1. Job Evaluation & Base Wage Systems

2. Base Wage and Salaries Largest portion of total compensation.
Foundation for employees’ perceptions of fairness of pay system.

3. Base Wage and Salary System
Primary Objective: establish structure for equitable compensation of employees
Systems establish pay ranges for jobs based on relative worth of job to organization.
Pay range = range of pay, with minimum and maximum.
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4. Establishing Pay Ranges
2 Basic Phases:
Determine relative worth of different jobs to the organization (Internal Equity).
Pricing Different jobs (External equity)
Job Evaluation: Determine relative job worth.
Wage Surveys: Methods for pricing jobs.
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5. Conventional Job Evaluation
Job Evaluation: Determination of value of job in relation to other jobs in organization.
General idea of Job Evaluation:
Enumerate requirements of a job
Job’s contribution to organization
Classify it according to its importance
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6. Conventional Job Evaluation
Gather Information on jobs being evaluated
Identify factor(s):
Knowledge
Responsibility
Working Conditions
Develop and implement Plan
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7. Conventional Job Evaluation
4 Basic Methods:
Job Ranking
Job Classification
Point Comparison
Factor Comparison
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8. Job Ranking Method of Job Evaluation
Ranks jobs in order of their difficulty from simplest to most complex.
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9. Job Classification Method (Job Grading)
Determines relative worth of a job by comparing it to a predetermined scale of classes (or grades) of jobs.
Methods is simple, but not always precise, since it evaluates the job as a whole.
U.S. government has used job classification method to evaluate all civil service jobs.
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10. Point Method
Quantitative point scale used to evaluate jobs on a factor-by-factor basis.
Advantages?
Relatively Simple
Reasonably Objective
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11. Point Method: Selection of Key Jobs
Key (Benchmark) jobs represent jobs common throughout the industry or in a locale.
Key jobs represent entire pay structure and major kinds of work being evaluated.
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12. Point Method: Selecting Compensable Factors
Compensable Factors = Job Characteristics that are important to the organization -- willing to pay for them.
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13. Point Method: Selecting Compensable Factors
Job Subfactors: Detailed breakdown of one single compensable factor of a job:
Describes factor in more detail.
Degree Statements (Profile Statements): Further break down job subfactors.
Describe specific requirements of each subfactor.
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14. Point Method: Assigning Weights to Factors
Weights are assigned to each factor, subfactor, and degree to reflect their relative importance.
Weights are assigned on basis of maximum number of points for any job.
Points are assigned to compensable factors, subfactors, and degrees based on their relative importance.
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15. Factor Comparison Method
Uses monetary scale for evaluating jobs on a factor-by-factor basis:
Key (Benchmark) jobs are selected.
Pay Rates of key jobs should be viewed as reasonable and fair to all making evaluations.
Compensable factors then identified.
Does not break down compensable factors into subfactors and degrees.
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16. Factor Comparison Method
Each compensable factor is ranked according to its importance in each key job:
Assign rank to every key job on one factor at a time rather than ranking one job at a time on all factors.
After each key job is ranked on factor-by- factor basis:
Allocate wage or salary for each job according to ranking of factors.
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17. Comparison of Job Evaluation Methods
Point and Factor Comparison methods: Commonly referred to as quantitative plans.
Job Classification and Ranking methods: Called qualitative or non-quantitative techniques, compare whole jobs.
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18. Wage and Salary Surveys
Survey selected organizations within a geographical area or industry to provide comparison information on:
Policies
Practices
Methods of Payment
Provide knowledge of market and ensure external equity.
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19. Conducting a Wage/Salary Survey
Conduct your own survey, or Purchase/ access a wage/salary survey from another organization?
“Key (Benchmark) jobs” are normally ones surveyed.
Rule of Thumb: minimum of 30% of jobs in an organization should be surveyed.
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20. Conducting a Wage/Salary Survey
Geographic area, industry type, or combination of the two may be surveyed.
Organizations surveyed usually competitors or companies employing similar types of employees.
3 traditional methods of surveying:
Personal or Telephone Interviews
Mailed Questionnaires
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21. Purchasing/Accessing Wage/Salary Surveys
Consulting firms sell compensation surveys; usually relatively Expensive.
Sources for relatively inexpensive wage/salary surveys:
Bureau of Labor Statistics (BLS), U.S. Dept. of Labor
State and local Governments
Trade Associations
Chambers of Commerce
Internet
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22. Avoiding Problems in Wage and Salary Surveys
Assess participating companies for comparability.
Compare more than base wage or salary: Total compensation package should be considered.
Consider variations in job descriptions.
Correlate survey data with adjustment periods.
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23. Comparable Worth Theory
Holds that every job should be compensated based on its value to employer and society:
Under this theory, wage surveys have no value.
Factors disregarded in this theory:
Availability of qualified employees.
Wage rates paid by other employers.
Ninth Circuit Court of Appeals ruling
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24. Wage and Salary Curves
Graphical depiction of relationship between relative worth of jobs and their wage rates:
Wage Curve plots:
Jobs in ascending order of difficulty along X-axis and wage rate along Y-axis.
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25. Wage and Salary Curves Points on Graph not following trend indicate:
Wage Rate for job is too low or too high, or
Job has been inaccurately evaluated
Green-circle jobs: Underpaid jobs
Red-circle jobs: Wages are overly high
Discrepancies can be remedied with above- or below-average pay increases for these jobs.
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26. Pay Grades
Pay Grades – Classes or grades of jobs grouped on basis of worth to organization:
Point method: Classes normally defined within a certain point spread.
Factor comparison method: Money spread can be used for defining grades.
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27. Pay Ranges
Pay Range – Minimum and maximum pay, determined for each pay grade.
2 Approaches for establishing pay grades & ranges:
Large number of grades with identical rates of pay for all jobs within grade.
Small number of grades with relatively wide dollar range for each grade.
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28. Pay Grades and Ranges On reaching top of range for a given grade:
Employee can increase pay only by moving to a higher grade.
Not unusual for ranges of adjacent pay grades to overlap:
Outstanding performer in a lower grade may earn higher salary than below-average performer in higher grade.
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29. Base Wage/Salary Structure
Organization’s compensation system should produce base wage/salary structure that is both internally and externally equitable.
Job Evaluation process: should ensure internal equity
Wage Surveys: to ensure external equity
Performance appraisal used to position individual employee within established range.
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30. Newer Approaches to Base Pay
Broadbanding: Created to provide additional flexibility to conventional base pay systems
Skill-based pay and competency-based pay: Systems based on employee capabilities.
Another approach: Based almost exclusively on market-pricing of jobs.
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31. Broadbanding
Collapsing job clusters or tiers of positions into a few wide bands.
Bands usually have minimum and maximum dollar amounts that overlap.
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32. Broadbanding
Advantages?
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33. Skill-Based Pay (Knowledge-Based Pay)
Compensate employees for skills they bring to the job:
To develop more versatile employees.
Systems pay employees for:
Range of knowledge
Number of business-related skills mastered
Level of those skills or knowledge
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34. Skill-Based Pay (Knowledge-Based Pay)
Typically, companies hire employees at below-market rates:
As employees gain skills and knowledge, levels of base pay increase.
Employees expected to learn from 5 to 10 skills over a two- to five-year period.
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35. Skill-Based Pay (Knowledge-Based Pay)
Most skill-based pay systems:
Focus on non-exempt employees in manufacturing environments.
Move is to extend skills-based pay to professionals and managers:
Called Competency-based pay
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36. Market-Based Pay
Focus on external equity and operates without traditional pay grades and ranges.
Believes market reality can fairly price jobs
Uses wage/salary surveys
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