By Mark Liangco | BUS 381
Chapter 11 (Week 9) – Strategic Pay Plans
- An integrated package of all rewards (monetary and non-monetary, extrinsic and intrinsic) gained by
employees arising from their employment.
- The category included direct financial payments in the form of wages, salaries, incentives, commissions
- Includes indirect payments in the form of financial benefits like employer paid insurance and vacations.
- Relates to programs that help employees do their job more effectively such as flexible scheduling,
childcare etc (ch 13)
Performance and recognition:
- This category includes pay for performance and recognition programs.
Development and career opportunities:
- Focuses on planning for advancement and changes in responsibilities to best suit individual skills, talents
and desires. Tuition assistance, professional development, sabbaticals, coaching and mentoring services
all fit into this categorty,
Considerations in determining Pay
1) Legal considerations
- Labour standards, human rights, worker’s compensation, employment insurance.
- Unions and labour relations laws have also influences how pay plan are designs
- Wage rates, time off pay, income security, cost of living adjustments and pensions.
- Collective bargaining agreement.
3) Compensation policies
- Leader or follower in compensation.
4) Equity and its impact
- Must have internal and external equity.
- Internal – Pay within the organization is somewhat equal between same positions.
- External – Pay across organizations is somewhat equal between same positions.
Establishing Pay Rates:
1) Job Evaluation
- A systematic comparison to determine the relative worth of jobs within a firm.
- Purpose is to measure internal equity.
- Jobs that are essential to the organization or are commonly found in other organizations.
- Cashier, Entry-level Accountant, Secretary, Payroll Assistant.
- A fundamental compensable element of a job
- skill, effort, responsibility and working conditions.
- Identifying these factors plays a pivotal role in job evaluation.
- All jobs should be evaluated using the same factors.
Job evaluation committee By Mark Liangco | BUS 381
- A committee consisting of a number of employees that have a different perspective regarding the nature
of the job.
Method of evaluation
a) Job Classification method
- Evaluates jobs based on class and grades
- Which class does the job belong to base on subjective method
o Class – Group of jobs that are similar to each other in terms of responsibility
Secretaries of all the different managers.
o Grades – Group of jobs where it is similar in difficulty but otherwise different.
b) Point method
- The job evaluation method in which a number of compensable factors are identified, the degree tow which
each of those factors is present in a job is determined, and an overall point value is calculated.
- Quantitative method and legally defensible.
- Widely used in private sector
2) Wage / Salary Survey
- A survey aimed at determining prevailing wage rates.
- A good salary survey provides specific wage rates for comparable jobs.
- Format written questionnaire and surveys are the most comprehensive.
3) Combine the Job Evaluation and Salary Survey
- Assigning pay rates to each pay grades. It is usually achieved by a wage curve
o Wage curve
A graphic representation of relationship between value of the job and the average wage
paid for the job.
o Broad banding
Reducing the number of salary grades and ranges into just a few levels or “bands”. Each
of them then contains a relatively wide range of jobs and salary levels.
Used in flatter organization or organization to encourage employees to participate in
Pay for Knowledge
- Also known as competency based pay (For management and professional employees) and skill base pay
(for manufacturing employees).
- These plans pay employees based on the range, depth and types of knowledge that they are capable of
using rather than for the job that they currently have.
- should pay for knowledge, skills and abilities that directly lead to successful job performance (base pay)
also use pay-for-performance plans
Pay for executive and managerial jobs
5 Elements in compensation packages:
a) Salary Reduced emphasis
c) Short term incentives Increased emphasis
d) Long term incentives Increased emphasis
Pay for professional emplo