1. Building Internally Consistent Compensation Systems

2. Example of Internally Consistent Compensation Structure
$60,000
Manager of Benefits
($58,000)
There is a positive relationship between job worth and salaries!
$50,000
$40,000
Benefits Counselor III
($40,000)
Average Annual Salary
$30,000
Benefits Counselor II
($26,000)
$20,000
Benefits Counselor I
($20,000)
Job Worth (skill, effort, responsibility, working conditions)

3. Example of Internally IN-Consistent Compensation Structure
$60,000
There is no relationship between job worth and salaries!
$50,000
Benefits Counselor II
($45,000)
Manager of Benefits
($39,000)
$40,000
Average Annual Salary
Benefits Counselor I
($32,000)
$30,000
Benefits Counselor III
($28,000)
$20,000
Job Worth (skill, effort, responsibility, working conditions)

4. Figure 7-1 Internally Consistent Compensation Structure (2 of 3)
Benefits Counselor I
Provides basic counseling services to employees and assistance to higher-level personnel in more-complex benefits activities. Works under general supervision of higher-level counselors or other personnel.
Benefits Counselor II
Provides skilled counseling services to employees concerning specialized benefits programs or complex areas of other programs. Also completes special projects or carries out assigned phases of the benefits counseling service operations. Works under general supervision from Benefits Counselor IIIs or other personnel.

5. Figure 7-1 Internally Consistent Compensation Structure (3 of 3)
Benefits Counselor III
Coordinates the daily activities of an employee benefits counseling service and supervises its staff. Works under direction from higher-level personnel.
Manager of Benefits
Responsible for managing the entire benefits function from evaluating benefits programs to ensuring that Benefits Counselors are adequately trained. Reports to the Director of Compensation and Benefits.

6. Aspects of Job Evaluation
Job Evaluation is: Assumption
A measure of job Content has an innate value outside of external market. content
A measure of relative Relevant groups can reach consensus on relative value value.
Link with external Job worth cannot be specified without external market market information.
Measurement device Honing instruments will provide objective measures.
Negotiation Puts face of rationality to a social / political process.
Establishes rules of the game.
Invites participation.

7. Figure 7-1 Phases of the Job Evaluation Process
Choose & train the job evaluation committee.
Select benchmark jobs.
Choose compensable factors.
Define factor degrees.
Determine point values for each factor.
Validate factor degrees and point values.
Evaluate all jobs.

8. Table 7-10 Characteristics of Benchmark Jobs
The contents are well known, relatively stable over time, and agreed upon by the employees involved.
The jobs are common across a number of different employers.
The jobs represent the entire range of jobs that are being evaluated within a company.
The jobs are generally accepted in the labor market for the purposes of setting pay levels.
Source: G.T. Milkovich and J.M. Newman, Compensation 5th ed. (Homewood, IL: Richard D. Irwin, 1996).

9. Table 7-13 Federal Government Factor Evaluation System (1 of 2)
1. Knowledge required by the position
a. Nature or kind of knowledge and skills needed
b. How the skills and knowledge are used in doing the work
2. Supervisory controls
a. How the work is assigned
b. The employee’s responsibility for carrying out the work
c. How the work is reviewed
3. Guidelines
a. The nature of guidelines for performing the work
b. The judgment needed to apply the guidelines or develop new guides

10. Compensable Factors - A Definition (1 of 2)
Compensable factors are paid-for, measurable qualities, features, requirements, or constructs that are common to many different kinds of jobs.
These factors are qualities intrinsic to the job and must be addressed in an acceptable manner if the job is to be performed satisfactorily.

11. Compensable Factors - A Definition (2 of 2)
In addition to being quantifiable, compensable factors should be relatively easy to describe and document.
Those involved in using compensable factors to measure job worth should consistently arrive at similar results.

12. Universal Compensable Factors
Skill: the experience, training, ability, and education required to perform a job under consideration - not with the skills an employee may possess

13. Universal Factor - Skill
Technical Know-how
Specialized Knowledge
Organizational Awareness
Educational Levels
Specialized Training
Years of Experience Required
Interpersonal Skills
Degree of Supervisory Skills

14. Universal Compensable Factors
Effort: the measurement of the physical or mental exertion needed for performance of a job

15. Universal Factor - Effort
Diversity of Tasks
Complexity of Tasks
Creativity of Thinking
Analytical Problem Solving
Physical Application of Skills
Degree of Assistance Available

16. Universal Compensable Factors
Responsibility: the extent to which an employer depends on the employee to perform the job as expected, with emphasis on the importance of job obligation.

17. Universal Factor - Responsibility
Decision-making Authority
Scope of the organization under control
Scope of the organization impacted
Degree of integration of work with others
Impact of failure or risk of job
Ability to perform tasks without supervision

18. Universal Compensable Factors
Working Conditions:
hazards
physical surroundings
of the job.

19. Universal Factor - Working Conditions
Potential Hazards Inherent in Job
Degree of Danger Which Can be Exposed to Others
Impact of Specialized Motor or Concentration Skills
Degree of Discomfort, Exposure, or Dirtiness in Doing Job

20. Table 7-13 Federal Government Factor Evaluation System (2 of 2)
4. Complexity
a. The nature of the assignment
b. The difficulty in identifying what needs to be done
c. The difficulty and originality involved in performing the work
5. Scope and effect
a. The purpose of the work
b. The impact of the work product or service
6. Personal contacts
7. Purpose of contacts
8. Physical demands
9. Work environment
Source: US Civil Service Commission, Instructions for the factor evaluation system ( Washington, D.C.: US Government Printing Office, 1977).

21. Example of pay structure
$80
Job title
Points
Salary
Computer Programmer
240
$60k
Computer Service
180
$30k
Systems Analyst
330
$70k
Computer Operator
210
$37k
Data Entry Clerk
150
$33k
$40
Salary
200
400
Points