1. Building Pay Structures That Recognize Individual Contribution
Chapter 9

2. Constructing a Pay Structure
Step 1: Deciding in the number of pay structures
Exempt vs non-exempt; job family; geography
Step 2: Determining the market pay line
Step 3: Defining pay grades
Step 4: Calculating pay ranges for each pay grade
Step 5: Evaluating the results

3. Step 2: Market Pay Line Pay Structure for Clerk Jobs (1 of 5)
26,000
Market Pay Line
24,000
21,000
Annual Salary ($)
18,000
15,000
12,000
250
Clerk I
500
Clerk II
750
Clerk III
1,200
Chief Clerk
Job Evaluation Points

4. Exhibit 9-1 Pay Structure for Clerk Jobs (2 of 5)
Clerk I
Employees receive training in basic office support procedures, the operation of office equipment, and the specific activities of the unit. tasks assigned are simple and repetitive in nature and are performed in accordance with explicit instructions and clearly established guidelines. Sample duties include: Files materials in established alphabetical order and prepared new file folders and affixes labels. Clerk Is must possess a high school diploma or equivalent.

5. Exhibit 9-1 Pay Structure for Clerk Jobs (3 of 5)
Clerk II
Employees work under general supervision in support of an office. They perform routine office support tasks that require a knowledge of standard office procedures and the ability to operate a variety of office equipment. Sample duties include: Prepares simple factual statements or reports involving computations such as totals or subtotals and composes memos requesting or transmitting factual information. Clerk IIs must possess a high school diploma or equivalent and one year work experience performing simple clerical tasks.

6. Exhibit 9-1 Pay Structure for Clerk Jobs (4 of 5)
Clerk III
Employees work under general supervision in support of an office. They perform office support tasks requiring knowledge of general office and departmental procedures and methods and ability to operate a variety of office equipment. Sample duties include: Reconciles discrepancies between unit records and those of other departments and assigns and reviews work performed by Clerks I and II. Clerk IIIs must possess a high school diploma or equivalent, two years work experience performing moderately complex clerical tasks, and completed coursework (five in all) in such related topics as word processing and basic accounting principles.

7. Exhibit 9-1 Pay Structure for Clerk Jobs (5 of 5)
Chief Clerk
Employees work under direction in support of an office. They perform a wide variety of office support tasks that require the use of judgment and initiative. A knowledge of the organization, programs, practices, and procedures of the unit is central to the performance of the duties. Chief clerks must possess a high school diploma or equivalent, four years work experience performing moderately difficult clerical tasks, and an associate’s degree in office management.

8. Step 3: Defining Pay Grades Pay Grade Definitions
26,000
Market Pay Line
24,000
21,000
18,000
Annual Salary ($)
15,000
651-1,150
1,151-2,000
12,000
Messenger (200)
Mail Clerk I (220)
Clerk I (250)
Recep. (300)
Mail Clerk II (350)
Clerk II (500)
Sec.I (650)
Mail Clerk III (675)
Clerk III (750)
Sec. II (1,000)
Mailroom
Super (1,175)
Chief Clerk (1,200)
Exec. Sec. (1,900)
Job Evaluation Points

9. Exhibit 9-3 Pay Range Definitions
26,000
24,000
Maximum
21,000
18,000
Midpoint
Annual Salary ($)
Minimum
15,000
651-1,150
1,151-2,000
12,000
Messenger (200)
Mail Clerk I (220)
Clerk I (250)
Recep. (300)
Mail Clerk II (350)
Clerk II (500)
Sec.I (650)
Mail Clerk III (675)
Clerk III (750)
Sec. II (1,000)
Mailroom
Super (1,175)
Chief Clerk (1,200)
Exec. Sec. (1,900)
Job Evaluation Points

10. Designing Merit Pay Systems
Merit increase amounts
Diminishing marginal returns, just-meaningful differences (COLA, recognition); increase as substantive (equity theory)
Timing
Common review date, anniversary date
Recurring vs. nonrecurring merit pay increases
Present level of base pay
Rewarding performance: The merit pay grid
Performance and position in range

11. Exhibit 9-7 Merit Pay Grid
Performance Rating
Above
Average
Below
Average
Excellent
Average
Poor Q3
$60,000
$55,000
$50,000 7% 5% 3% 0% 0% Q2
$45,000
$40,000
$35,000 9% 7% 6% 2% 0%
Current Annual Salary Q1
$30,000
$25,000
$20,000
12%
10% 8% 4% 0%

12. Merit Pay Grid Higher Pay for Performance
Lo%
Hi%
Position in Range
High %
Low %
Percent increase already allocated: 6.3%

13. Sales Force as a Special Group
High initiative needed, customer focus, feedback to company.
Extended periods without supervision. Need to stay motivated regardless.
Incentives when willingness to work hard can make the difference between success and failure 7

14. Designing Sales Incentive Compensation Plans
Alternative sales compensation plans
Salary only; salary-plus-bonus plans; salary-plus commission; commission-plus-draw; commission-only.
Determining fixed pay and the compensation mix
Influence of salesperson on buying decision
Competitive pay standards
Amount of nonsales activities
Noncash incentives

15. Designing Pay-for-Knowledge Programs
Establishing skill blocks
Transition matters
Skills assessment; Aligning pay with knowledge structure; access to training
Training and certification
In-house or outsourcing training
Expertise, timeliness; size of employee population to be trained; sensitivity or proprietary nature
Certification and recertification

16. Pay Structure Variations
Broadbanding
Advantages and limitations
Two-tier pay structures

17. Job Worth (based on job evaluation points)
Exhibit 9-9 Broadbanding Structure and Its Relationship to Traditional Pay Grades and Ranges
Grade E
Grade D
Annual Salary
Grade C
Grade B
Grade A
Band A
Band B
Job Worth (based on job evaluation points)

18. Exhibit 9-10 Two-Tier Wage Structure
The following pay rates apply to the 1998 calendar year. Employees hired on or after 1/1/98 will be paid according to Schedule A below. Employees hired after 1/1/98 will be paid according to Schedule B below.
SCHEDULE A
HOURLY
PAY RATE
COST-OF-LIVING
ADJUSTMENT
TOTAL HOURLY PAY RATE
JOB CLASSICATION
Shop floor laborers
Assemblers
Carpenters
Plumbers
$12.10
$14.05
$16.50
$16.90
$1.36
$13.46
$15.41
$17.86
$18.26
SCHEDULE B
HOURLY
PAY RATE
COST-OF-LIVING
ADJUSTMENT
TOTAL HOURLY PAY RATE
JOB CLASSIFICATION
Shop floor laborers
Assemblers
Carpenters
Plumbers
$14.10
$16.05
$18.50
$18.90
$1.36
$15.46
$17.41
$19.86
$20.26