Establishing a Pay Structure Flashcards
Total compensation
Consists of: 1. Monetary rewards Cash compensation Benefits 2. Nonmonetary rewards Interesting or fulfilling work
Job structure
Relative pay for different functions and jobs within the org
Pay level
Average amount, including wages, salaries and bonuses the org is going to pay
Structure
Pay rates
Pay grades
Pay ranges
Pay dfferentials
Legal requirements
Equal pay for equal work
Minimum wage
Overtime pay
Restrictions on child labor
Organization’s goals
High-quality workforce
Cost control
Equity and fairness
Legal compliance
Equal Employment Opportunity
An employer may not base differences in pay on age, sex, race or other
Equal Pay for comparable worth public policy
A remedy, which uses job evaluation to establish the worth of an organization’s jobs in terms of their difficulty and importance to the company.
Lilly Ledbetter Fair Pay Act of 2009
Allows employees claiming discrimination to treat each receipt of a paycheck as an instance of discrimination for purposes of determining their eligibility to file a complaint
Fair Labor Standard Act
A federal law that establishes a min wage and requirements for overtime pay and child labor
Exempt employees
Employees that do not fall under this rule:
Executives
Teachers
Computer professionals
Child labour
16-17: May not be employees in hazardous occupations
14-15: May work only outside school hours in non-hazardous jobs and for limited time periods
-14: May only work in non-hazardous job owned by parents or guardians
Laws govern pay policies of federal contractors
Davids-Bacon Act of 1931:
only construction contractors who receive more than $2000 in federal money
Walsh-Healy Public Contracts Act of 1936:
covers all gov contractors receiving $100000 or more in federal funds
Federal contractors must pay their employees at rates at least equal to their prevailing wages in the area
product markets
Organizations that offer competing goods and services
Consumer price index (CPI)
Trends in the nation’s cost of living
Pay range
SIze of the range depends on the details of the ogs competition environment
Broad range
Pay below at or above the market level
Above market level
Advantageous in situations where:
- org structure id decentralized and performance us hard to measure
- The company wants to attract top talent
Equity theory
Look at their own ratio of outputs over inputs in comparison to the ratio of outputs over inputs of other workers
Under-rewarded employees
- Put less effort
- Find a way to increase their outcomes
- WIthdraw by leaving the company
Job evaluation
Administrative procedure for measuring the relative worth of the org jobs
Evaluation committee: familiar with the job, specialists and consultants
Compensable factors
Characteristics of a job that the org values and chooses to pay for
Pay surveys
Reveal the min and max rates for a job
Useful for key jobs –> jobs with stable content and common for many organizations
Market pay policy line
A mathematical expression that describes the relationship between a job’s pay and its job evaluation points
It refelcts the pay structure of the market, which does not always match rates in the or BUT provides some guidance for non-key jobs
Pay grades
Sets of jobs having similar worth or content, grouped together to establish rates of pay
Advantage: Pay grades
Reduces administrative tasks and provides greater flexibility when assigning people to jobs
Drawbacks: pay grades
Grouping jobs will result in rates of pay for individual jobs that do not precisely math the levels specified by the market and the org job structure.
Pay differentials
IF company pays more to employees in locations where living expenses are higher
Avoid inequitable treatment of employees
Delayering
Number of levels in the org job structure is reduced
Skill-based pay system
Set pay according to employees’ level of skill or knowledge they acquire and their capability to use them
Disadvantages: skill-based pay system
- rewards for acquiring skills but not using them
- if learn skill quickly might reach mac level fast makes it difficult to reward them
- creates bureaucracy –> training programs must be developed
- gathering data about skill-based pay is difficult
Compa-ratio
Compare the ratio of average pay to the midpoint of the pay range
Should be close to 1
Uniformed Service Employment and Reemployment Rights Act
Requires employers to make jobs available to their workers when they return after fulfilling military duties for up to five years
