Byars 10e Ch13

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    Selecting

    Employees

    Chapter 7

    Base Wage

    and Salary

    Systems

    Chapter 13

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    Learning Objectives

    1. Define base wages and salaries and state the

    objective of any base wage and salary system.

    2. Define job evaluation.

    3. Name and briefly discuss the four basicconventional methods of job evaluation.

    4. Explain the concepts of key jobs and compensable

    factors.5. Differentiate between subfactors and degrees.

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    Learning Objectives (cont.)

    6. Explain the purpose of wage and salary surveys.

    7. Discuss wage and salary curves.

    8. Define pay grades and pay ranges.

    9. Explain the concepts of broadbanding, skill-

    based pay, competency-based pay, market-

    based pay, and total rewards.

    13-3

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    Base Wage and Salaries

    Base wages and salaries

    Hourly, weekly, and monthly pay that employees

    receive for their work.

    make up the largest portion of an employees

    total compensation

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    Objective of the Base Wage

    and Salary System

    Primary objective

    To establish a structure for equitable

    compensation of employees, depending on their

    jobs and level of performance in their jobs

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    Objective of the Base Wage

    and Salary System

    Establishing pay ranges involves two basic

    phases:

    Determining relative worth of different jobs to

    the organization (ensuring internal equity)

    Pricing the different jobs (ensuring external

    equity)

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    Conventional Job Evaluation

    Job evaluation

    Systematic determination of value of each job in

    relation to other jobs in the organization

    Used for designing a pay structure

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    Conventional Job Evaluation

    1. Gather informationon the jobs being evaluated

    2. Identifyfactor or factors to be used in

    determining worth of different jobs to the

    organization

    3. Developand implementa plan using chosen

    factors for evaluating relative worth of different

    jobs to the organization

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    Job Evaluation Methods

    13-10

    Job ranking

    Job classification

    Point comparison

    Factor comparison

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    Potential Uses of Job Evaluations

    13-11

    Figure 13.2

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    Job Ranking Method

    Job ranking method

    Job evaluation method

    that ranks jobs in order

    of their difficulty fromsimplest to most

    complex.

    13-12

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    Job Classification Method

    Job classification method

    method that determines the relative worth of a

    job by comparing it to a predetermined scale of

    classes or grades of jobs

    Also called job grading

    defined on basis of differences in duties,

    responsibilities, skills, working conditions

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    Point Method

    Point method

    method in which a quantitative point scale is used

    to evaluate jobs on a factor-by-factor basis.

    simple to use and reasonably objective.

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    Selection of Key Jobs

    Key jobs (benchmark) represent jobs that are

    common throughout the industry or in general

    locale under study

    Content of key jobs should be commonlyunderstood

    General idea is to select a limited number of key

    jobs that are representativeof entire paystructure and the major kinds of work being

    evaluated

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    Selection of Key Jobs

    Selection of key jobs should adequately

    represent

    Span of responsibilities

    Duties

    Work requirements

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    Selecting Compensable Factors

    Compensable factors

    Characteristics of jobs that the organization

    deems important to the extent that it is willing to

    pay for them.

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    Selecting Compensable Factors

    Job subfactor

    Detailed breakdown of

    a single compensable

    factor of a job.

    Degree statements

    Written statements

    used as a part of the

    point method of jobevaluation to further

    break down job

    subfactors.

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    Possible Subfactors and Degrees for the

    Compensable Factors of Responsibility, with

    Sample Jobs

    13-19

    Table 13.1

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    Assigning Weights to Factors

    Weights are assigned to each of the factors,

    subfactors, and degrees to reflect their

    relative importance

    Weight assigned varies from job to job

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    Assigning Weights to Factors

    Weights are assigned on basis of maximum

    number of points for any job

    Pointsare then assigned to compensable

    factors, subfactors, and degrees based on

    their relative importance

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    Sample Point Values

    13-22Table 13.2

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    Assigning Points to Specific Jobs

    After point scale has been agreed on, point

    values are derived for key jobs using the

    following steps:

    1. Examine the job descriptions

    2. Determine degree statement that best describes

    each subfactor for each compensable factor

    3. Add total number of points

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    Possible Point Totals for Key

    Banking Jobs

    13-24

    Table 13.3

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    Factor Comparison Method

    Factor comparison

    method

    Job evaluation

    technique that uses amonetary scale for

    evaluating jobs on a

    factor-by-factor basis.

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    Factor Comparison Method

    Each compensable factor is rankedaccording to its

    importance in each key job

    Done by assigning a rank to everykey job on one

    factor at a time rather than ranking one job at a timeon all factors

    After each key job has been ranked on a factor-by-

    factorbasis allocate wage or salary for each job

    according to ranking of factors

    Monetary scale is prepared for each compensable

    factor

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    Factor-by-Factor Ranking of

    Key Banking Jobs

    Table 13.4

    13-27

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    Sample Allocation Pay for

    Key Banking Jobs

    13-28

    Table 13.5

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    Monetary Scale for Responsibility

    Requirements in Banking Jobs

    13-29

    Table 13.6

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    Advantages and Disadvantages of

    Different Job Evaluation Methods

    13-30Table 13.7

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    Pricing the Job

    13-31

    Labor market

    conditions

    Prevailing

    wage rates

    Living costs

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    Wage and Salary Surveys

    Wage and salary survey

    Survey of selected organizations within a

    geographical area or industry designed to provide

    a comparison of reliable information on policies,practices, and methods of payment.

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    Wage and Salary Surveys

    Advantages

    Provides knowledge of market and ensure

    external equity

    Corrects employee misconceptions about certainjobs

    Has a positive impact on employee motivation

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    Wage and Salary Surveys

    Wage or salary survey information can be

    obtained in two basic ways:

    Conducting your own survey

    Purchasing or accessing a wage/salary survey

    undertaken by another party

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    Conducting a Wage/Salary Survey

    13-35

    Personal

    interviews

    Telephone

    interviews

    Mailed

    questionnairesInternet

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    Conducting a Wage/Salary Survey

    Personal interview

    Most reliable and most expensive method

    Mailed questionnaires

    Probably used most frequently

    Used only to survey jobs having uniform meaning

    all over industry

    Can be answered by someone not fully familiarwith wage structure

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    Conducting a Wage/Salary Survey

    Telephone method

    Quick but yields incomplete information

    May be used to clarify responses to mailed

    questionnaires

    Internet

    Inexpensive and quick

    All companies are not reachable on Internet

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    Possible Topics in a Wage Survey

    13-38

    Figure 13.3

    P rchasing or Accessing

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    Purchasing or Accessing

    Wage/Salary Surveys

    Potential sources for relatively inexpensive

    wage/salary surveys include

    The Bureau of Labor Statistics of U.S. Department

    of Labor

    State and local governments

    Trade associations

    Chambers of commerce

    Internet

    13-39

    Purchasing or Accessing

    http://www.bls.gov/home.htm
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    Purchasing or Accessing

    Wage/Salary Surveys

    Surveys available on the Internet fall into two

    broad categories:

    Surveys conducted by federal government

    Surveys conducted by private research

    organizations, professional associations,

    employees associations, and consulting firms

    13-40

    l f b f

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    Sample of Web Sites for

    Wage/Salary Survey Data

    13-41

    Figure 13.4

    Guidelines to Avoid Problems

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    Guidelines to Avoid Problems

    during Wage and Salary Surveys

    1. Assess the participatingcompanies for

    comparability

    2. Compare more than base wage or salary

    3. Consider variations in job descriptions

    4. Correlate survey data with adjustment

    periods

    13-42

    P bl E d Wh U i

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    Problems Encountered When Using

    Salary Survey Data

    13-43

    Figure 13.5

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    Wage and Salary Curves

    Wage and salary curves

    Graphical depiction of the relationship between

    the relative worth of jobs and their wage rates

    can be used to indicate pay classes and ranges forthe jobs

    13-44

    W C U i h

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    Wage Curve Using the

    Point Method

    13-45

    Figure 13.6

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    Wage and Salary Curves

    Points of graph not

    following general

    trend indicate

    Wage rate for that jobis too low or too high

    The job has been

    inaccurately evaluated

    Green-circle jobs

    Underpaid jobs

    Red-circle jobs

    Wages are overly high

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    Pay Grades and Ranges

    Pay grades

    Classes or grades of

    jobs that for pay

    purposes are groupedon the basis of their

    worth to an

    organization.

    Pay range

    Range of permissible

    pay, with a minimum

    and a maximum, thatis assigned to a given

    pay grade.

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    Pay Grades and Ranges

    Two approaches for establishing pay grades and

    ranges

    1. To have a relatively large number of grades with

    identical rates of pay for all jobs within eachgrade

    2. To have a small number of grades with a

    relatively wide dollar range for each grade

    13-48

    E t bli h t f P G d ith

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    Establishment of Pay Grades with

    Ranges

    13-49Figure 13.7

    D l i th B W

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    Developing the Base Wage

    Salary Structure

    13-50

    Figure 13.8

    N A h t th

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    New Approaches to the

    Base Wage/Salary Structure

    13-51

    Broadbanding

    Skills-based pay

    Competency-based pay

    Market-based pay

    Total rewards

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    Broadbanding

    Broadbanding

    Collapsing job clusters or tiers of positions into a

    few wide bands to manage career growth and

    deliver paybands usually have minimum and maximum

    dollar amounts that overlap

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    Broadbanding

    Advantages

    Managers have more autonomy in setting pay

    rates

    Easier to move employees around

    Encourages lateral moves or downgrading in flat

    organizations

    Helps improve communication teamwork

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    Skill-based Pay

    Skill-based pay

    systems

    Systems that

    compensateemployees for the

    skills they bring to the

    job.

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    Skill-Based Pay

    Employeesare paid for

    Range of knowledge

    Number of business-related skills mastered

    Level of those skills or knowledge

    Some combination of level and range

    13-55

    Skill-Based Pay Potential

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    Skill Based Pay Potential

    Concerns

    1. Increased labor costs

    2. Topped-out employees

    3. False expectations

    4. Union agreements

    13-56

    Potential Benefits of a

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    Potential Benefits of a

    Skill-Based Pay System

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    Competency-Based Pay

    Competency-based pay system

    Rewarding employees based on knowledge, skills,

    and behaviors that result in performance.

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    Designing Competency-Based Pay

    13-59

    Figure 13.9

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    Market-Based Pay

    Market-based pay

    systems

    Systems that focus on

    external rather thaninternal equity and

    operate without

    traditional pay ranges.

    13-60

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    Total Rewards

    Total Rewards

    include everything the employee perceives to be

    of value resulting from the employment

    relationship.basic idea is to consider all aspects of the work

    experience

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    Total Rewards

    Compensation,

    Benefits

    Worklife

    balance

    Performance

    and recognition

    Developmentand career

    opportunities