Designing Compensation System: Part IIIDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)                   Professor    ...
Constructing a Pay Structure                               2
Pay StructureUseful for standardizing compensation practicesPay structures include several gradesEach grade contains mi...
Factors Affecting Pay                        Structures Corporate culture and value Management Philosophy External Econ...
Anatomy of a Pay structure  Pay Structure – consists of a series of Pay Ranges, or      “grades”, each with a minimum and...
Range Spread    – Difference between maximum and minimum pay value    - Usually expressed as % of difference between max a...
Spread on either side of midpoint    Midpoint – Minimum             Maximum– Midpoint          Minimum                    ...
Range Spread                               -75%              75%          Minimum                     Midpoint         Max...
Range Spread    Vary based on level and sophistication of skills        required for a given position    Entry level pos...
Typical Range Spreads    20 – 25 % - Lower-level service, production    30 – 40 % - clerical, technical    40 – 50 % - ...
Compa - Ratios      A Statistic that expresses the relationship          between base salary and the midpoint, or        ...
Compa - Ratios Individual C-R vary according to      How long the individual has been in the job      Previous work exp...
Compa - Ratios                         Person 1 Person 2 Person 3 AverageBase Salary 22500                  25000   27500 ...
Building Market Competitive    Compensation System                              14
Pay StructureBasis of pay programs is a pay structure - a hierarchy of jobs with pay rangesGreater worth of job, higher ...
Constructing a Pay StructureStep 1: Job Evaluation - Deciding number of pay structuresStep 2: Salary surveys - Determini...
Step 1: Job EvaluationSystematic process of determining relative worth ofjobs in order to establish which jobs should be p...
Step 2: Salary Surveys       (Compensation Surveys)Salary surveys compare an organisation’s salaries to those offered in ...
Step 2: External Market Pay Structure                             Pay Structure for Clerk Jobs                    26,000  ...
Step 3 Grouping JobsGroup jobs into Pay Grades or Job ClassesGroups of jobs within a particular class that are paid the ...
Step 3: Defining Pay Grades (Internal                                     Job Structure                    26,000         ...
Hierarchy of Clerical Jobs, JE Points and               Pay Grades                JOB                Pt.   Grd.Customer Se...
Step 4 Pricing Each Pay GradePrice Each Pay Grade and establish Wage CurveWage Curve shows pay rates currently paid for ...
Wage Curve: Integrating Internal Job      Wage Curve: Integrating Internal Job    Structure with External Market Pay Rates...
Step 5: Formulating Rate Structure                    GR           JOBS     SALARY (Rs.)Single Rate         I            A...
Pay Policies Over Time                         26
Upcoming SlideShare
Loading in...5
×

Designing compensation system Part III

460

Published on

Designing compensation system Part III

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
460
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
31
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • For the sake of simplicity, most large organizations classify jobs into grades as the last step in the job-evaluation process. Typically, the job hierarchy is reduced to a manageable number of grade levels, with the assigned points used to determine where to set up dividing lines between grades. For example, this graphic shows how the hierarchy of 18 clerical jobs is divided into five grade levels.
  • Designing compensation system Part III

    1. 1. Designing Compensation System: Part IIIDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt) Professor 1
    2. 2. Constructing a Pay Structure 2
    3. 3. Pay StructureUseful for standardizing compensation practicesPay structures include several gradesEach grade contains minimum salary/wage and step increments/grade rangePay for each job may be pre-determined through collective bargaining. 3
    4. 4. Factors Affecting Pay Structures Corporate culture and value Management Philosophy External Economic Environment External “Socio-political” environment (Unions)Thursday, September 20, 2012 4
    5. 5. Anatomy of a Pay structure Pay Structure – consists of a series of Pay Ranges, or “grades”, each with a minimum and maximum pay rate Pay Range - has a minimum pay value, maximum pay value and a “midpoint” Midpoint of a range – represents the competitive market value for the job or group of jobsThursday, September 20, 2012 5
    6. 6. Range Spread – Difference between maximum and minimum pay value - Usually expressed as % of difference between max and minimum divided by the minimumThursday, September 20, 2012 6
    7. 7. Spread on either side of midpoint Midpoint – Minimum Maximum– Midpoint Minimum Midpoint Midpoint = Max + Min 2Thursday, September 20, 2012 7
    8. 8. Range Spread -75% 75% Minimum Midpoint Maximum 200000 350000 612500 Range Spread Width = 206 %Thursday, September 20, 2012 8
    9. 9. Range Spread Vary based on level and sophistication of skills required for a given position Entry level positions (skills that are quickly mastered) have narrower pay ranges Managerial positions will have broader pay rangesThursday, September 20, 2012 9
    10. 10. Typical Range Spreads 20 – 25 % - Lower-level service, production 30 – 40 % - clerical, technical 40 – 50 % - professional, administrative, middle management Range spreads 300% or more with Broad bandingThursday, September 20, 2012 10
    11. 11. Compa - Ratios A Statistic that expresses the relationship between base salary and the midpoint, or between the midpoint and the market average Compa-Ratio = Base Salary Midpoint Companies strive to pay around a compa-ratio of 100 %Thursday, September 20, 2012 11
    12. 12. Compa - Ratios Individual C-R vary according to How long the individual has been in the job Previous work experience Job performanceThursday, September 20, 2012 12
    13. 13. Compa - Ratios Person 1 Person 2 Person 3 AverageBase Salary 22500 25000 27500 25000 24500 Mkt AvgMidpoint 25000 25000 25000 25000 25000 Base Salary Base Salary Mkt Avg Midpoint MidpointCompa-Ratio 90% 100% 110% 100% 98% Thursday, September 20, 2012 13
    14. 14. Building Market Competitive Compensation System 14
    15. 15. Pay StructureBasis of pay programs is a pay structure - a hierarchy of jobs with pay rangesGreater worth of job, higher the pay grade and rangePay program objectives are as follows: • Internal equity. • External equity (or competitiveness), • Individual equity, • Process equity, • Performance or productivity incentives, • Maximum use of financial resources, • Compliance with laws and regulations, and • Administrative efficiency 15
    16. 16. Constructing a Pay StructureStep 1: Job Evaluation - Deciding number of pay structuresStep 2: Salary surveys - Determining external market pay structureStep 3: Grouping Jobs - Defining pay gradesStep 4: Pricing each pay grade – Establishing wage curveStep 5: Formulating rate structure
    17. 17. Step 1: Job EvaluationSystematic process of determining relative worth ofjobs in order to establish which jobs should be paidmore than others within an organization.
    18. 18. Step 2: Salary Surveys (Compensation Surveys)Salary surveys compare an organisation’s salaries to those offered in other organisations.Does the organisation want to compare itself with: Organisations in the same or related industries? Organisations in the same geographic area? ‘Best practice’ companies? Domestic companies? Multinationals?
    19. 19. Step 2: External Market Pay Structure Pay Structure for Clerk Jobs 26,000 Market Pay Line 24,000Annual Salary ($) 21,000 18,000 15,000 12,000 250 500 750 1,200 Clerk I Clerk II Clerk III Chief Clerk Job Evaluation Points
    20. 20. Step 3 Grouping JobsGroup jobs into Pay Grades or Job ClassesGroups of jobs within a particular class that are paid the same rate or rate range jobs of equal difficulty
    21. 21. Step 3: Defining Pay Grades (Internal Job Structure 26,000 Market Pay structure 24,000 21,000Annual Salary ($) 18,000 15,000 200-300 301-650 651-1,150 1,151-2,000 12,000 Messenger (200) Mail Clerk II (350) Mail Clerk III (675) Mailroom Mail Clerk I (220) Clerk II (500) Clerk III (750) Super (1,175) Clerk I (250) Sec.I (650) Sec. II (1,000) Chief Clerk (1,200) Recep. (300) Exec. Sec. (1,900) Job Evaluation Points
    22. 22. Hierarchy of Clerical Jobs, JE Points and Pay Grades JOB Pt. Grd.Customer Service Rep. 300 5Executive Secretary/Admin. Asst. 298Senior Secretary 290Secretary 230 4Senior General Clerk 225Credit and Collection 220Accounting Clerk 175 3General Clerk 170Legal Secretary/Assistant 165Senior Word Processing Operator 160
    23. 23. Step 4 Pricing Each Pay GradePrice Each Pay Grade and establish Wage CurveWage Curve shows pay rates currently paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation committee
    24. 24. Wage Curve: Integrating Internal Job Wage Curve: Integrating Internal Job Structure with External Market Pay Rates Structure with External Market Pay Rates 8 7 6monthlysalary 5(Rs.000) 4 PAY 3 Line of Best Fit : 2 using Market-Survey data or current organization data 1JE Points 40 80 120 160 200 240 280 320 Jobs AB CDEF GHIJ KLM 0P QRS TUV Grades 1 2 3 4 5 6 7
    25. 25. Step 5: Formulating Rate Structure GR JOBS SALARY (Rs.)Single Rate I AB 5000Structure II CDEF 7000 III GHIJ 9000 GR JOBS SALARY (Rs.)Overlapping I AB 3000–250–4500–500-9000Rate Range II CDEF 6000–400–8400–750-14400 III GHIJ 10000–600–13600–900-20800
    26. 26. Pay Policies Over Time 26
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×