Exam 2 Flashcards
Describe broad banding:
Collapsing a number of salary grades into a smaller number of broad
grades with wide ranges
A single band has one minimum and one maximum
Since it includes so many jobs of different values, a range midpoint is usually not used
Some advantages are more flexibility in providing pay raises without giving a promotion
Sets pay structures almost exclusively on external market rates
Market pricing
Willing to make adjustments to increase compensation in certain positions that are in demand
Market pricing
When the rates for jobs of the external market are calculated, and nonbenchmark jobs are blended into the pay hierarchy created by the external rates
Market pricing
Position which requires adjusting pay policy and pay structure
Correlator
A prototypical job, or group of jobs, used as a reference point for making pay comparisons within or without the organization.
Benchmark jobs
What are the characteristics of a benchmark job?
Contents well known and stable over time
Job is common across different employers
Reasonable proportion of the workforce is employed in this job
generalists with knowledge in all phases of operations including marketing, manufacturing, finance, and human resources
Breadth skill plan
Correlation helps out, gets rid of outliers
Normalization
The pay rates from minimum to maximum set for a pay grade or
class. It puts limits on the rates an employer will pay for a particular job
Pay ranges
Pay structure that links pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to the work.
Skill-based structure
specialists in corporate law, finance, or welding and hydraulic maintenance (likely based on education level)
depth skill plan
Orders jobs on the basis of internal factors
Job structure
What are the objectives for a skill based structure?
supports organizational strategy, supports work flow, fair to employees, directs behavior toward organization objectives
What are the 3 steps of skill based structures?
skill analysis, skill blocks, skill certification
What job was the highest rated?
marketing manager
What job was lowest rated?
Material clerk
What are the pay range ratios
0.8 minimum
0.9: 25th
1.0: 50th
1.1: 75th
1.2 maximum
Why are pay surveys done?
Help companies set competitive pay policy relative to other organizations
What does a job evaluation establish?
A job hierarchy based on job content
Job evaluation where organizing jobs by extremes
Alternation ranking
What is the most likely compensable factor
Accountability
Jobs common across a variety of organizations are known as
benchmark jobs
minimum a person will accept for job
reservation wage
method of job evaluation based on points
point method
Sometimes organizations are forced to give not a high enough salary increase because they are right against the line
Don’t want to pay beyond the maximum
Paid Compression
a wage structure that is set to lead the market throughout the plan year. Its aim is to maximize a firm’s ability to attract and retain quality employees and to minimize employee dissatisfaction with pay
lead pay level policy
a wage structure that is set to match market rates at the beginning of the plan year only. the rest of the plan year, internal rates will lag behind market rates.
lag pay level policy
Compensation approach
that links pay to the depth and scope of competencies
that are relevant to doing the work
competency based structure
How to determine the reliability of job evaluation method:
do different evaluators provide same results
The relevant market can be…
local international or national
process of taking different survey data, which can be accurate at different points in time, and adjusting the data to some common point in time
aging the data
How to calculate departmental compa ratio
sum of salaries / sum of midpoints in pay grade
Logic supporting person based pay is that…
it provides each individual with more flexibility
the more education costs the more salary should be
Human capital theory
How to find compa ratio
salary / midpoint of pay grade
Supply chain issues during pandemic: lack of commercial drivers licenses
Use market pricing compensation strategy
