This document discusses establishing a market-competitive pay structure. It outlines 6 steps to develop a pay structure: 1) Conduct a salary survey, 2) Evaluate jobs and group similar jobs into pay grades, 3) Price each pay grade using a wage curve, 4) Fine-tune pay rates by developing ranges, 5) Correct any out-of-line pay rates, and 6) Use raises, bonuses and incentives to reward performance. Key factors in determining pay include aligning compensation with organizational strategy, addressing issues of internal/external equity, and maintaining individual/procedural equity through performance evaluations and communication.

1. Compensation & Benefits
ESTABLISH A MARKET – COMPETITIVE
PAY STRUCTURE
By Lamees, H. El-Ghazoly,
HR Business Partener

2. Establish a Market – Competitive Pay structure
Introduction
HR Professional should be able to establish a Market – Competitive Pay structure. No doubt, SMEs and
startups cannot compete with more giant corporations when it comes to offering glamorous salary
packages and benefits. Make sure you provide a competitive salary and contribute as many benefits to
your team as possible, such as health insurance, life insurance, retirement plans, extra.
To freshen the deal, even more, offer pliable benefits like flexible hours and performance-based benefits
like profit sharing.
These decisions take into account not only a position’s salary range but also the value of benefits
provided. Total compensation consists of salary, leave earned, insurance which paid, and retirement plan.
Total Rewards
Frist of all we have to put in our consideration a few main point:
1- The Strategy.
2- Organization Structure (chart).
3- Job Analysis (Job Discretion and Job Specification).
4- Performance Appraisal.
Basic Factors in Determining Pay Rates
A- Aligning total rewards with strategy:
Any company must have its compensation and benefits to support the organization’s strategic direction
(mission, vision, values, goals and strategy) regardless of its type of business, profit margins, size or
private or public status.
In smaller companies with no strategies, the HR professional may consider other indicators (company life
cycle, downsizing, expansion, profitability ..etc)
The HR responsibility is to design a compensation & benefits program (in alignment with the
organization’s strategic direction) to:
– Attract the right people to the right jobs (salary)
– Retain employees (loyalty programs - Benefits)
– Motivate them to perform at higher levels (incentives, bonuses, profit share, ...etc).
B- Equity and its impact on pay rates:
Four Forms of Equity:

3. • External equity
– How a job’s pay rate in one company compares to the job’s pay rate in other companies.
• Internal equity
– How fair the job’s pay rate is, when compared to other jobs within the same company. e.g. Sales manager
vs Production manager.
• Individual equity
– How fair an individual’s pay as compared with what his or her co-workers are earning for the same or very
similar jobs within the company. e.g. men and women equity.
• Procedural equity
– The perceived fairness of the process and procedures to make decisions regarding the allocation of pay.
C- Addressing equity issues:
Methods to Address Equity Issues:
1- Salary surveys: To maintain (Equity External)
For SME we resorted to comparing salary in an informal way through employees who work in the same
job and in the same size of the, and one of the websites like; (Glassdoor.com) to approach the average
salary in the market.
In the other hand, middle and large organization salary survey is an accurate tool to price benchmark jobs
and make decisions about compensations.
Salary Survey Sources:
• Professional associations
• Government agencies
• Private consulting and/or executive recruiting companies
• Hay Associates
• Job Master
2- Job analysis and job evaluation (To maintain internal equity).
Why Job Analysis is must??

4. The performance of employees contributes to their compensation that means; we don’t assume that
employees are on the same wavelength as you when it comes to what their job involves and what results
are expected.
Job analysis involves collecting and recording job-related data such as the desired behaviors and results
that will constitute performance in the job) necessary skills required to perform a job, duties and
responsibilities involved, education qualifications and experience needed and physical and emotional
characteristics essential to perform a job in the desired manner. It requires as much data as possible to
put together a job description, which is the due output result of the job analysis.
3- Performance appraisal and incentive pay (To maintain individual equity).
4- Communications and employees’ participation (To maintain procedural equity)
Legal Considerations in Compensation:
 Probationary pay
 Minimum wages and minimum periodical annual increments
 Overtime and shift pay
 Paid leaves and paid holidays (Discussed with benefits)
 Deductions
Probationary pay:
If an employee is hired on probation, the employment contract should indicate the probationary period.
The probation labor contract should not exceed three months. Neither shall an employee be appointed
under probation more than once for the same employer.
A probation contract is a conditional labor contract, in case the employee proves unsuitable for the job
during the probation period; thus, allowing the employer to cancel the contract.
-Minimum wages
-Minimum periodical annual increments (not less than 7%)
-Overtime pay, paid leaves and holidays (kindly chick )‫االئحه‬‫الداخلية‬‫للشركة‬
Addressing Equity Issues
To head off discussions of internal or individual equity, some firms maintain strict secrecy over pay
matters. However, the equity individual, internal, external, or procedural.

5. Establish Market-Competitive Pay Plan
Step 1#: Salary Survey
For SME we resorted to comparing salary in an informal way through employees who work in the same
job and in the same size of the, and one of the websites like; (Glassdoor.com) to approach the average
salary in the market.
In the other hand, middle and large organization salary survey is an accurate tool to price benchmark jobs
and make decisions about compensations.
Salary Survey Sources:
• Professional associations
• Government agencies
• Private consulting and/or executive recruiting companies
• Hay Associates
• Job Master
First-quartile (below-
market) strategy
A major disadvantage of
using a first-quartile
strategy is high turnover
Third-quartile
(above-market)
strategy
Allows an
organization to be
more selective
Second-quartile (middle-
market) strategy
Most employers seek to
position themselves in this
quartile or higher.

6. Step 2#: Job Evaluation
An example of an employee compensation plan for salary levels is one based on a salary scale that
considers education, years of professional experience, credentials and qualifications such as job
competency and functional expertise, as well as increases based on step and grade promotions.
Basic principle: jobs that require more responsibilities and more qualifications and complex duties should
be paid more highly than jobs with lesser requirements
Different Job Evaluation Methods
Job vs. scale Job Classification Point Method
Job as job Parts
BASIS FOR A WHOLE OR FACTORS
COMPARISON (NONQUANTITATIVE) (QUANTITATIVE)
Job vs. job Job Ranking Factor Comparison
Job vs. scale Job Classification Point Method
SCOPE OF COMPARISON

7. Point Method
It's one of the JA's methods that Widely used and it's a quantitative job-to-predetermined standard
comparison technique that involves:
 Identifying several compensable factors, each with several degrees.
 Identifying the degree to which each compensable factors are present in the job.
 Awarding points for each degree of each factor.
 Calculating a total point value for the job by adding up the corresponding points for each factor
ears of experiences
Less than 2
years
2 to 5 years5 to 8 years8 to 11 years11 to 15 years15 to 20
years
+ 20 years
evel of education A B C D E F G
Minimum Education Ability to read & write 1 20 24 30
Completion of basic education (9 years of schooling)2 30 37 46 55
Completion of secondary education (12 years of
chooling)
3 38 46 55 65 75
Diploma of 2 years after secondary schooling 4 46 55 65 75 85 97 110
Bachelor degree in a discipline related to the job 5 55 65 75 85 97 110 125
Master degree or post graduates studies 6 65 75 85 97 110 125 140

8. Highest Level Supervised Workers & clerksSkilled & senior clerksOfficers & specialistsSupervisors & section headsLine managers Operation managers
A B C D E F
Number Supervised p f p f p f p f p f p f
1 to 3 13 6 4 7 5 9 6 11 8 15 10 20
4 to 7 24 8 5 9 6 11 8 14 9 18 12 24
8 to 12 35 10 6 12 7 14 9 17 11 22
13 to 19 46 12 8 15 9 18 11 22
20 to 29 58 16 10 20 12 24
MORE than 30 611 22 13 26
Highest level Contacted Same level Next higher level Middle management Top management
Purpose of Contacts A B C D
Routine contacts regarding the day to day work 1 10 13 15 17
Exchange of information 2 13 16 18 20
Take/ give information/ instructions 3 16 19 21 24
Present ideas, get approval, maintain cooperation 4 19 22 25 30
Coordinate activities 5 22 25 30 36
Negotiate/ convince others/ solve problems on major issues6 25 29 35 44
fects of Actions & DecisionsMinimum effect,
controllable
Limited & controllableSignificant within the work
area, but controllable
Considerable on one or
more function, may not
easy controlled
Heavy effect on one or more
function, could not be
controlled
Serious effect on the
company, not
controllable
Serious external effect o
the company.
upervision Received A B C D E F G
ose detailed check frequently
1
10 13 15 17 19 22 25
Worked checked in details when
nished
2 13 16 18 20 23 26 30
omplete review of basic work
ements
3 16 19 21 24 28 32 37
eview of main points with
espect with work procedures
4 19 22 25 30 35 40 46
eneral review of completed
ork with respect to policies5
22 25 30 36 43 50 57
eview of achievements with
espect to targets
6 25 29 35 44 53 62 72

9. Percentage of time spent in exerting the physical efforts
15% - 30% of the
job total time
31%- 60% of the
job total time
Over 60% of the job total
time
A B C
Little, including standing, walking, or
handing weights of 2- 8 kg.
1 2 6 10
Moderate, including pulling, pushing,
handling weights over 8 kg to 15 kg.
2 6 10 15
Significant, including bending, climbing,
handling weights over 15 kg.
3 10 15 23
Step 3#: Group Similar Jobs into Pay Grades
*Hay Group Compensation Report
2009 Egypt Pay & Benefits Report

10. Step 4#: Price Each Pay Grade Wage Curve
-Pricing Compensation for a company’s top executives usually consists of 4 elements:
1.Base pay: fixed salary, guaranteed bonuses
2.Short-term incentives: cash or stock bonuses
3.Long-term incentives: stock options
4.Executive benefits and perks: retirement plans, life insurance, and health insurance without a deductible
or coinsurance. managerial & Professional Jobs
 Competency-based
 Money and Motivation
Figure 1-1 Money and Motivation
Grade
Cut off Points
From To
1 75
2 76 85
3 86 95
4 96 110
5 111 125
6 126 140
7 141 170
8 171 200
9 201 230
10 231 260
11 261 290
12 291 320
Strategy
Performance
Incentive Pay

11. Job 1 2 3 4 5 Total grade Salary
Sales Director F5/110 G6/72 F2F/24 D6/44 C1/10 260 10 20000
Business Development Director F5/110 G6/72 F2F/24 D6/44 B1/6 256 10 20000
Operation Director F5/110 G6/72 E3F/22 D6/44 B1/6 254 10 20000
Business Developer Manager C6/85 G5/57 C2F/11 D6/44 B1/6 203 9 7500
Financial Manager C6/85 F6/53 C1F/9 D6/44 A1/2 193 8 7500
Accounting Manager D5/85 F6/53 C1F/9 D5/36 A1/2 185 8 7500
Sales Manager B5/65 F6/53 C2F/11 D4/30 B1/6 165 7 4000
Key Account Manager B5/65 C6/35 D3/24 C1/10 134 6 4000
Operation Manager A5/55 D5/36 C2F/11 D5/36 A1/2 140 6 5500
Warehouse Supervisor A5/55 C5/30 A1P/3 C3/21 C2/15 124 5 4500
Technical Office Engineer B5/65 C5/30 D4/30 B1/6 131 6 6000
Technical Account Manager B5/65 C4/25 D3/24 C2/15 129 6 3500
Office Manager A5/55 C2/18 A1F/6 D3/24 A1/2 105 4 3500
Back Office Assistant A5/55 C2/18 D3/24 A1/2 99 4 3500
Account Manager A5/55 B4/22 C3/21 C2/15 113 5 3000
Marketing specialist A5/55 C6/35 C4/25 A1/2 118 5 4000
Accountant Assistant A5/55 C3/21 C3/21 A1/2 100 4 4000
HR Specialist A5/55 C2/18 C3/21 A1/2 96 4 3500

12. If we take an example of how we go through all above to Price Each Pay Grade and establish market
competitive pay structure for a small company which follows cost leadership strategy and includes 23
employees and we should get the current salary of each grade to compare with market.
Shows the 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.
Shows the relationships between the value of the job as determined by one of the job evaluation methods
(e.g. points) and the current average pay rates for your grades (e.g. in $).
1. Find the average pay for each pay grade (since each pay grade consists of several jobs)
2. Plot the pay rates for each pay grade
3. Fit a line called a “wage line” through the points just plotted
4. Wages along the wage line are the target wages or salary rates for the jobs in each pay grade.
5. In this step, all grades are divided into three bands to include Stuff (from grade/Level 1 to 4), Management
(from grade/level 5 to 8), and Executives (from grade/ level 9 to 12).
Let's make it step by step together to Plotting a Wage Curve:
1- Open a new PowerPoint go to Insert then click on Chart, chose (XY) Scatter end this step with OK

13. 2- Insert on X Columns all the grades/Levels that you have in the first band and the current salary on Y
Columns. Now we have the Staff Plotting a Wage Curve.
3- Replicate this process for the Line managers and Executives
Staff
Line Managers
Executives
y = 300x + 2666.7
0
2000
4000
6000
0 1 2 3 4 5
Salaries
y = 1263.2x - 3052.6
0
5000
10000
0 2 4 6 8 10
Salaries
y = 12500x - 105000
0
10000
20000
30000
8.8 9 9.2 9.4 9.6 9.8 10 10.2
Salaries

14. Step 5#: Fine-tune pay rates
– Developing pay ranges
• Flexibility in meeting external job market rates
• Easier for employees to move into higher pay grades
• Allows for rewarding performance differences and seniority (based on years of service)
– Correcting out-of-line rates
• Raising underpaid jobs to the minimum of the rate range for their pay grade.
• Freezing rates or cutting pay rates for overpaid (“red circle”) jobs to maximum in the pay range for their
pay grade.
Midpoint

15. Allows for rewarding performance differences and seniority (based on years of service)
Step 6#: Correcting out-of-line rates
Raises, Bonuses and Incentives. Usually, the employer's performance management system is what drives
a compensation plan's salary increases. Employees receive annual increases based on performance
ranking and ratings. For example, an outstanding performance appraisal could result in a 5% salary
increase.
Sample employee bonus and incentive plans include cash incentives based on a percentage of the
employee's gross Salary or an employee's share based on a changeable pool of funds designated for
distribution to employees whose performance contributed to business success. Many executive bonuses
and incentives tied to the improvement of the bottom line or even increases in the value of shares for
publicly held companies.
* Raising underpaid jobs to the minimum of the rate range for their pay grade.
* Freezing rates or cutting pay rates for overpaid ("red circle") jobs to a maximum in
the pay range for their pay grade
Do not handle the mistake with another larger.
It's costly blunder to upgrade the jobs with (Red circles) positions to the maximum in the pay range to
maintain the same Salary.
According to the company's strategy (cost Leadership), and budget after comparing the current salaries
with the market, we put the competitive pay structure of the company.

16. Job Grade Current Salary Market salary
Sales Director 10 20000 20000
Business Development Director 10 20000 20000
Operation Director 10 20000 20000
Business Developer Manager 9 7500 15000
Financial Manager 8 7500 15000-20000
Accounting Manager 8 7500 10000
Sales Manager 7 4500 7000
Key Account Manager 6 7500 6000
Operation Manager 6 5000 7000
Warehouse Supervisor 5 4000 7000
Technical Office Engineer 6 5000 7000
Technical Account Manager 6 4000 6000
Office Manager 4 4500 5000
Back Office Assistant 4 5500 5000
Account Manager 5 2500 4000
Marketing specialist 5 4500 4500
Accountant Assistant 4 3500 4500
HR Specialist 4 6000 4500
Digital Marketing Specialist 4 4000 Part-time 3000
Truck Driver 4 3500 6000
Collector 3 3500 4000
Driver 2 4000 4000
Office-Boy 1 3500 3500
Incentive Pay Plans
-Main Incentives for Individual Employees
Incentives for professional employees
Professional employees are those whose work involves the application of learned knowledge to the
solution of the employer’s problems.
.
Possible incentives
 Bonuses, stock options and profit sharing
 Better vacations, more flexible work hours
 improved pension plans
 Equipment for home offices
 Recognition-based awards
Straight Commission
Sales Incentive Plans
Straight Salary
Salary and Commission Combinations