Transcript A Pay Structure - Gatton College of Business and Economics

A Pay Structure
melding of internal &
external equity
© Nancy Brown Johnson, 2000
Develop a Pay Policy
• Above market: Lead
– Increases ability to attract & retain
employees
– Can be more selective in hiring
• Market
– Reduces ability to select
– Reduces labor expenses
Pay Ranges
• Productivity differences
• Employee performance differences
• Recognizes impreciseness of job
evaluation
• Allows for seniority pay differentials
Construct Grades
• Pay grades are jobs that are similar in
their worth to the organization
• Grouping of jobs
• Each grade will have its own pay range:
minimum, maximum & midpoint
• Midpoint represents a fully trained
employee, performing satisfactorily
Pay Policy Line
8
7
monthly
salary
($000)
PAY
6
Predicted Salary = $6,486
5
4
3
2
1
Job Evaluation Points = 315
40
80
120
160
200
240
Job Evaluation Points
IRWIN
©a Times Mirror Higher Education Group, Inc., company, 1997
280
320
Pay Structure
8
7
monthly
salary
(000)
PAY
6
5
4
3
2
1
100
150
200
250
300
Job Evaluation Points
IRWIN
©a Times Mirror Higher Education Group, Inc., company, 1997
350
Number of Ranges
• Judgment about career paths &
promotions
–
–
–
–
–
number of jobs
hierarchical level
reporting relationships
flexibility
pay differentials
• Broadbanding
– Flexibility
– Simplicity
– Potential for favoritism
More on Ranges
• Range Parameters - distance between
midpoints
• Range Spread
– market rate, percentage spread
• Range Overlap
– inducing promotions
– not restricting salaries artificially
– great overlap does not recognize differentials
Issues
• Reconciling internal & external equity
– potential for two structures
– managers weigh external data more
• Pay compression
– Wages filled outside pay rises faster than
those filled within