1. Establishing Strategic Pay Plans
Part 4 | Compensation
Chapter 11
Establishing Strategic Pay Plans
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2. After studying this chapter, you should be able to:
List the basic factors in determining pay rates.
Explain in detail how to establish pay rates.
Explain how to price managerial and professional jobs.
Discuss competency-based pay and other current trends in compensation.
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3. Basic Factors in Determining Pay Rates
Direct Financial Payments
Indirect Financial Payments
Employee Compensation
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4. Legal Considerations in Compensation
Employee Compensation
Equal Pay Act (1963)
Employee Retirement Income Security Act (ERISA)
Age Discrimination in Employment Act
Americans with Disabilities Act
Davis-Bacon Act (1931)
Walsh-Healey Public Contract Act (1936)
Title VII of the Civil Rights Act
Fair Labor Standards Act (1938)
The Family and Medical Leave Act
The Social Security Act of 1935 (as amended)
Workers’ Compensation
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5. Equity and Its Impact on Pay Rates
External Equity
Procedural Equity
Internal Equity
Individual Equity
Forms of Equity
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6. Addressing Equity Issues
Salary Surveys
Job Analysis and Job Evaluation
Performance Appraisal and Incentive Pay
Communications, Grievance Mechanisms, and Employees’ Participation
Methods to Address Equity Issues
© 2008 Prentice Hall, Inc. All rights reserved.

7. The Salary Survey Step 1. The Wage Survey: Uses for Salary Surveys
To price benchmark jobs
To make decisions about benefits
Step 1. The Wage Survey: Uses for Salary Surveys
To market-price wages for jobs
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8. Sources for Salary Surveys
Employer Self-Conducted Surveys
Government Agencies
Consulting Firms
Sources of Wage and Salary Information
Professional Associations
The Internet
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9. Establishing Pay Rates (cont’d)
Skills
Effort
Responsibility
Working Conditions
Step 2. Job Evaluation: Identifying Compensable Factors
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10. Establishing Pay Rates (cont’d)
Ranking
Factor Comparison
Job Classification
Methods for Evaluating Jobs
Point Method
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11. Establishing Pay Rates (cont’d)
Point Method
Ranking Method
Classification Methods
Step 3. Group Similar Jobs into Pay Grades
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12. Pricing Managerial and Professional Jobs
Base Pay
Executive Benefits and Perks
Short-term Incentives
Long-Term Incentives
Compensating Executives and Managers
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13. Competency-Based Pay (cont’d)
Support High-Performance Work Systems
Support Performance Management
Why Use Competency-Based Pay?
Support Strategic Aims
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14. Other Compensation Trends
Broadbanding
Consolidating salary grades and ranges into just a few wide levels or “bands,” each of which contains a relatively wide range of jobs and salary levels.
Pro and Cons
More flexibility in assigning workers to different job grades.
Provides support for flatter hierarchies and teams.
Promotes skills learning and mobility.
Lack of permanence in job responsibilities can be unsettling to new employees.
© 2008 Prentice Hall, Inc. All rights reserved.

15. K E Y T E R M S employee compensation direct financial payments
indirect financial payments
Davis-Bacon Act (1931)
Walsh-Healey Public Contract Act (1936)
Title VII of the 1964 Civil Rights Act
Fair Labor Standards Act (1938)
Equal Pay Act (1963)
Employee Retirement Income Security Act (ERISA)
salary compression
salary survey
benchmark job
job evaluation
compensable factor
ranking method
job classification (or grading) method
classes
grades
grade definition
point method
factor comparison method
pay grade
wage curve
pay ranges
competency-based pay
competencies
broadbanding
comparable worth
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16. Quantitative Job Evaluation Methods
Part 4 | Compensation
Appendix for Chapter 11
Quantitative Job Evaluation Methods
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17. Quantitative Job Evaluation Methods
Factor Comparison Job Evaluation Method
Step 1. Obtain job information
Step 2. Select key benchmark jobs
Step 3. Rank key jobs by factor
Step 4. Distribute wage rates by factors
Step 5. Rank key jobs according to wages assigned to each factor
Step 6. Compare the two sets of rankings to screen out unusable key jobs
Step 7. Construct the job-comparison scale
Step 8. Use the job-comparison scale
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