chapter 8 pt 1 - designing pay levels, mix and pay Flashcards
3. Select Relevant Labor Market (Competitors)
A relevant labor market includes employers who compete in one or more of the following areas:
- Hire the same occupations or skills
- Microsoft and Google include both product market and labor market competitors - Have employees in the same geographic area
- As importance and complexity of qualifications increase, the geographic limits also increase - Develop/provide the same products and services
- If the skills are tied to a particular industry, define the market by industry
- International comparisons are improving, but use judgment
3. Select Relevant Labor Market (Competitors) (IMAGE IS ON QUIZ FOR SURE)
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3. Select Relevant Labor Market (Competitors)
two approaches:
a) where you compete for talent and
b) where you compete as a company (peer group)
compete for talent:
1. occupation
2. geography/location
peer group:
1. company size - revenue, market cap, headcount
2. industry
3. company type - public/private, growing, mature
Exhibit 8.3: Relevant Labor Markets by Geographic and Employee Groups
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pay differences by location: annual wage by metro area, computer programmer
As the importance and complexity of the qualifications increase, the geographic limits also increase
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4. Identify Benchmark Jobs
What is Benchmarking?
1. Identify your internal jobs that are standard across industries, relatively stable jobs, such as HR Generalist, Accountant, etc.
2. Then select jobs that are industry-specific, but are consistent across your industry
3. Using surveys (or other external market data, e.g., competing offers) to ensure pay levels are aligned to internal pay philosophy and/or market
Matching your jobs
1. Start with benchmark jobs
– Match job description: don’t match to title alone; look at scope of role and match to job descriptions
– Rule of thumb – 80% more better match of major job activities considered a good match
– Varies by company, generally 80-100% of jobs can be mapped to a benchmark job
2. Slot non-benchmark jobs: differences are quantified when job content does not sufficiently match survey jobs
Exhibit 8.10: Advantages and DIsadvantages of Measures of Compensation
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BASE PAY
TOTAL CASH
TOTAL COMPENSATION
Base pay is the best source of information reflecting the “value” of a job. Why?
The value of the job is in the task and duties of the job and how it is valued in the market
Is there enough data? Number of datapoints
number of Data Points in Survey Data
– Sample size (“n”) is a significant consideration in evaluating survey data
– Generally, larger sample size, more valid the data
– Sample size includes both # of companies represented in the data and number of incumbents represented in the data
– Survey vendors have their own requirements for data sufficiency (typically 5 or more companies)
– Some surveys, like custom surveys, inherently may have small “n”
Adjust Pay Level vs. Adjusting Pay Mix
Most organizations adjust pay levels on a regular basis
Such adjustments can be based on:
- The overall movement of pay rates caused by competition for people in the market
- Performance
- Ability to pay
Adjustments to the different forms of pay (pay mix) occur less frequently