Designing Pay Levels, Mix and Pay Structures
CHAPTER 8
DESIGNING PAY LEVELS, MIX AND PAY STRUCTURES
LEARNING OBJECTIVES
1. Identify the major decisions in establishing externally competitive pay.
2. Describe the purpose(s) of a salary survey.
3. Discuss the importance of defining the relevant market in a pay survey.
4. Explain the steps involved in designing a pay survey.
5. Describe the key issues involved in interpreting the results of a pay survey.
6. Explain how the market pay line combines the internal structure with external market rates.
7. Discuss the use of pay grades and pay ranges and their relationship to internal alignment and external competitiveness.
8. Discuss the pros and cons of the market pricing approach to establishing a pay structure.
OUTLINE
I. MAJOR DECISIONS
A. There are seven major decisions involved in setting externally competitive pay and designing the corresponding pay structures
1. specifying employer's external/competitive pay policy 2. define the purpose of the survey 3. select the relevant market competitors 4. designing and conducting surveys 5. interpreting survey results and constructing the market line 6. constructing a pay policy line that reflects the external pay policy 7. balancing competitiveness with internal alignment through the use of ranges, flat rates, and/or bands
Definition: A survey is the systematic process of collecting and making judgments about the compensation paid by other employers Steps in conducting wage and salary surveys:
1. select the jobs to be surveyed 2. define the relevant markets 3. select the firms to be surveyed 4. determine the information to ask 5. determine the data collection technique 6. administer the survey
II. SPECIFY COMPETITIVE PAY POLICY
• an external pay policy requires information on the external market
• surveys provide the data for
DESIGNING PAY LEVELS, MIX AND PAY STRUCTURES
LEARNING OBJECTIVES
1. Identify the major decisions in establishing externally competitive pay.
2. Describe the purpose(s) of a salary survey.
3. Discuss the importance of defining the relevant market in a pay survey.
4. Explain the steps involved in designing a pay survey.
5. Describe the key issues involved in interpreting the results of a pay survey.
6. Explain how the market pay line combines the internal structure with external market rates.
7. Discuss the use of pay grades and pay ranges and their relationship to internal alignment and external competitiveness.
8. Discuss the pros and cons of the market pricing approach to establishing a pay structure.
OUTLINE
I. MAJOR DECISIONS
A. There are seven major decisions involved in setting externally competitive pay and designing the corresponding pay structures
1. specifying employer's external/competitive pay policy 2. define the purpose of the survey 3. select the relevant market competitors 4. designing and conducting surveys 5. interpreting survey results and constructing the market line 6. constructing a pay policy line that reflects the external pay policy 7. balancing competitiveness with internal alignment through the use of ranges, flat rates, and/or bands
Definition: A survey is the systematic process of collecting and making judgments about the compensation paid by other employers Steps in conducting wage and salary surveys:
1. select the jobs to be surveyed 2. define the relevant markets 3. select the firms to be surveyed 4. determine the information to ask 5. determine the data collection technique 6. administer the survey
II. SPECIFY COMPETITIVE PAY POLICY
• an external pay policy requires information on the external market
• surveys provide the data for