Compensation System Design Flashcards
What are the activities in Compensation System Design?
Job Analysis > Job Documentation > Job Evaluation > Pay Structure
Used to group jobs that have approximately the same relative worth in an organization.
Pay Grades
Sets the upper and lower limits of compensation for employees whose job fits within that particular grade.
Pay Range
An indicator as to how actual wages match, lead, or lag the target market.
Compa-ratios
Combines two or more salary grades to create larger ranges and give people wide latitude to move within their job without outgrowing the pay scale.
Broadbanding
Each incumbent of a job has the same rate of pay, regardless of performance or seniority.
Single-rate pay or flat-rate pay
The employee’s rate is based on longevity in the job. Pay increases occur on a pre-determined schedule.
Time-based step-rate pay
The individual employee’s performance on the job is the basis for the amount and timing of pay increases.
Performance-based pay
A performance-based pay system is commonly called _____.
Merit pay or pay for performance (P4P of PfP)
Pay is determined by the employee’s output.
Productivity-based pay
Employee characteristics, rather than how the job is performed, determine pay. In such systems, two employees perform similar tasks, but the person with superior knowledge or skill mastery receives more pay.
Person-based pay
Pay is based on the level of knowledge the employee has in a field. This approach is dominant for compensating learned professions such as scientists or teachers, although staff professionals may also be paid this way.
Knowledge-based system
Base pay on the number of different skills an employee is qualified to perform. Employees increase their pay by acquiring new skills, even if they do not use the skills in their current assignment. This type of system is most commonly used in a production environment.
Skill-based system
Set pay at a level which an employee can operate in defined competencies (e.g., directing or training others). This type of system is commonly found when rewarding professional groups of employees.
Competency-based systems
Pay adjustment given to all eligible employees without regard to organizational profitability, employee productivity, or other performance factors.
Cost-of-living adjustment (COLA)
Given to all employees (or sometimes a class of employees such as office or production workers) based on local competitive market requirements.
General Pay Increase
One-time payment of all or part of a yearly pay increase.
Lump-sum increase (LSI) or performance bonus
Used to motivate employees to perform at a higher level by paying for performance that exceeds base-pay exceptions.
Incentive pay
Incentive used to improve individual performance.
Individual incentive
Used when measuring individuals performance is difficult or when performance requires cooperation of the group.
Group incentive
Incentive used to reward overall results.
Organization-wide incentive
Employee pay rates above the range maximum.
Red-circle rates
The opposite of red-circle rates-an employee’s pay is below the minimum of the range.
Green-circle rates
Describes situations where there is only a small difference in pay between employees regardless of their experience, skills, level, or seniority.
Pay compression or salary compression
Relationship of current salaries to the midpoints of the salary ranges. Employee’s pay rate divided by pay range midpoint.
Compensation Ratio
All costs associated with employment, including salaries, overtime, benefits, and bonuses. Salaries + Overtime + Benefits + Bonuses divided by Total Operating Costs
Total Organization Compensation Expense
Number of people on the organization’s payroll at a particular time.
Head Count
Subdivides employees into various categories (e.g., executives, manages, staff, trainees, contractors).
Groups and subgroups
Basic statistics and characteristics of certain employee groups.
Demographics
The traditional measure of recruiting costs, determined by taking the total costs of all hires and dividing that figure by the number of new hires.
Cost of Hire
A measure of the effort exerted (defined in financial terms) to staff an open position in an organization.
Cost per hire
Systematic study of jobs to determine what activities (tasks) and responsibilities they include, the personal qualifications necessary for performance of the jobs, and the conditions under which the work is performed.
Job analysis
The three key elements in job analysis are commonly abbreviated as KSAs and stand for?
Knowledge, Skills, Abilities
Direct observation of employees performing the tasks of a job, recording observations, and translating them into the necessary knowledge, skill and abilities.
Observation
Face-to-face interview in which the interviewer obtains the necessary information from the employee, peers, supervisors, and team/unit members about knowledge, skills, and abilities needed to perform the job.
Interview
Questionnaires to job incumbents, and sometimes to their managers, asking about the knowledge, skills, and abilities necessary to perform the job. The answers are combined, and a composite statement of job requirements is published.
Open-ended questionnaire
Questionnaires structured in a manner that allows only specific responses, aimed at determining the frequency with which specific tasks are performed, their relative importance, and the skills required.
Highly structured questionnaire
Diary or anecdotal record maintained by the employee. Job information, including the frequency and timing of tasks, is recorded in the diary. Logs are usually kept over an extended period of time. They are analyzed, and patterns are identified and translated into duties and responsibilities.
Work diary or log
Written description of a job and its essential functions and requirements, including tasks, knowledge, skills, abilities, responsibilities, and reporting structure.
Job description
Written statement of the minimum qualifications necessary to perform a job.
Job specifications
Clusters of highly interrelated attributes, including knowledge, skills, and abilities (KSAs), that give rise to the behaviors needed to perform a given job effectively. These competencies should be part of a competency model.
Job competencies
Determines the value and price of a job in order to place and compare it within an organization as well as attract and retain employees in a competitive environment.
Job evaluation
The relative worth and the pay structure of different jobs on an assessment of their content (e.g., responsibilities and requirements) and their relationship to other jobs within the organization.
Job-content-based job evaluation
Involves establishing a hierarchy of job from lowest to highest based on each job’s overall value to the organization.
Job ranking
May be used in which each job is compared with every other job being evaluated.
Paired-comparison method
Writes descriptions for each class of jobs. Individual jobs are then put into the grade that best matches their class description, based on the judgment of the evaluator.
Job classification
Evaluate specific factors on a scale and provide a score that indicates how valuable one job is compared to another.
Quantitative job evaluation method
A form of quantitative evaluation. It is the most commonly used method of job evaluation. The compensable factors chosen for the evaluation must reflect the nature of the job being evaluated.
Point-factor system
The relative worth and the pay structure of different jobs are based on their market value or the going rate in the marketplace.
market-based job evaluation
Collect information on prevailing market compensation and benefit practices, including starting wage rates, base pay, pay ranges, other statutory and market cash payments (e.g., overtime pay and shirt differentials), variable compensation (e.g., short- and long-term incentive plans), and time off (vacation and holiday practices).
Remuneration surveys
Organizations that have available resources and expertise may choose to develop their own internal survey to allow for more control over the survey technique and data analysis.
Internal surveys
Organizations have different options available if they choose an external pay survey.
External surveys`
When salary data is _____, movement in market rates is used to adjust outdated data.
aged
If a job in a survey is similar but not identical to one in the organization, the data can be weighted or _____ for a better match.
leveled
Since wage rates typically will vary by location, an organization should ____ ____ ____ any national survey data for the local or regional recruiting area to approximate local wage rates.
factor for geography
