11-1

Establishing Strategic

Pay Plans 11

11-2

Learning Objectives

1. List the basic factors determining

pay rates.

2. Define and give an example of how

to conduct a job evaluation.

3. Explain in detail how to establish a

market-competitive pay plan.

11-3

Learning Objectives

4. Explain how to price managerial

and professional jobs.

5. Explain the difference between

competency-based and traditional

pay plans.

6. List and explain six important trends

in compensation management.

11-4

List the basic factors

determining pay rates.

11-5

Basic Factors in

Determining Pay Rates

• Aligning total rewards with strategy

• Equity and its impact on pay rates

• Equity theory of motivation

• Addressing equity issues

11-6

Legal Considerations in

Compensation

• Fair Labor Standards Act (1938)

• Exempt/nonexempt

• Equal Pay Act (1963)

• Employee Retirement Income

Security Act (1974)

• Other legislation

11-7

Other Factors

• Union influences on compensation

decisions

• Pay policies

• Geography

11-8

Review

• Alignment with strategy

• Equity – external, internal

• Legal Considerations

• Union influences

• Pay policies

• Geography

11-9

Define and give an example

of how to conduct

a job evaluation.

11-10

Job Evaluation Methods

• Compensable

factors

• Preparing for the

job evaluation

11-11

Job Evaluation Methods:

Ranking

1. Obtain job information

2. Select and group jobs

3. Select compensable factors

4. Rank jobs

5. Combine ratings

11-12

Job Evaluation Methods

• Job classification

• Point method

o “Packaged” point

plans

• Computerized job

evaluations

11-13

Review

• Compensable factors

• Preparation

• Ranking

• Classification

• Point method

• Computer-based

11-14

Explain in detail how to

establish a market-

competitive pay plan.

11-15

How to Create a Market-

Competitive Pay Plan

• Choose benchmark jobs

• Select compensable factors

• Assign weights

• Convert percentages to points

• Define each factor’s degrees

• Determine degrees and assign points for job factors

11-16

How to Create a Market-

Competitive Pay Plan

• Review job descriptions and

specifications

• Evaluate the jobs

oWhat is a market competitive pay plan?

oWhat are wage curves?

11-17

How to Create a Market-

Competitive Pay Plan

• Draw current (internal) wage curve

• Conduct market analysis: salary

surveys

oCommercial, professional, and

government

• Using internet to do compensation

surveys

11-18

How to Create a Market-

Competitive Pay Plan

• Draw market (external) wage curve

• Compare and adjust

• Develop pay grades

• Establish rate ranges

• Address remaining jobs

• Correct out-of-line rates

11-19

Review

11-20

Explain how to price

managerial and professional

jobs.

11-21

Pricing Managerial and

Professional Jobs

• Compensating executives and managers

• What determines executive pay?

oElements of executive pay

oManagerial job evaluation

• Compensating professional employees

11-22

Review

• Executives

• Professionals

• Pay

11-23

Explain the difference

between competency-based

and traditional pay plans.

11-24

Contemporary Topics in

Compensation

• Competency-based

pay

• What is it?

• Why use it?

• In practice

• The bottom line

11-25

Review

11-26

List and explain six important

trends in compensation

management.

11-27

Trends

• Broadbanding

• Actively managing

• Comparable worth

oThe pay gap

• Board oversight

• Total rewards and tomorrow’s pay programs

11-28

Review

• Broadbanding

• Management

• Worth

• Boards

• Tomorrow