1. Establishing Strategic Pay Plans
Ch. 10

2. Basic Factors in Determining Pay Rates
Direct Financial Payments
Indirect Financial Payments
Employee Compensation

3. 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

4. Corporate Policies, Competitive Strategy, and Compensation
Aligned Reward Strategy
The employer’s basic task:
To create a bundle of rewards—a total reward package—that specifically elicits the employee behaviors that the firm needs to support and achieve its competitive strategy.
The HR or compensation manager along with top management creates pay policies that are consistent with the firm’s strategic aims.

5. Compensation Policy Issues
Pay for performance
Pay for seniority
The pay cycle
Salary increases and promotions
Overtime and shift pay
Probationary pay
Paid and unpaid leaves
Paid holidays
Salary compression
Geographic costs of living differences

6. Equity and Its Impact on Pay Rates
External Equity
Procedural Equity
Internal Equity
Individual Equity
Forms of Equity

7. 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

8. Establishing Pay Rates
Steps in Establishing Pay Rates 1
Conduct a salary survey of what other employers are paying for comparable jobs (to help ensure external equity). 3 2 4
Determine the worth of each job in your organization through job evaluation (to ensure internal equity). 5
Group similar jobs into pay grades.
Price each pay grade by using wave curves.
Fine-tune pay rates.

9. Step 1. The Wage Survey: Uses for Salary Surveys
The Salary Survey
To price benchmark jobs
To make decisions about benefits
Step 1. The Wage Survey: Uses for Salary Surveys
To market-price wages for jobs

10. Sources for Salary Surveys
Employer Self-Conducted Surveys
Government Agencies
Consulting Firms
Sources of Wage and Salary Information
Professional Associations
The Internet

11. Establishing Pay Rates (cont’d)
Skills
Effort
Responsibility
Working Conditions
Step 2. Job Evaluation: Identifying Compensable Factors

12. Competency-Based Pay Competencies
Demonstrable characteristics of a person, including knowledge, skills, and behaviors, that enable performance.
What is Competency-Based Pay?
Paying for the employee’s range, depth, and types of skills and knowledge, rather than for the job title he or she holds.

13. Competency-Based Pay (cont’d)
Support High-Performance Work Systems
Support Performance Management
Why Use Competency-Based Pay?
Support Strategic Aims