Human Resource Management 1 ELEVENTH EDITION GARY DESSLER

Human Resource Management 1 ELEVENTH EDITION GARY DESSLER Part 4 | Compensation Chapter 11 Establishing Strategic Pay Plans Power. Point Presentation by Charlie Cook The University of West Alabama

After studying this chapter, you should be able to: 1. List the basic factors in determining pay rates. 2. Explain in detail how to establish pay rates. 3. Explain how to price managerial and professional jobs. 4. Discuss competency-based pay and other current trends in compensation. © 2008 Prentice Hall, Inc. All rights reserved. 2

Basic Factors in Determining Pay Rates Employee Compensation Direct Financial Payments © 2008 Prentice Hall, Inc. All rights reserved. Indirect Financial Payments 3

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 © 2008 Prentice Hall, Inc. All rights reserved. 4

Equity and Its Impact on Pay Rates Forms of Equity External Equity © 2008 Prentice Hall, Inc. All rights reserved. Internal Equity Individual Equity Procedural Equity 5

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 © 2008 Prentice Hall, Inc. All rights reserved. 6

The Salary Survey Step 1. The Wage Survey: Uses for Salary Surveys To price benchmark jobs © 2008 Prentice Hall, Inc. All rights reserved. To marketprice wages for jobs To make decisions about benefits 7

Sources for Salary Surveys Sources of Wage and Salary Information Employer Self. Conducted Surveys Consulting Firms © 2008 Prentice Hall, Inc. All rights reserved. Professional Associations Government Agencies The Internet 8

Establishing Pay Rates (cont’d) Skills Step 2. Job Evaluation: Identifying Compensable Factors Effort Responsibility Working Conditions © 2008 Prentice Hall, Inc. All rights reserved. 9

Establishing Pay Rates (cont’d) Methods for Evaluating Jobs Ranking Job Classification © 2008 Prentice Hall, Inc. All rights reserved. Point Method Factor Comparison 10

Establishing Pay Rates (cont’d) Point Method Step 3. Group Similar Jobs into Pay Grades Ranking Method Classification Methods © 2008 Prentice Hall, Inc. All rights reserved. 11

Pricing Managerial and Professional Jobs Compensating Executives and Managers Base Pay © 2008 Prentice Hall, Inc. All rights reserved. Short-term Incentives Long-Term Incentives Executive Benefits and Perks 12

Competency-Based Pay (cont’d) Why Use Competency. Based Pay? Support High. Performance Work Systems © 2008 Prentice Hall, Inc. All rights reserved. Support Strategic Aims Support Performance Management 13

Other Compensation Trends • Broadbanding Ø 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. Ø Pro and Cons v More flexibility in assigning workers to different job grades. v Provides support for flatter hierarchies and teams. v Promotes skills learning and mobility. v Lack of permanence in job responsibilities can be unsettling to new employees. © 2008 Prentice Hall, Inc. All rights reserved. 14

KEY TERMS employee compensation direct financial payments indirect financial payments Davis-Bacon Act (1931) Walsh-Healey Public Contract Act (1936) Title VII of the 1964 Civil Rights Act Fair Labor Standards Act (1938) Equal Pay Act (1963) Employee Retirement Income Security Act (ERISA) salary compression salary survey benchmark job evaluation © 2008 Prentice Hall, Inc. All rights reserved. compensable factor ranking method job classification (or grading) method classes grade definition point method factor comparison method pay grade wage curve pay ranges competency-based pay competencies broadbanding comparable worth 15

Human Resource Management ELEVENTH EDITION 1 GARY DESSLER Part 4 | Compensation Appendix for Chapter 11 Quantitative Job Evaluation Methods Power. Point Presentation by Charlie Cook The University of West Alabama

Quantitative Job Evaluation Methods • Factor Comparison Job Evaluation Method Step 1. Obtain job information Step 2. Select key benchmark jobs Step 3. Rank key jobs by factor Step 4. Distribute wage rates by factors Step 5. Rank key jobs according to wages assigned to each factor Step 6. Compare the two sets of rankings to screen out unusable key jobs Step 7. Construct the job-comparison scale Step 8. Use the job-comparison scale © 2008 Prentice Hall, Inc. All rights reserved. 17