Module 3--Practical Applications of Base Pay Structure Design

Question 1

What does a BASE PAY STRUCTURE using MARKET-PRICING APPROCACH use?

Answer 1

■ Market-pricing approach
* Use of market (external) data as a priority to establish pay grades and ranges. Aligns pay structure closer to the external market.

Question 2

What does a BASE PAY STRUCTURE using POINT FACTOR APPROCACH use?

Answer 2

■ Point factor approach
* Use of the job content evaluation (internal) as a priority to establish pay grades and ranges.
Aligns pay structure to value internal hierarchy and culture.

Question 3

What does a BASE PAY STRUCTURE using INTEGRATED APPROCACH use?

Answer 3

■ Integrated approach
* Utilizes market data to incorporate external data into the internal job worth hierarchy.
Allows the organization to align pay structures to external market components while still valuing the internal hierarchy.

Question 4

What are the FOUR STEPS to MARKET PRICING?

Answer 4

Four steps to market pricing

STEP 1: Complete a competitive market pricing analysis of benchmark jobs, and create a marketbased job worth hierarchy.

STEP 2: Develop a pay structure that covers lowest to highest market rates from Step 1, plus an additional grade or two at the top and bottom.

STEP 3: Assign benchmark jobs to the pay structure based on the relationship of market rate to midpoint, review benchmarks and modify based on internal equity. Some jobs may be placed at different levels based on internal preferences, if the company does not agree with the market rate.

STEP 4: Assign nonbenchmark jobs to the pay structure.

Question 5

What are the FIVE STEPS for ESTABLISHING JOB GRADES Using POINT FACTOR EVALUATION APPROACH?

Answer 5

Steps for Establishing Job Grades Using the Point Factor Evaluation
Approach

Internal equity is a priority if using a point factor job evaluation approach to develop pay structures.

Five steps to point factor
Step 1: Review overall job evaluation point differentials by job family.
Step 2: Rank order from high to low.
Step 3: Look for logical groupings of jobs.
Step 4: Develop point bands (absolute or percent-based).
Step 5: Check intra-family and supervisor/subordinate relationships.

Question 6

What are the STEPS for DEVELOPING PAY RANGES when INTEGRATING Market DATA?

Answer 6

Steps for Developing Pay Ranges When Integrating Market Data

Six steps to an integrated approach
Step 1: Incorporate market data.
Step 2: Review market inconsistencies and reassign jobs; compute raw averages and percent differences by grade.
Step 3: Smooth out grade averages.
Step 4: Review differences between midpoints and market data.
Step 5: Resolve inconsistencies between internal and external competitiveness.
Step 6: Develop pay ranges around the proposed midpoints.

Question 7

What do you do if a Computer Operator II is too close to a Computer Operator I (when doing point factor)?

Answer 7

SLOTTING JOBS.

Re slotting jobs is certainly one option. You can take a
role and decide to internally value it higher or lower based on where it will fall in the grade structure.

Question 8

How do you INTEGRATE DATA in the POINT FACTOR PAY STRUCTURE?

Question 9

MIDPOINT DIFFERENTIAL (Formula)

Answer 9

                    Midpoint of Lower Grade

Question 10

Range Spread (Formula)

Answer 10

Maximum - Minimum
_______________________
Minimum