Establishing Strategic
Pay Plans
1
1
Learning Objectives
1. List the basic factors determining
pay rates.
2. Define and give an example of how
to conduct a job evaluation.
Learning Objectives
4. Explain how to price managerial
and professional jobs.
5. Explain the difference between
competency-based and traditional
pay plans.
6. List and explain six important trends
in compensation management.
Basic Factors in
Determining Pay Rates
• Aligning total rewards with strategy
• Equity and its impact on pay rates
• Equity theory of motivation
• Addressing equity issues
Legal Considerations in
Compensation
• Fair Labor Standards Act (1938)
• Exempt/nonexempt
• Equal Pay Act (1963)
Other Factors
• Union influences on compensation
decisions
• Pay policies
• Geography
Review
• Alignment with strategy
• Equity – external, internal
• Legal Considerations
• Union influences
• Pay policies
Define and give an example
of how to conduct
a job evaluation.
Job Evaluation Methods
• Compensable
factors
Job Evaluation Methods:
Ranking
1. Obtain job information
2. Select and group jobs
3. Select compensable factors
4. Rank jobs
5. Combine ratings
Job Evaluation Methods
• Job classification
• Point method
o
“Packaged” point
plans
Review
• Compensable factors
• Preparation
• Ranking
• Classification
• Point method
• Computer-based
Explain in detail how to
establish a
How to Create a
Market-Competitive Pay Plan
• Choose benchmark jobs
• Select compensable factors
• Assign weights
• Convert percentages to points
• Define each factor’s degrees
• Determine degrees and assign points
for job factors
How to Create a
Market-Competitive Pay Plan
• Review job descriptions and
specifications
• Evaluate the jobs
How to Create a
Market-Competitive Pay Plan
• Draw current (internal) wage curve
• Conduct market analysis: salary
surveys
o
Commercial, professional, and
government
• Using internet to do compensation
surveys
How to Create a
Market-Competitive Pay Plan
• Draw market (external) wage curve
• Compare and adjust
• Develop pay grades
• Establish rate ranges
Review
Explain how to price
Pricing Managerial and
Professional Jobs
• Compensating executives and
managers
• What determines executive pay?
o
Elements of executive pay
o
Managerial job evaluation
• Compensating professional
employees
Review
• Executives
Explain the difference
between competency-based
and traditional pay plans.
Contemporary Topics in
Compensation
• Competency-based
pay
Review
List and explain six important
trends in compensation
Trends
• Broadbanding
• Actively managing
• Comparable worth
o
The pay gap
• Board oversight
• Total rewards and tomorrow’s pay
programs
Review
• Broadbanding
• Management
• Worth
• Boards
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