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Pay_Structure_Internal_Equity_with_Case_Studies.pptx
- 1. Pay Structure andInternal Equity Alignment • Job Value Approaches • Good Pay Structures
- 2. Learning Objectives • Explaininternal equity in pay systems • Identify approaches to determining job value • Describe characteristics of a good pay structure • Analyze the link between alignment, motivation, and performance
- 3. Alignment & InternalEquity • Alignment: Pay system supports strategy, workflow, and culture • Internal Equity: Fairness of pay relationships among jobs • Employees compare pay to coworkers → affects motivation and retention
- 4. Dimensions of InternalAlignment • Work content: Skills, responsibilities, effort, conditions • Value to organization: Contribution to goals • External market alignment: Consistency with market rates • Employee perceptions: Fairness and transparency matter
- 5. Approaches to JobValue • Job Ranking – simple, subjective • Job Classification – group into grades • Point-Factor Method – systematic, factor scoring • Factor Comparison – rare, complex
- 6. Job Evaluation Example(Point System) • Factors: Education/skills (30), Responsibility (40), Effort (20), Conditions (10) • Total Score → Job Hierarchy → Pay Grade Assignment
- 7. Characteristics of aGood Pay Structure • Equitable: Perceived fairness internally • Competitive: Aligns with labor market • Efficient: Supports objectives & controls costs • Clear & Transparent: Easy to understand • Flexible: Adapts to change • Legally Compliant: Meets regulations
- 8. Benefits of aWell-Aligned Pay Structure • Attracts and retains talent • Motivates through fairness and transparency • Enhances trust in management • Reduces turnover and conflict • Supports performance and culture
- 9. Potential Problems inMisaligned Structures • Perceived unfairness → demotivation, conflict • Pay compression → little role difference • Overemphasis on external equity → resentment • Rigid structures → hinder adaptability
- 10. Case Study /Discussion • Scenario: Accountant (5 yrs) earns less than HR Officer (3 yrs) • Is this internally equitable? Why or why not? • Which job evaluation method could resolve this issue?
- 11. Summary • Alignment =fairness + strategy fit • Job value approaches: ranking, classification, point-factor, factor comparison • Good pay structure = equitable, competitive, efficient, transparent, flexible, legal • Impact: motivation, retention, success
- 12. Further Reading • Milkovich,G. & Newman, J. (2020). Compensation • Armstrong, M. (2021). Armstrong’s Handbook of Reward Management • ILO Guidelines on Wage Structures
- 13. Solved Case Study1 • Case: Two engineers: Junior Engineer earns close to Senior Engineer due to market pressure. Senior Engineer feels unfairly treated. • Solution: Problem: Pay compression between junior and senior roles. • Solution: Solution: Conduct job evaluation → assign higher weight to senior role responsibilities. • Solution: Introduce broader pay grades to reflect career progression. • Solution: Communicate rationale to employees to maintain trust.
- 14. Solved Case Study2 • Case: Customer Service Representative (CSR) and IT Support earn the same pay. CSR jobs have higher turnover due to workload and stress. • Solution: Problem: Internal inequity due to different job demands. • Solution: Solution: Apply point-factor method → CSR jobs score higher on effort and working conditions. • Solution: Adjust pay structure to reflect additional stress factors. • Solution: Introduce retention incentives for high-turnover roles.
- 15. Solved Case Study3 • Case: In a hospital, nurses complain that administrative staff with fewer qualifications earn more. • Solution: Problem: Misalignment between qualifications, skills, and pay. • Solution: Solution: Review compensable factors (skills, responsibility, effort). • Solution: Reclassify jobs using job classification method. • Solution: Adjust pay to reward skill-intensive, patient-care roles appropriately.