Grievance Mechanisms, and Employees’ Participation 11– 5
The Salary Survey Step 1. The Wage Survey: Uses for Salary Surveys To price benchmark jobs To marketprice wages for jobs To make decisions about benefits 11– 6
Sources for Salary Surveys Sources of Wage and Salary Information Employer Self. Conducted Surveys Consulting Firms Professional Associations Government Agencies The Internet 11– 7
Establishing Pay Rates (cont’d) Skills Step 2. Job Evaluation: Identifying Compensable Factors Effort Responsibility Working Conditions 11– 8
Establishing Pay Rates (cont’d) Methods for Evaluating Jobs Ranking Job Classification Point Method Factor Comparison 11– 9
Establishing Pay Rates (cont’d) Point Method Step 3. Group Similar Jobs into Pay Grades Ranking Method Classification Methods 11– 10
Pricing Managerial and Professional Jobs Compensating Executives and Managers Base Pay Short-term Incentives Long-Term Incentives Executive Benefits and Perks 11– 11
Competency-Based Pay (cont’d) Why Use Competency. Based Pay? Support High. Performance Work Systems Support Strategic Aims Support Performance Management 11– 12
Other Compensation Trends • Broadbanding – Consolidating salary grades and ranges into just a few wide levels or “bands, ” each of which contains a relatively wide range of jobs and salary levels. – Pro and Cons • More flexibility in assigning workers to different job grades. • Provides support for flatter hierarchies and teams. • Promotes skills learning and mobility. • Lack of permanence in job responsibilities can be unsettling to new employees. 11– 13
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