Chapter 14 Compensation Control & Administration Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida Compensation Decision Making Bergmann & Scarpello 4th edition

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Budget Controls: Forecasting Need Top-Down Forecasting Bottom-up Forecasting

Top-Down Forecasting Normally done by comptroller’s office Projections of revenues & costs are generated & financial revenues allocated based on careful analysis of the past & review of expected activities for the coming year Does not consider external changes such as job redesign or introduction of technologies Does not factor in needs of specific organizational units or diversity of skills Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

Top-Down Forecasting Normally done by comptroller’s office Projections of revenues & costs are generated & financial revenues allocated based on careful analysis of the past & review of expected activities for the coming year Does not consider external changes such as job redesign or introduction of technologies Does not factor in needs of specific organizational units or diversity of skills Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

Bottom-up Forecasting Supervisory pay adjustment recommendations are used to obtain expected changes in wages and salaries for the next year The summation of all supervisor recommendations is the proposed pay adjustment budget Pay adjustment budgets can be determined from the pool of money allocated for the % level rise Normally based on further analysis of Current year’s spendingCurrent year’s spending Best estimates for next year’s spendingBest estimates for next year’s spending Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Budget Controls: Analysis of Current Pay Plan’s Results Focuses on examining the way money was used in the past year to project the amount that will be needed for the next year

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Pay Plan Design Processes & Procedures Analysis of Pay Level Policy-Practice Congruence Analysis of People Movement within and across Pay Structures

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Compa-ratio Compa-ratio is an index used –to examine whether managers comply with the organization’s pay level policy –to determine how the present pay ranges are being used Analysis of Pay Level Policy-Practice Congruence

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Standard compa-ratio formula: Analysis of Pay Level Policy-Practice Congruence Compa-ratio = Average Rates Actually Paid Midpoint of the Range

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Benefits of compa-ratio analyses Analysis of Pay Level Policy-Practice Congruence Help control labor costs Assess range utilization Assess managers’ compliance with Equal Pay Act & other employment legislation

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Controls imbedded into pay techniques Performance of task-oriented job analysis (determine who does what, when, why, how, & under what conditions) Managerial approvals for implementing new jobs & their job descriptions Use of same compensable factors & weights when evaluating jobs that will be paid under the same pay structure Analysis of People Movement within and across Pay Structures

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Controls imbedded into pay techniques, cont. Use of multiple pay surveys to identify the going rate of pay, hours of work, & other pay treatments for employees on benchmark jobs Use of appropriately overlapping pay ranges Use of same rules, criteria, or standards for allocating pay raises & pay awards to individuals on given jobs Analysis of People Movement within and across Pay Structures

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Employee Positions across pay structures Analysis of People Movement within and across Pay Structures When jobs are linked in a career progression ladder but are paid under different pay structures, between-job wage compression can occur Quality Control Technician Sales Representative Low salary $25,000 High salary $30,000

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monitoring the Pay System- Employee Behavior Relationship Pay-turnover relationship –Exit interviews –Turnover indices Pay-performance relationship Pay-organizational citizenship relationship Pay system-employee opinion relationship