1. Compensation System Development
Chapter Eleven
Compensation System Development

2. Chapter Outline
Employee Satisfaction and Motivation Issues in Compensation Design
Establishing Internal Equity: Job Evaluation Methods
Establishing External Equity
Establishing Individual Equity
Administering Compensation Systems
The Issue of Comparable Worth
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3. Figure 11.1 Components of the Compensation System
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4. Employee Satisfaction and Motivation Issues in Compensation Design
Equity Theory
Satisfaction with Pay
Designing Equitable Compensation Systems
Internal Equity
External Equity
Individual Equity
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5. Types of Equity
Internal Equity: Relationship among jobs within a single organization
External Equity: Comparisons of similar jobs in different organizations
Individual Equity: Comparisons among individuals in the same job within the same organization
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6. Establishing Internal Equity: Job Evaluation Methods
Job Ranking
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7. Establishing Internal Equity: Job Evaluation Methods (cont’d)
Job Grading or Classification
Point Method
Compensable Factors
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8. Table 11.4 A Typical Point Plan
Source: Richard Henderson, Compensation Management: Rewarding Performance, 5th ed., © 1989, p Adapted by permission of Prentice-Hall, Inc., Englewood Cliffs, New Jersey.
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9. Establishing External Equity
Wage and Salary Surveys
Identifying Key Jobs
Selecting Organizations to Survey
Collecting Data
Self-Surveys
Online Surveys
Government Surveys
Interpreting the Data
Pay Level Policy
Matching the Competition
Adapting a Lead Policy
Following a Lag Approach
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10. Establishing Individual Equity
Designing Pay Ranges
Establishing Pay Ranges
Wage Ranges
Broadbanding
Above- and Below-Range Employees
Setting Individual Pay
Seniority
Merit Pay
Skill Based Pay
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11. Administering Compensation Systems
Pay Secrecy
Employee Participation
Wage Compression
Impact of Inflation
Wage Concessions
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12. The Issue of Comparable Worth
The Earnings Gap
Legal and Judicial Developments
Comparable Worth and Job Evaluation
Alternatives
Prospects for the Future
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13. Review
Employee Satisfaction and Motivation Issues in Compensation Design
Establishing Internal Equity: Job Evaluation Methods
Establishing External Equity
Establishing Individual Equity
The Issue of Comparable Worth
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