STUDeNT WORKBOOK Designing A Pay Structure ©2008 SHRM Lisa Burke, Ph.D., SPHR 45 CASE STUDY AND INTEGRATED APPLICATION E X E RCISES Designing A Pay Structure By Lisa A. Burke, Ph.D., SPHR Student Workbook TOTAL REWARDS St ud en t W or kb oo k INSTRUCTOR’S MANUAL Designing A Pay Structure AUTHOR : Lisa Burke. PhD This case study has been adapted from the original version of the case study found at www.shrm.org. The submission instruction is the portion that has been adapted. http://www.shrm.org/ Student Workbook - Case Study Introduction to Compensation and Designing a Pay Structure Compensation is a critical area of human resource (HR) management, and one that can greatly affect employee behavior. To be effective, compensation must be perceived by employees as fair, competitive in the market, accurately based, motivating and easy to understand. HR professionals might create the pay structure for their organization, or they might work with an external compensation consultant. There are several steps to designing a pay structure: job analysis; job evaluation; pay survey analysis; pay policy development; and pay structure formation. Each step is briefly explained below. For a more extensive discussion, please review Milkovich & Newman, 2008. Step 1: Job Analysis Job analysis is the process of studying jobs in an organization. The outcome of this process is a job description that includes the job title, a summary of the job tasks, a list of essential tasks and responsibilities, and a description of the work context. Also included are the knowledge, skills and abilities needed to perform the job. Step 2: Job Evaluation Job evaluation is the process of judging the relative worth of jobs in an organization. The outcome of job evaluation is the development of an internal structure or hierarchical ranking of jobs. Job-based evaluation is used more often than person-based evaluation, and so the former will be the focus in this case. There are three methods of job-based evaluation: the point method (which is the most commonly used); ranking; and classification. Job evaluation helps to ensure that pay is internally aligned and perceived to be fair by employees. Step 3: Pay Policy Identification Pay policy identification is the process of determining whether the organization wants to lead, lag or meet the market in compensation. The pay policy or strategy will likely influence employee attraction and retention. Pay policies can vary across job families (i.e., groups of similar jobs) and job levels if the top management feels that different strategies can be effective in different areas of the organization. Step 4: Pay Survey A.

1. STUDeNT WORKBOOK
Designing A Pay Structure
©2008 SHRM Lisa Burke, Ph.D., SPHR
45
CASE STUDY AND INTEGRATED APPLICATION E X E

2. RCISES
Designing A Pay Structure
By Lisa A. Burke, Ph.D., SPHR
Student Workbook

3. TOTAL REWARDS
St
ud
en
t
W
or
kb
oo
k
INSTRUCTOR’S MANUAL
Designing A Pay Structure
AUTHOR : Lisa Burke. PhD

4. This case study has been adapted from the original version of
the case study found at www.shrm.org.
The submission instruction is the portion that has been adapted.

5. http://www.shrm.org/
Student Workbook - Case Study
Introduction to Compensation and Designing a Pay Structure
Compensation is a critical area of human resource (HR)
management, and one that can greatly affect employee behavior.

6. To be effective,
compensation must be perceived by employees as fair,
competitive in the market, accurately based, motivating and
easy to understand.
HR professionals might create the pay structure for their
organization, or they might work with an external compensation
consultant. There are several steps to designing a pay structure:
job analysis; job evaluation; pay survey analysis; pay policy
development; and pay structure formation. Each step is briefly
explained below. For a more extensive discussion, please review
Milkovich & Newman, 2008.
Step 1: Job Analysis
Job analysis is the process of studying jobs in an organization.
The outcome of this process is a job description that includes
the job
title, a summary of the job tasks, a list of essential tasks and
responsibilities, and a description of the work context. Also
included are
the knowledge, skills and abilities needed to perform the job.
Step 2: Job Evaluation
Job evaluation is the process of judging the relative worth of
jobs in an organization. The outcome of job evaluation is the
development of an internal structure or hierarchical ranking of
jobs. Job-based evaluation is used more often than person-based
evaluation, and so the former will be the focus in this case.
There are three methods of job-based evaluation: the point
method
(which is the most commonly used); ranking; and classification.

7. Job evaluation helps to ensure that pay is internally aligned and
perceived to be fair by employees.
Step 3: Pay Policy Identification
Pay policy identification is the process of determining whether
the organization wants to lead, lag or meet the market in
compensation. The pay policy or strategy will likely influence
employee attraction and retention. Pay policies can vary across
job
families (i.e., groups of similar jobs) and job levels if the top
management feels that different strategies can be effective in
different
areas of the organization.
Step 4: Pay Survey Analysis
Pay survey analysis is the process of analyzing compensation
data gathered from other employers in a survey of the relevant
labor
market. Gathering external pay data (e.g., base pay, bonuses,
stock options and benefits) is essential to keep the
organization’s
compensation externally competitive within its industry.
Employee attraction and retention can be improved by
maintaining
externally aligned pay structures.
Step 5: Pay Structure Creation
Pay structure creation is the final step, in which the internal
structure (Step 2) is merged with the external market pay rates
(Step 4)

8. in a simple regression to develop a market pay line. Depending
on whether the organization wants to lead, lag or meet the
market,
the market pay line can be adjusted up or down. To complete
the pay structure, pay grades and pay ranges are developed.
In this case, you will design a pay structure using a case
scenario and integrated application.
©2008 SHRM Lisa Burke, Ph.D., SPHR
Designing A Pay Structure
CASE
You are the newly hired human resource (HR) director for an
engineering consulting
firm that is expanding its operations to Chattanooga, Tenn. The
organization is
headquartered in Indianapolis, Ind. Based on the organization’s
mission statement,
you know the firm strives to create customized and technically
proficient electrical
engineering plans for regional clients. The following personnel
are required to start
the Chattanooga operation (the numbers in parentheses indicate
the number of

9. positions):
• Director of regional operations
• Assistant to the director of
operations
• Operations analyst (2)
• Operations trainee
• HR director (this is you)
• Administrative assistant in HR
• Benefits manager
• Benefits counselor
• Payroll assistant
• Lead engineer (3)
• Engineer (6)
• Engineering associate for special
projects
• Manager of information systems
• Senior information systems analyst
• Information systems analyst
• Security guard

10. • Front desk receptionist
You can see from the list that there are several job families,
including operations, HR,
engineering, information systems and office support. You can
now begin the process
of designing a pay structure for the organization.
Job analysis is central to many HR functions, including
compensation, recruiting and
training. You need to understand what tasks, duties and
responsibilities various jobs
will entail before you can assign fair and competitive pay rates.
Begin the process by gathering the needed job description
information. To do so, combine information from O*NET
(http://online.onetcenter.org), an online job analysis resource
developed by the Department of Labor, and existing internal
corporate HR documents (such as previous job descriptions).
Each job description includes the job title; a job summary;
essential
job tasks; the job’s work context; and job-relevant knowledge
and skills that an incumbent must possess.
Benchmark jobs (jobs that are common and consistent across a
wide range of employers) will be the focus of this exercise,
because
they will be used to design the pay structure. Appendix A
contains the job descriptions of the benchmark jobs. You have
one
description left to complete; your first task is to create a job

11. description for the benefits manager position.
48 ©2008 SHRM Lisa Burke, Ph.D., SPHR
Learning Objectives
In this case, students will learn to
design a pay structure. To do so,
you will:
• Write a job description, using the
O*NET website.
• Use the point method to conduct
a job evaluation.
• Analyze pay survey data for
benchmark jobs.
• Create a market pay line using
Excel.
• Establish a pay policy line based
on a pay level strategy.
• Create pay grades.
• Establish pay ranges.
Recommended Reading

12. Milkovich, G., and Newman, J.
(2008). Compensation. McGraw-
Hill Irwin. Chapters 1-8.
STUDENT WORKBOOK
Designing A Pay Structure
» Task A: Create a complete job description for the Benefits
Manager position using O*NET.
To design a pay structure, there must be a formal way to value
the work inside the organization so that pay is awarded fairly.
The
job evaluation process will help develop this internal work
hierarchy.
Different evaluation methods, pay strategies, and pay structures
will be used for different job families in the organization. You
decide to use a job-based evaluation approach for the
operations, office support, and HR job families. A skills-based
approach
will be used for information systems and engineering job
families, although it is not included as a task in this case. The
security
guard and director of regional operations jobs will be assigned
pay rates primarily using market pricing and slotted later into

13. the
pay structure.
Company representatives from various job levels and families
will periodically provide you with input during the job
evaluation
process. This will help you gain acceptance of the established
job structure. You ask this job evaluation committee whether
they
agree with the specific benchmark jobs identified in the job
analysis step (see below).
Office Support Operations HR
HR Director
Assistant to the director of operations Director of regional
operations *Benefits manager
*Admin assistant (HR) *Operations analyst Benefits counselor
*Front desk receptionist Operations trainee *Payroll assistant
* Benchmark job.
The committee studies the various job titles and asks why the
administrative assistant in HR is not included in the HR job
family.
You explain that administrative assistants perform similar tasks
across departments and do not handle functional-specific tasks
(e.g.,
HR). You suggest grouping the front-line administrative jobs in
a separate job family called office support. The other job

14. families
that will be evaluated are operations and HR.
You decide to use the point method for job evaluation for
operations, HR, and office support job families because it is the
most
commonly used job evaluation method. Next, the compensable
factors, degrees and weights of each factor must be determined.
With input from the job evaluation committee and your
knowledge of the organization’s mission and work content,
three common
compensable factors are selected: skill, responsibility and
effort, each having two specific sub-factors. For example, the
compensable
factor of skill is comprised of education level and the degree of
technical skills.
You recommend weighting the skill compensable factor at 50
percent because the organization is very knowledge-intensive
and
depends heavily on its human capital. Responsibility is
weighted 30 percent because each job has the potential to affect
other jobs;
and effort is assigned 20 percent because problem solving and
task complexity are integral across jobs in the organization.
©2008 SHRM Lisa Burke, Ph.D., SPHR 49
Four degrees should be sufficient for rating the various jobs.

15. For example, the four degrees for education level are identified
as:
1=High School/GED
2=Associates
3=Bachelors
4=Masters/Graduate
Points are then calculated by multiplying the degrees by the
weights.
You present an example of how this point scheme is applied to
the front desk receptionist benchmark job (see below). The
committee agrees with the approach.
Compensable Factor Job evaluation for front desk receptionist
Degree (1, 2, 3, 4) Weight Points
Skill (50%)
-Education Level 1 25% 25
-Degree of Technical Skills 1 25% 25
Responsibility (30%)
-Scope of Control 1 10% 10
-Impact of Job 2 20% 40

16. Effort (20%)
-Degree of Problem Solving 1 10% 10
-Task Complexity 1 10% 10
120 points
The next task is to calculate the job evaluation points for the
remaining benchmark jobs using the established compensable
factors
and specified weights above. In other words, the degrees of
each remaining benchmark job must be determined based on a
logical
rationale, and then the total job evaluation points for each
benchmark job can be calculated. To do so, consult the job
descriptions
in Appendix A.
50 ©2008 SHRM Lisa Burke, Ph.D., SPHR
STUDeNT WORKBOOK
Designing A Pay Structure
STUDeNT WORKBOOK
Designing A Pay Structure

17. » Task B: Calculate the job evaluation points for the
administrative assistant, payroll assistant, operational
analyst, and benefits manager jobs. Provide a rationale for
assigning specific degrees to the various jobs.
After determining the job evaluation points for the remaining
benchmark positions, you meet with the president, the head of
corporate HR in Indianapolis and the director of regional
operations in Chattanooga to discuss a pay level strategy for
each job
family. One decision resulting from these meetings is that your
organization will pay 3 percent above the market in base pay for
the
HR, operations and office support job families. The group
realizes that this lead pay policy will help meet the firm’s
customer-focus
business strategy by attracting and retaining high-potential
employees without incurring labor costs too far above their
competitors.
Top management also decides to match the market in benefits to
contain benefit costs (e.g., health care costs). After analyzing
web-based data about benefits offered in your industry by
smaller organizations (retrieved from BenefitsLink, SHRM, and
Employee Benefits Research Institute) you discern that on
average, employee benefits costs are approximately 25 percent
of
total compensation. Once the pay structure is finalized, you will
set benefits at a similar ratio of total compensation to achieve a
matching benefits policy.

18. To ensure that the pay structure is externally competitive, a pay
survey will be conducted. For the results of a survey to be valid,
the market pay data must be from the relevant labor market for
each benchmark job. That is, regional pay data should be
gathered
because most of the office support, HR and operations jobs will
be filled by regional candidates (i.e., within a 90-mile radius of
Chattanooga).
You develop a streamlined pay survey and administer it to
industry competitors. Descriptive organization data (e.g., size,
industry,
annual revenue) is gathered as well as compensation data for
each of the benchmark jobs, including base pay, bonuses, stock
options and benefits. [Note: All participating organizations will
receive the survey results.]
Surveys are completed and returned by six organizations
(referred to as companies A, B, C, D, E, and F) who recruit and
hire
similar benchmark jobs in the surrounding region. Base pay
salary data from the responding organizations are reflected in
the
following table. You have already checked to ensure that
summary job descriptions for the benchmark jobs (in the sample
data) are
appropriately similar to those in your organization (to ensure
you are comparing “apples to apples”). The next step is to
analyze the
pay data and generate weighted means for each benchmark job
to use in future parts of the case.

19. ©2008 SHRM Lisa Burke, Ph.D., SPHR 51
STUDeNT WORKBOOK
Designing A Pay Structure
» Task C: If there were any outliers (i.e., extreme data points)
in these data, what would you recommend doing
with them? [From this point forward, assume no extreme data
points exist in the dataset.]
Second, calculate the weighted means (for base pay) for each
benchmark job.
Company # of Job Incumbents Base Pay
A
Front Desk Receptionist 1 Average $21,000
Minimum
Maximum
B
Front Desk Receptionist 2 Average $22,000

20. Minimum $21,000
Maximum $23,000
C
Front Desk Receptionist 1 Average $18,000
Minimum
Maximum
D
Front Desk Receptionist 2 Average $21,000
Minimum $20,000
Maximum $22,000
E
Front Desk Receptionist 2 Average $18,500
Minimum $18,000
Maximum $19,000
F
Front Desk Receptionist 1 Average $17,500
Minimum
Maximum

21. 52 ©2008 SHRM Lisa Burke, Ph.D., SPHR
STUDENT WORKBOOK
Designing A Pay Structure
Company # of Job Incumbents Base Pay
A
Administrative Assistant 4 Average $25,000
Minimum $21,000
Maximum $28,000
B
Administrative Assistant 4 Average $31,000
Minimum $27,000
Maximum $34,500

22. C
Administrative Assistant 3 Average $30,000
Minimum $29,000
Maximum $32,000
D
Administrative Assistant 5 Average $33,000
Minimum $28,000
Maximum $34,000
E
Administrative Assistant 4 Average $29,000
Minimum $27,000
Maximum $30,000
F
Administrative Assistant 4 Average $28,000
Minimum $27,000
Maximum $30,000
©2008 SHRM Lisa Burke, Ph.D., SPHR 53

23. Company # of Job Incumbents Base Pay
A
Operations Analyst 2 Average $55,000
Minimum $50,000
Maximum $60,000
B
Operations Analyst 4 Average $57,000
Minimum $54,000
Maximum $59,000
C
Operations Analyst 3 Average $56,000
Minimum $54,000
Maximum $58,000
D
Operations Analyst 5 Average $58,500
Minimum $52,000
Maximum $61,000

24. E
Operations Analyst 3 Average $59,000
Minimum $57,000
Maximum $61,000
F
Operations Analyst 3 Average $54,000
Minimum $53,000
Maximum $55,000
54 ©2008 SHRM Lisa Burke, Ph.D., SPHR
STUDENT WORKBOOK
Designing A Pay Structure
STUDENT WORKBOOK
Designing A Pay Structure

25. Company # of Job Incumbents Base Pay
A
Payroll Assistant 2 Average $35,000
Minimum $34,000
Maximum $36,000
B
Payroll Assistant 3 Average $34,000
Minimum $32,000
Maximum $35,000
C
Payroll Assistant 1 Average $35,000
Minimum
Maximum
D
Payroll Assistant 3 Average $35,000
Minimum $33,000
Maximum $37,000
E

26. Payroll Assistant 2 Average $36,000
Minimum $35,000
Maximum $37,000
F
Payroll Assistant 2 Average $29,000
Minimum $27,000
Maximum $31,000
©2008 SHRM Lisa Burke, Ph.D., SPHR 55
Company # of Job Incumbents Base Pay
A
Benefits Manager 1 Average $62,000
Minimum
Maximum
B
Benefits Manager 2 Average $61,500

27. Minimum $61,000
Maximum $62,000
C
Benefits Manager 1 Average $60,000
Minimum
Maximum
D
Benefits Manager 3 Average $64,000
Minimum $62,000
Maximum $65,000
E
Benefits Manager 2 Average $63,000
Minimum $62,000
Maximum $64,000
F
Benefits Manager 1 Average $66,000
Minimum
Maximum

28. 56 ©2008 SHRM Lisa Burke, Ph.D., SPHR
STUDENT WORKBOOK
Designing A Pay Structure
STUDENT WORKBOOK
Designing A Pay Structure
The next task is to conduct a simple regression using Microsoft
Excel to create a market pay line. Enter the job evaluation
points
(as X) and weighted average base pay rates (as Y) for each
benchmark job and generate the regression results.
» Task D: Conduct a simple regression in Excel to create a
market pay line by entering the job evaluation points
(on the X axis) and the respective weighted average market base
pay (on the Y axis) for each benchmark job.
Identify the slope and y-intercept and write the equation for the
market pay line.

29. The regression output will also show information about how
good the regression line fits the data. Specifically, look at the
“R
squared” in the regression output. Generally, the R squared,
referred to as variance explained, should be .95 or higher.
If R squared is significantly lower than this, there may be
problems stemming from the job evaluation step. For example,
the points
assigned to certain benchmark jobs may be off – i.e., not make
sense given the level of tasks, duties and responsibilities
required for
the job and the knowledge, skills and abilities needed by the job
incumbent. If this is the case, re-examine the job descriptions
and
reconsider the points assigned to the benchmark jobs.
Alternatively, there may be errors in the weighted average
calculations. After
conducting the regression again, examine the new R squared.
» Task E: What is your R squared (variance explained)? Is it
sufficient to proceed?
Using the regression output (the slope and y-intercept),
calculate the predicted market pay rate (using Excel) for each
benchmark job.

30. » Task F: Calculate the predicted base pay for each benchmark
job.
Next, adjust the market pay line based on the organization’s
lead pay level strategy; this will create the pay policy line.
Since the
organization wants to lead the market by 3 percent across the
operations, office support and HR job families, adjust the
market pay
line accordingly (by 3 percent). In other words, each predicted
pay rate can be multiplied by 1.03 to get a new base pay rate
that is
3 percent above market.
» Task G: Because your company wants to lead in base pay by 3
percent, adjust the predicted pay rates to
determine the base pay rate you will offer for each benchmark
job.
©2008 SHRM Lisa Burke, Ph.D., SPHR 57
Next, create pay grades for the pay structure. Pay grades
represent groupings of jobs that are similar for pay purposes
(i.e., of
similar value to the organization). All the jobs in a pay grade

31. share the same pay range (minimum and maximum pay rates).
Examine the benchmark jobs in this case again and determine
which ones are sufficiently similar for compensation purposes.
Do
this by revisiting the job evaluation results.
» Task H: Create pay grades by combining any benchmark jobs
that are substantially comparable for pay
purposes. Clearly label your pay grades and explain why you
combined any benchmark jobs to form a grade.
The final step to designing the pay structure is to set the pay
ranges for each pay grade. Pay ranges create upper and lower
pay
rates (on the Y axis) for each job in the pay grade. Each pay
grade will have a minimum and maximum pay rate. It is
important to
remember that all jobs in a pay grade will have the same
minimum and maximum pay rates.
Percent guidelines are used to determine how far above and
below the midpoint the pay range will reach. For example, the
maximum might be 10 percent above the midpoint and the
minimum might be 10 percent below the midpoint.
The percent guidelines, based on input from the job evaluation
committee, are:
• Clerical and office positions: 10 percent above and below the

32. midpoint.
• Entry to mid-level professional and management positions: 30
percent above and below the midpoint.
» Task I: Use your answer to Task H to determine the pay range
(i.e., minimum and maximum) for each pay
grade.
» Task J: Given the pay structure you have generated, consider
the following:
» Does this pay structure make good business sense? Do you
think it is consistent with the organization’s
business strategy?
» What are the implications of this pay structure for other HR
systems, such as retention and recruiting?

33. 58 ©2008 SHRM Lisa Burke, Ph.D., SPHR
STUDENT WORKBOOK
Designing A Pay Structure
©2008 SHRM Lisa Burke, Ph.D., SPHR 59
STUDENT WORKBOOK
Designing A Pay Structure
References
Milkovich, G., and Newman, J. (2008). Compensation.
McGraw-Hill Irwin.
O*NET. Available at http://online.onetcenter.org.
other ComPensAtion texts

34. Bergmann, T., and Scarpello, V. (2002). Compensation decision
making. Southwestern.
Martocchio, J. (2006). Strategic Compensation.
Pearson/Prentice Hall.
relevAnt websites
WorldAtWork: www.worldatwork.org.
Society for Human Resource Management: www.shrm.org.
Economic Research Institute: www.eridlc.com.
http://online.onetcenter.org/
http://www.worldatwork.org/
http://www.shrm.org/
http://www.eridlc.com/
INSTRUCTOR’S MANUAL
Designing A Pay Structure
60 ©2008 SHRM Lisa Burke, Ph.D., SPHR

35. Appendix A – Job Descriptions for Benchmark Jobs
[Created using O*NET]
Front Desk Receptionist
Job Summary
Answer inquiries and obtain information for general public,
customers, visitors and other interested parties. Provide
information
regarding activities conducted at establishment; location of
departments, offices, and employees within organization.
Essential Job Tasks
• Operate telephone to answer, screen and forward calls,
providing information, taking messages and scheduling
appointments.
• Greet persons entering establishment, determine nature and
purpose of visit, and direct or escort them to specific
destinations.
• Hear and resolve complaints from customers and public.
• Transmit information or documents to customers, using e-
mail, mail or fax machine.
• Analyze data to determine answers to questions from
customers or members of the public.
• Provide information about the establishment, such as location
of departments or offices, employees within the organization, or

36. services provided.
Job Context
Indoor, environmentally controlled; telephone; contact with
others.
Knowledge, Skills and Abilities
• Knowledge of principles and processes for providing customer
and personal services. This includes customer needs assessment,
meeting quality standards for services and evaluation of
customer satisfaction.
• Knowledge of administrative and clerical procedures and
systems such as word processing, managing files and records,
taking
and organizing messages, and other office procedures and
terminology.
• Awareness of others’ reactions and understanding why they
react as they do.
• Gives full attention to what other people are saying, taking the
time to understand the points being made, asking questions as
appropriate and not interrupting at inappropriate times.
• Actively looks for ways to help people.
• Manages one’s own time and the time of others.
• Talks to others to convey information effectively.
• Knowledge of the English language including the meaning and

37. spelling of words, rules of composition, and grammar.
• Understands written sentences and paragraphs in work-related
documents.
• Communicates effectively in writing as appropriate for the
needs of the audience.
Administrative Assistant
Job Summary
Provide administrative support by conducting research,
preparing reports, handling information requests and performing
clerical
functions such as preparing correspondence, receiving visitors,
arranging conference calls, and scheduling meetings.
Essential Job Tasks
• Manage and maintain executives’ schedules.
• Prepare invoices, reports, memos, letters, financial statements
and other documents, using word processing, spreadsheet,
database, or presentation software.
• Read and analyze incoming memos, submissions and reports to
determine their significance and plan their distribution.

38. • Open, sort and distribute incoming correspondence, including
faxes and e-mail.
• File and retrieve corporate documents, records and reports.
• Greet visitors and determine whether they should be given
access to specific individuals.
• Prepare responses to correspondence containing routine
inquiries.
• Perform general office duties such as ordering supplies,
maintaining records, management systems and performing basic
bookkeeping work.
• Make travel arrangements for executives.
Job Context
Indoor, environmentally controlled; telephone; contact with
others.
Knowledge, Skills and Abilities
• Knowledge of administrative and clerical procedures and
systems such as word processing, managing files and records,
designing and completing forms, and other office procedures
and terminology.
• Knowledge of principles and processes for providing customer
and personal services. This includes customer needs assessment,
meeting quality standards for services, and evaluation of
customer satisfaction.

39. • Knowledge of computer hardware and software.
• Knowledge of the structure and content of the English
language including the meaning and spelling of words, rules of
composition and grammar.
• Gives full attention to what other people are saying, taking
time to understand the points being made, asking questions as
appropriate, and not interrupting at inappropriate times.
• Monitors/assesses performance of self, other individuals or
organizations to make improvements or take corrective action.
• Manages one’s own time and the time of others.
• Talks to others to convey information effectively.
• Understands written sentences and paragraphs in work-related
documents.
• Communicates effectively in writing as appropriate for the
needs of the audience.
• Adjusts actions in relation to others’ actions.
62 ©2008 SHRM Lisa Burke, Ph.D., SPHR
APPENDIX A

40. Designing A Pay Structure
APPENDIX A
Designing A Pay Structure
Payroll Assistant
Job Summary
Compile and post employee time and payroll data. Compute
employees’ time worked, production and any commission.
Compute
and post wages and deductions.
Essential Job Tasks
• Process and issue employee paychecks and statements of
earnings and deductions.
• Compute wages and deductions and enter data into computers.
• Compile employee time, production and payroll data from
time sheets and other records.

41. • Review time sheets, work charts, wage computation and other
information to detect and reconcile payroll discrepancies.
• Verify attendance, hours worked and pay adjustments, and
post information to records.
• Record employee information, such as exemptions, transfers
and resignations to maintain and update payroll records.
• Issue and record adjustments to pay related to previous errors
or retroactive increases.
• Complete time sheets showing employees’ arrival and
departure times.
Job Context
Indoor, environmentally controlled; telephone; contact with
others.
Knowledge, Skills and Abilities
• Knowledge of administrative and clerical procedures and
systems such as word processing, managing files and records,
designing and completing forms, and other office procedures
and terminology.
• Knowledge of principles and processes for providing customer
service.
• Knowledge of math, arithmetic, statistics to analyze data and
solve problems and use of Microsoft Excel.
• Uses logic and reasoning to identify the strengths and

42. weaknesses of alternative solutions, conclusions or approaches
to
problems.
• Knowledge of the English language including the meaning and
spelling of words, rules of composition, and grammar.
• Understands written sentences and paragraphs in work-related
documents.
• Gives full attention to what other people are saying, taking
time to understand the points being made, asking questions as
appropriate, and not interrupting at inappropriate times.
• Talks to others to convey information effectively.
• Communicates effectively in writing as appropriate for the
needs of the audience.
©2008 SHRM Lisa Burke, Ph.D., SPHR 63

43. Operations Analyst
Job Summary
Formulate and apply mathematical modeling and other
optimizing methods using a computer to develop and interpret
information
that assists management with decision making or other
managerial functions. Frequently concentrates on collecting and
analyzing
data using decision support software.
Essential Job Tasks
• Analyze information obtained from management to
conceptualize and define operational problems.
• Collaborate with senior managers and decision makers to
identify and solve a variety of problems and to clarify
management
objectives.
• Define data requirements and then gather and validate
information, applying judgment.
• Study and analyze information about alternative courses of
action to determine which plan will offer the best outcome.
• Prepare management reports defining and evaluating problems

44. and identifying solutions.
• Formulate mathematical or simulation models of problems,
relating constants and variables, restrictions, alternatives,
conflicting objectives and their parameters.
Job Context
Indoor, environmentally controlled; telephone; contact with
others.
Knowledge, Skills and Abilities
• Knowledge and application of arithmetic, algebra, geometry,
calculus and statistics.
• Knowledge of the practical application of engineering science
and technology. This includes applying principles, techniques,
procedures and equipment.
• Knowledge of computer hardware and software including
applications and programming.
• Identifies complex problems and reviews related information
to develop and evaluate options and implement solutions.
• Uses logic and reasoning to identify the strengths and
weaknesses of alternative solutions, conclusions or approaches
to
problems.
• Analyzes needs and product requirements to create a design.
• Determines how a system should work and how changes in

45. conditions, operations and the environment will affect
outcomes.
• Considers the relative costs and benefits of potential actions
to determine course of action.
• Understands the implications of new information for both
current and future problem solving and decision making.
• Knowledge of the English language including the meaning and
spelling of words, rules of composition, and grammar.
• Understands written sentences and paragraphs in work-related
documents.
• Communicates effectively in writing as appropriate for the
needs of the audience.
64 ©2008 SHRM Lisa Burke, Ph.D., SPHR
APPENDIX A
Designing A Pay Structure

46. APPeNDIx A
Designing
08-0745 1800 Duke Street
Alexandria, VA 22314
www.shrm.org/hreducation/cases.asp
http://www.shrm.org/hreducation/cases.aspIntroduction to
Compensation and Designing a Pay StructureStep 1: Job
AnalysisStep 2: Job EvaluationStep 3: Pay Policy
IdentificationStep 4: Pay Survey AnalysisStep 5: Pay Structure
CreationCASE» Task A: Create a complete job description for
the Benefits Manager position using O*NET.Compensable
Factor Job evaluation for front desk receptionist» Task B:
Calculate the job evaluation points for the administrative
assistant, payroll assistant, operational analyst, and benefits
manager jobs. Provide a rationale for assigning specific degrees
to the various jobs.» Task C: If there were any outliers (i.e.,
extreme data points) in these data, what would you recommend
doing with them? [From this point forward, assume no extreme
data points exist in the dataset.]» Task D: Conduct a simple
regression in Excel to create a market pay line by entering the
job evaluation points (on the X axis) and the respective
weighted average market base pay (on the Y axis) for each
benchmark job.» Task E: What is your R squared (variance
explained)? Is it sufficient to proceed?» Task F: Calculate the
predicted base pay for each benchmark job.» Task G: Because

47. your company wants to lead in base pay by 3 percent, adjust the
predicted pay rates to determine the base pay rate you will offer
for each benchmark job.» Task H: Create pay grades by
combining any benchmark jobs that are substantially
comparable for pay purposes. Clearly label your pay grades and
explain why you combined any benchmark jobs to form a
grade.» Task I: Use your answer to Task H to determine the pay
range (i.e., minimum and maximum) for each pay
grade.Referencesother ComPensAtion textsrelevAnt
websitesFront Desk ReceptionistJob SummaryEssential Job
TasksJob ContextKnowledge, Skills and AbilitiesAdministrative
AssistantJob SummaryEssential Job TasksJob
ContextKnowledge, Skills and AbilitiesPayroll AssistantJob
SummaryEssential Job TasksJob ContextKnowledge, Skills and
AbilitiesOperations AnalystJob SummaryEssential Job TasksJob
ContextKnowledge, Skills and Abilities
Assessment
Prepara�on for Performance and Rewards
This Competency Assessment assesses the following
outcome(s):
Analyze Human Resource considera�ons to business decision
making.
Review the SHRM case, “Designing a Pay Structure.”
You will prepare the SHRM case analysis on Designing a Pay
Structure which consists of
your comple�on of Tasks A-J that simulates the crea�on of a
compensa�on system for an

48. organiza�on in mee�ng its goals and suppor�ng its mission.
You are to complete this case
analysis using Excel in a spreadsheet analysis format. In your
analysis, respond to the
following TASKS found in the case study.
Your case analysis should consist of:
Task A: Create a complete job descrip�on for the Benefits
Manager posi�on using
O*NET.
Task B: Calculate the job evalua�on points for the
administra�ve assistant, payroll
assistant, opera�onal analyst, and benefits manager jobs.
Provide a ra�onale for
assigning specific degrees to the various jobs.
Task C: If there were any outliers (i.e., extreme data points) in
these data, what
would you recommend doing with them? From this point
forward, assume no
extreme data points exist in the dataset.
Task D: Conduct a simple regression in Excel to create a market
pay line by
entering the job evalua�on points (on the X axis) and the

49. respec�ve weighted
average market base pay (on the Y axis) for each benchmark
job.
Task E: What is your R squared (variance explained)? Is it
sufficient to proceed?
Task F: Calculate the predicted base pay for each benchmark
job.
Task G: Because your company wants to lead in base pay by 3
%, adjust the
predicted pay rates to determine the base pay rate you will offer
for each
benchmark job.
Task H: Create pay grades by combining any benchmark jobs
that are substan�ally
comparable for pay purposes. Clearly label your pay grades and
explain why you
combined any benchmark jobs to form a grade.
Task I: Use your answer to Task H to determine the pay range
(i.e., minimum and
maximum) for each pay grade.
https://kapextmediassl-
a.akamaihd.net/business/GB520/GB520_1707D/GB520_Unit4_C
ase_Study.pdf

50. Task J: Given the pay structure you have generated, consider
the following: Does
this pay structure make good business sense? Do you think it is
consistent with the
organiza�on’s business strategy? What are the implica�ons of
this pay structure for
other HR systems, such as reten�on and recrui�ng?
Your analysis of this case and your wri�en submission should
reflect an
understanding of the cri�cal issues of the case, integra�ng the
material covered in
the text, and present concise and well-reasoned jus�fica�ons
for the stance that
you take. You are to complete this case analysis using Excel in
a spreadsheet
analysis format.
Case analysis �ps: Avoid common errors in case analyses, such
as:
● Focusing too heavily on minor issues.
● Lamen�ng because of insufficient data in the case and
ignoring crea�ve alterna�ves.
● Rehashing of case data — you should assume the reader
knows the case.

51. ● Not appropriately evalua�ng the quality of the case's data.
● Obscuring the quan�ta�ve analysis or making it difficult to
understand.
Typical “minus (–)” grades result from submissions that:
● Are late.
● Are not well integrated and lack clarity.
● Do not address �ming issues.
● Do not recognize the cost implica�ons or are not prac�cal.
● Get carried away with personal biases and are not per�nent
to the key issues.
● Are not thoroughly proofread and corrected.
Make sure your document includes:
• Your name
• Date
• Course name and sec�on number
• Unit number
• Case name
• Page numbers

52. Be sure to review the Competency Assessment Checklist Rubric
in order to understand
the criteria on which you will be evaluated.
Assessment Checklist:
Create job descrip�ons for mul�ple jobs.
Conduct a regression analysis that results in a market pay line
that supports the
validity of the pay ranges in the case study.
Calculate the predicted base pay for each benchmark job.
Create pay grades by combining any benchmark jobs that are
substan�ally
comparable for pay purposes.
Make sure your document includes:
• Your name
• Date
• Course name and sec�on number
• Unit number
• Case name
• Page numbers

53. Minimum Submission Requirements
This Assessment should be a Microso� Excel spreadsheet.
This Assessment should be a minimum of 10–15 slides, with
analysis notes, in
addi�on to the �tle and reference slides.
Respond to the ques�ons in a thorough manner, providing
specific examples of
concepts, topics, defini�ons, and other elements asked for in
the ques�ons. Your
paper should be highly organized, logical, and focused.
Your analysis must be wri�en in Standard English and
demonstrate excep�onal
content, organiza�on, style, and grammar and mechanics.
Your analysis should provide a clearly established and sustained
viewpoint and
purpose.
Your wri�ng should be well ordered, logical and unified, as
well as original and
insigh�ul.
A separate slide at the end of your spreadsheet analysis should
contain a list of
references, in APA format. Use your textbook, the Library, and

54. the internet for
research.
Be sure to cite both in-text and reference list cita�ons were
appropriate and
reference all sources. Your sources and content should follow
proper APA cita�on
style. Review the APA forma�ng and cita�on style found in the
Wri�ng Center.
The Wri�ng Center can be found within the Academic Support
Center under
Academic Tools in the le� naviga�on of your course. (It should
include a cover
sheet, paper is double spaced, in Times New Roman 12-point
font, correct
cita�ons, Standard English with no spelling or punctua�on
errors, and correct
references at the bo�om of the last page.)
If work submi�ed for this competency assessment does not
meet the minimum
submission requirements, it will be returned without being
scored.

55. Analyze Human Resource considerations to business decision
making.
If work submitted for this Competency Assessment does not
meet the minimum submission
requirements, it will be returned without being scored.
CRITERIA MET NOT MET
Create job descriptions for multiple jobs.
[Defend the weighted value of each job created.]
Conduct a regression analysis that results in a market pay line
that
supports the validity of the pay ranges in the case study.
[Critique the statistical analysis conducted and determine how
the
data is valid.]
Calculate the predicted base pay for each benchmark job.
[Create and adjust the predicted pay rates to determine the base
pay rate you will offer for each benchmark job by 3%.]
Create pay grades by combining any benchmark jobs that are
substantially comparable for pay purposes.
[Determine the pay range (i.e., minimum and maximum) for
each
pay grade.]

56. Overall # Bold Criteria Met/Not Met
[Overall # Mastery Criteria Met/Not Met]
The criterion statements in bold are the minimum requirement
to show competent
performance on the course outcome; all bold criteria must be
met to pass this Course
Outcome.
The criterion statements in [Brackets] represent mastery
achievement. A predefined number of
mastery criteria must be achieved to earn an A grade, indicating
mastery of the Course
Outcome.
CLA and Grade Criteria Chart
CRITERIA
CLA
Score
Grade Points
Meets all bold criteria and 2 to 4 of the mastery
criteria
5 A 1,000
Meets all bold criteria and 0 to 1 of mastery
criteria
4 B 800

57. Meets 3 of bold criteria 3
Not yet
competent
(F at term end)
0
Meets 2 of bold criteria 2
Not yet
competent
(F at term end)
0
Meets 1 of bold criteria 1
Not yet
competent
(F at term end)
0
Meets no bold criteria 0
Not yet
competent
(F at term end)
0
No submission NA

58. Not yet
competent
(F at term end)
0
Assessment
Prepara�on for Performance and Rewards
This Competency Assessment assesses the following
outcome(s):
Analyze Human Resource considera�ons to business decision
making.
Review the SHRM case, “Designing a Pay Structure.”
You will prepare the SHRM case analysis on Designing a Pay
Structure which consists of
your comple�on of Tasks A-J that simulates the crea�on of a
compensa�on system for an
organiza�on in mee�ng its goals and suppor�ng its mission.
You are to complete this case
analysis using Excel in a spreadsheet analysis format. In your
analysis, respond to the

59. following TASKS found in the case study.
Your case analysis should consist of:
Task A: Create a complete job descrip�on for the Benefits
Manager posi�on using
O*NET.
Task B: Calculate the job evalua�on points for the
administra�ve assistant, payroll
assistant, opera�onal analyst, and benefits manager jobs.
Provide a ra�onale for
assigning specific degrees to the various jobs.
Task C: If there were any outliers (i.e., extreme data points) in
these data, what
would you recommend doing with them? From this point
forward, assume no
extreme data points exist in the dataset.
Task D: Conduct a simple regression in Excel to create a market
pay line by
entering the job evalua�on points (on the X axis) and the
respec�ve weighted
average market base pay (on the Y axis) for each benchmark
job.
Task E: What is your R squared (variance explained)? Is it
sufficient to proceed?

60. Task F: Calculate the predicted base pay for each benchmark
job.
Task G: Because your company wants to lead in base pay by 3
%, adjust the
predicted pay rates to determine the base pay rate you will offer
for each
benchmark job.
Task H: Create pay grades by combining any benchmark jobs
that are substan�ally
comparable for pay purposes. Clearly label your pay grades and
explain why you
combined any benchmark jobs to form a grade.
Task I: Use your answer to Task H to determine the pay range
(i.e., minimum and
maximum) for each pay grade.
https://kapextmediassl-
a.akamaihd.net/business/GB520/GB520_1707D/GB520_Unit4_C
ase_Study.pdf
Task J: Given the pay structure you have generated, consider
the following: Does
this pay structure make good business sense? Do you think it is
consistent with the

61. organiza�on’s business strategy? What are the implica�ons of
this pay structure for
other HR systems, such as reten�on and recrui�ng?
Your analysis of this case and your wri�en submission should
reflect an
understanding of the cri�cal issues of the case, integra�ng the
material covered in
the text, and present concise and well-reasoned jus�fica�ons
for the stance that
you take. You are to complete this case analysis using Excel in
a spreadsheet
analysis format.
Case analysis �ps: Avoid common errors in case analyses, such
as:
● Focusing too heavily on minor issues.
● Lamen�ng because of insufficient data in the case and
ignoring crea�ve alterna�ves.
● Rehashing of case data — you should assume the reader
knows the case.
● Not appropriately evalua�ng the quality of the case's data.
● Obscuring the quan�ta�ve analysis or making it difficult to
understand.
Typical “minus (–)” grades result from submissions that:

62. ● Are late.
● Are not well integrated and lack clarity.
● Do not address �ming issues.
● Do not recognize the cost implica�ons or are not prac�cal.
● Get carried away with personal biases and are not per�nent
to the key issues.
● Are not thoroughly proofread and corrected.
Make sure your document includes:
• Your name
• Date
• Course name and sec�on number
• Unit number
• Case name
• Page numbers
Be sure to review the Competency Assessment Checklist Rubric
in order to understand
the criteria on which you will be evaluated.
Assessment Checklist:

63. Create job descrip�ons for mul�ple jobs.
Conduct a regression analysis that results in a market pay line
that supports the
validity of the pay ranges in the case study.
Calculate the predicted base pay for each benchmark job.
Create pay grades by combining any benchmark jobs that are
substan�ally
comparable for pay purposes.
Make sure your document includes:
• Your name
• Date
• Course name and sec�on number
• Unit number
• Case name
• Page numbers
Minimum Submission Requirements
This Assessment should be a Microso� Excel spreadsheet.
This Assessment should be a minimum of 10–15 slides, with
analysis notes, in

64. addi�on to the �tle and reference slides.
Respond to the ques�ons in a thorough manner, providing
specific examples of
concepts, topics, defini�ons, and other elements asked for in
the ques�ons. Your
paper should be highly organized, logical, and focused.
Your analysis must be wri�en in Standard English and
demonstrate excep�onal
content, organiza�on, style, and grammar and mechanics.
Your analysis should provide a clearly established and sustained
viewpoint and
purpose.
Your wri�ng should be well ordered, logical and unified, as
well as original and
insigh�ul.
A separate slide at the end of your spreadsheet analysis should
contain a list of
references, in APA format. Use your textbook, the Library, and
the internet for
research.
Be sure to cite both in-text and reference list cita�ons were

65. appropriate and
reference all sources. Your sources and content should follow
proper APA cita�on
style. Review the APA forma�ng and cita�on style found in the
Wri�ng Center.
The Wri�ng Center can be found within the Academic Support
Center under
Academic Tools in the le� naviga�on of your course. (It should
include a cover
sheet, paper is double spaced, in Times New Roman 12-point
font, correct
cita�ons, Standard English with no spelling or punctua�on
errors, and correct
references at the bo�om of the last page.)
If work submi�ed for this competency assessment does not
meet the minimum
submission requirements, it will be returned without being
scored.