4-11 Copyright © 2015 Pearson Education, Inc. 11-1 Establishing Strategic Pay Plans

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Copyright © 2015 Pearson Education, Inc.

11-1

Establishing Strategic Pay Plans

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1. List the basic factors determining pay

rates.

2. Define and give an example of how to

conduct a job evaluation.

3. Explain in detail how to establish a

market-competitive pay plan.

Learning Objectives

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Learning Objectives

4. Explain how to price managerial and

professional jobs.

5. Explain the difference between

competency-based and traditional pay.

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List the basic factors determining pay

rates.

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Basic Factors in Determining Pay Rates

• Aligning total rewards with strategy

• Equity and its impact on pay rates

• Equity theory of motivation

• Addressing equity issues

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Legal Considerations in Compensation

• Fair Labor Standards Act (1938)

• Exempt/nonexempt

• Equal Pay Act (1963)

• Employee Retirement Income

Security Act (1974)

• Other legislation

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IMPROVING PERFORMANCE:

HR as a Profit Center

• Wegmans Foods Uses

o Strategic compensation management

o A total rewards package

• Produces employee behaviors

• Achieves Wegmans’ strategic goals

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Other Factors

• Union influences on

compensation decisions

• Pay policies

• Geography

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IMPROVING PERFORMANCE: HR Practices Around the Globe

Compensating Expatriate Employees

• Home-based plan

o Transferee’s base salary tied to home

country’s salary structure salary

• Host-based plan

o Transferee’s base salary tied to the host

country’s salary structure

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Review

• Alignment with strategy

• Equity – external, internal

• Legal considerations

• Union influences

• Pay policies

• Geography

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Define and give an example of how to conduct a job evaluation.

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Job Evaluation Methods

• Compensable

factors

• Preparing for the

job evaluation

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Job Evaluation Methods: Ranking

1. Obtain job information

2. Select and group jobs

3. Select compensable factors

4. Rank jobs

5. Combine ratings

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• Job classification

• Point method

o “Packaged” point

plans

• Computerized job

evaluations

Job Evaluation Methods

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• Compensable factors

• Preparation

• Ranking

• Classification

• Point method

• Computer-based

Review

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Explain in detail how to establish

a market-competitive pay plan.

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How to Create a Market-Competitive Pay Plan

• Choose benchmark jobs

• Select compensable factors

• Assign weights

• Convert percentages to points

• Define each factor’s degrees

• Determine degrees and assign

points for job factors

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• Review job descriptions and

specifications

• Evaluate the jobs

o What is a market

competitive pay plan?

o What are wage curves?

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• Draw current (internal) wage curve

• Conduct market analysis: salary

surveys

o Commercial, professional, and

government

• Using internet to do compensation

surveys

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• Draw market (external) wage curve

• Compare and adjust

• Develop pay grades

• Establish rate ranges

• Address remaining jobs

• Correct out-of-line rates

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IMPROVING PERFORMANCE: HR Tools for Line Managers and Entrepreneurs

• International Stockhouse.com has

global based employees

• Uses the Web for determining salaries

and trends

• Request salary data from professional

groups

• Monitors rates viewing job boards

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Review

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Explain how to price managerial and

professional jobs.

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Pricing Managerial and Professional Jobs

• Compensating executives and

managers

• What determines executive pay?

o Elements of executive pay

o Managerial job evaluation

• Compensating professional

employees

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• Executives

• Professionals

• Pay

Review

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Explain the difference between

competency-based and traditional pay.

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Contemporary Topics in Compensation

• Competency-based

pay

• What is it?

• Why use it?

• In practice

• The bottom line

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IMPROVING PERFORMANCE: HR Practices Around the Globe

JLG’s Skill-Based Pay Program

• Supplies access equipment such as

aerial work platforms and mast booms

o Pay increases based on skill

acquisition

o Productivity has increased

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• Broadbanding

• Actively managing

• Comparable worth

o The pay gap

• Board oversight

• Total rewards and

tomorrow’s pay

programs

Trends

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Review

• Broad banding

• Management

• Worth

• Boards

• Tomorrow

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Translating Strategy into HR Policies and Practices

• What would you tell Lisa if she asked, “How do I set up a new compensation plan for the Hotel Paris?”

• Devise a ranking job evaluation system for the Hotel Paris’s non-managerial employees (housekeepers, front-desk clerks) and use it to show the worth of these jobs relative

to one another.

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Hotel ParisStrategyChapter 11

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Documents

4-11 Copyright © 2015 Pearson Education, Inc. 11-1 Establishing Strategic Pay Plans