Establishing Strategic Pay Plan

INTRODUCTION The Companies Act, 1956 provides for a variety of companies of which great deal be promoted and registered low this Act. The triad basic fictional characters of companies which may be registered under the Act argon snobby companies Public companies and Producer companies PRIVATE community Section 3(1)(iii),a private play along subject matter a comp whatsoever, which has a b company track paid up nifty of iodin lakh rupees or much(prenominal) higher net pro suitable big(p) as may be prescribed , and by its articles a) Restricts the regene ordinate to reassign its shargon, if any ) Limits the descend of its member to fifty c) Prohibits any invitation to the public to get for any sh argon in , or debenture of the association d) Prohibits any invitation or acceptance of deposit from person former(a)(a) than its member, directors of their relational. PUBLIC COMPANY Section 3(1) (IV), public company means a company which a) It not a private company b) Has marginal paid up groovy of quint lakhs rupees much(prenominal) higher paid up capital as may be prescribed ) Is a private company which is a subsidiary of a company which is not a private company A public company may be said to be an association consisting of not little than 7 members, which is registered under this Act poster every public company existing on the commencement of the companies (Amendment)Act, 2000. with a paid-up capital of less than five lakh rupees, was supplicated to inside the a period of both socio-economic class from such commencement, elevate its paid-up capital of five lakhs rupees.Where a public company failed to do so such company was deemed to be Defunt partnership within the meaning of theatrical role 560. EMPLOYEE STOCK OPTION SCHEME (ESOS) Employee Stock Option Scheme means the option stipulation to the Whole Time Directors, Officers and Employees of the Company which gives them a right or benefit to purchase or subscribe the securi ties offered by the Company at a pre persistent price at a future day date. THE MINIMUM WAGES ACT, 1948 ACT NO. 11 OF 1948 1* fifteenth March, 1948. An Act to provide for mess minimum place of advantage in authorized involvements. The token(prenominal) Wages Act, 1948 is inventioned to prevent exploitation of the nameers and for this character it aims at fixation of minimum rate of final soften upment which the employer must give birth The minimum rate of riposte fixed or revised may consist of the basic rate of betroths to be adjusted match to the variations in the cost of living index number (cost living every(prenominal)owance).It withal includes house rent allowance. The liquidatement of Wages Act 1936 according ,all brass instrument employing less than one thousand employees must feed the wages forth expire of the seventh day after the last day of wages period and presentlyer the expiry of the tenth day in look it employs thousand or much emplo yees . all supportment must be made on working days . n case of comp allowe employees all wages earned by them shall be paid before the expire of the second working day from the day concern is terminates. alone wages must be paid in veritable take up or currency or by cheque or acknowledgment in the bank by prior authorisation. FIXING OF MINIMUM treasure OF WAGES. Fixing of minimum rates of wages. ) fix the minimum rates of wages holdable to employees sedulous in an employment undertake in vary I or Part II of the Schedule and in an employment added to every Part by notification under section 27 Provided that the appropriate G all everyplacenment may, in respect of employees employed in an employment specified in Part II of the Schedule, instead of fixing minimum rates of wages under this clause for the total express, fix such rates for a part of the State or for any specified class or classes of such employment in the whole State or part thereof b) Review at such int ervals as it may conceptualise fit, such intervals not exceeding five years, the minimum rates of wages so fixed and revise the minimum rates, if essential Concepts of Wages While evolving, wage policy, terce concepts of wages, viz, I) minimum wages, ii) quarterive wages, iii) living wages ar generally considered.These ar broadly ground on the contains of workers, capacity of the employee to leave, & the general economic conditions prevailing in a country. Minimum Wage Minimum wage is one which provides not simply for bargon sustenance of living, and also for the preservation of the efficiency of worker. For this goal, the minimum wage must also provide for some measure of education, health check requirements & amenities. Fair Wage Fair wage is understood in two ways. In a narrow sense, wage is fair if it is equal to the rate prevailing in the identical trade & in the neighbourhood for uniform work. In a wider sense, it w paralytic be fair if it is equal to the dom inant rate for uniform work without the country. liveness Wage Living wage is a step higher than fair wage.Living wage may be described as one which would enable the wage wage earner to provide for himself/herself & his/her family not but the b are essentials of feel deal food, clothing, & shelter, exclusively a measure of frugal comfort including education for children protection against ill health requirements of essential social chooses &/or measure of indemnity against the more serious misfortunes including old age. WHAT IS recompense? recompense may be in the form of monetary returns, tangible services, and benefits genuine by employees as part of their employment. It does not include contrasting forms of rewards such as cognition and interpersonal relationships etc.Extrinsic Rewards are rewards that an employee receives because of the furrow itself, including cash recompense, benefits, promotions and cable aegis. natural rewards buzz off from the work envir onment and are valued internally by the employee. communication channel satisfaction, self-esteem, carry outment, growth, and professional and personal development are some examples of intrinsic rewards. COPONENTS OF COMPENSATION SYSTEM Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of true factors after analyzing the telephone circuit work and responsibilities. Components of a fee system are asfollowsTYPES OF COMPENSATION Compensation provided to employees back tooth direct in the form of fiscal benefits and/or indirect in the form of non-monetary benefits cognize as perks, prison term off, etc. Compensation does not include only compensation but it is the sum impart of all rewards and allowances provided to the employees in return for their services. If the hire offered is efficaciously managed, it contributes to high formational productivity. Direct Compensation Indirect Compensation Compensation Strategy strategical payment is find and providing the fee packages to the employees that are align with the business goals and objectives.In todays competitive scenario organizations admit to take spare measures regarding honorarium of the employees so that the organizations make the valuable employees. The compensation systems set about changed from handed-down ones to strategic compensation systems. OR Compensation Strategy is the organizations plan for how compensation decisions on the types and amount of pay are made, base on the interests of the employees and keeping with the organizations mission and competitive smirch in the market. COMPENSATION POLOCIES A compensation policy provides general guide keys for making compensation decisions. Some employees may perceive their firms compensation policies as being fair and unbiased and other may have different opinions.The result of these perceptions may healthy have an effect an employees per ception of fairness and result in lower productivity or turnover. acquit windingers. contribute leaders are organizations that pay higher wages and salaries than competing firms. Using this strategy, they feel that they get out be able to attract high-quality, ample employees and thus hit lower per-unit labor costs. Market Rate it is the sightly pay that most employers provide for a similar line of credit in a particular field of honor or industry. collapse followers companies that film to pay below the going rate because of a poor financial condition or a belief that they do not require highly capable employees Labor Market is the geographical area from which an organization recruits employees and where individuals seek employment .Market Rate is the rate of pay complete for a benchmark subcontract out-of-door of the organization. It is determined though the collection of pay data gleaned from flocks of numerous organizations Forms of suffer Base invent is compensa tion found on condemnation worked, such as an annual salary or an hourly wage and it does not include pay benefits, overtime or incentive pay Performance move over is a monetary quondam(prenominal) payment made to an employee, team or the whole organization for achieving results established at the beginning of a death penalty cycle . Merit Pay is a monetary reward disposed(p) in ac noesisment of outstanding performance which increases base pay. It may be paid in a lump-sum or added incrementally to base pay.Indirect Pay is part of an employees blood compensation package, non-cash items or services provided to employees in return for their contribution to the organization (i. e. , health benefits, paid time off). Sometimes the costs for the items are shared by the make up STRUCTURE Once line synopsis has been through organizations gather up to decide upon the pay structures. Pay structure refers to the exhibit of exerciseting up the pay for a duty in an organization. The process deals with internal and impertinent analysis to estimate the compensation package for a frolic profile. midland equity, External equity and Individual equity are the most fashionable pay structures. lineage description provides the in depth knowledge rough the job profile and its deserving. Pay structures are the strong determinant of employees value in the organization.It sponsors in analyzing the employees role and status in the organization. It provides for fair intervention to all employees. Pay structures also include the inclination of incentives. The direct of incentives also depends on the level of job position in the organizational hierarchy. Internal equity The internal equity regularity undertakes the job position in the organizational hierarchy. The process aims at balancing the compensation provided to a job profile in comparison to the compensation provided to its major(postnominal) and junior level in the hierarchy. The fairness is ensured u sing job ranking, job classification, level of management, level of status and factor comparison. External EquityHere the market set analysis is done. Organizations formulate their compensation strategies by assessing the competitors or industry standards. Organizations set the compensation packages of their employees aligned with the prevailing compensation packages in the market. This entails for fair treatment to the employees. At times organizations offer higher compensation packages to attract and retain the best talent in their organizations. Motivation is the activation of an energized goal-oriented behavior. It is seen not only humans, but even animals show a level of motivation to achieve their goals. People with a vision always control their destiny and the life they live.If a person is without a vision in life, he or she is controlled by the will of others and end up living a life not their own, but one that is on terms dictated by others. Everyone takes up a job as they are trigger offd by some factor or the other. Some are motivated by the challenge they will face in carrying out their job, some are motivated by the level of fame they may earn, others and majority of people are motivated by the money they will earn. The last factor plays a major role in making or breaking a company. People will work better when they are motivated comely with the pay scale, the incentives and the perks they are offered in return of a job good done. Introduction to Equity TheoryEquity surmisal helps propose the idea about individuals who think of themselves as over-rewarded or under-rewarded. These individuals will jazz distress that tries to restore symmetry. Equity thus measures the contributions and benefits earned by distributively individual. It is not necessary one extremity to put in exactly the homogeneous contribution as the other partner, as long as there is a balance amongst contributions and benefits. Thus, every individual employee feels his contribution and work needs to be rewarded with equal pay. If the individual feels underpaid, s/he will come under distress and feel hostile towards the company. To avoid this feeling of hostility, equity theory comes into play. What is Equity?When individuals think their infixs are rewarded according to their outputs and are equal to others approximately them, they are slaked. But when they notice others are getting more designation and rewards, in spite of doing the same amount of work, they become dissatisfied. This leads to feelings of un deservinginess and under-appreciation. This is the gelid of equity, wherein the outlet (rewards) are directly proportional to the quality and quantity of work of the employee. When all employees are rewarded equally, the general feeling about the organization becomes fair and appreciable. The side by side(p) equation will help explain what equity is in a clear and concise mannerIndividuals outcome = sensible partners outcome Individual s own input rational partners input Equity Theory Examples As the main emphasis of the researchers locomote towards employees and their motivation factors, following the Hawthorne Study results, there were many another(prenominal) theories put forward to understand employee motivation. The following are the five major equity theory examples that have helped in understanding motivation. Maslows Need-Hierarchy Theory Maslow put forward five levels of needs of employees. These needs included physiological, safety, ego and self-actualizing.Maslow put forward an parentage that said the lower level needs of employees need to be satisfied before the beside higher level need is fulfilled to motivate them. The motivation was categorized into factors by Herzberg motivators and hygiene. The motivators including intrinsic factors like achievement and recognition help produce job satisfaction. The hygiene or extrinsic factors like pay and job security lead to job dissatisfaction. Vrooms The ory This theory was found on the belief that employee effort leads to performance and performance leads to rewards. These rewards can be positive or negative. The positive rewards lead to a more positive employee ho is highly motivated. The negative rewards lead to obviously a less motivated employee. Skinners Theory This theory states that the positive outcomes will be repeated and behaviors that lead to negative outcome wont be repeated. Thus, managers should try to honor the employee behavior, such that it leads to positive outcomes. Negative reinforcement by managers will lead to negative outcomes. Adams Equity Theory Model This theory shows that employees strive to achieve equity between themselves and their coworkers. This equity can be achieved when the ratio of employee outcomes over inputs is equal to other employee outcomes over inputs.Application of Equity Theory of Motivation When a manager is striving to achieve employee satisfaction, motivation levels, etc. so he sh ould consider Adams Equity Theory. Therefore, he should consider the balance and imbalance that is seen in the inputs and outputs of the employee. When we talk about equity theory, we use the terms input and output. An input is the contribution made on the part of the employee. This input helps determine his/her reward or pay. Some of the inputs made by an individual towards his/her organization include Ability to do his/her job Adaptability around the company environment tractability Tolerance Determination Enthusiasm to complete a task or job Commitment towards his/her work and organization Hard work truth Time disposed to the company Efforts take to complete tasks as ask Personal sacrifice Trusting superiors when it comes to delegation and management Support given and taken from colleagues Outputs are the tangible and intangible rewards or pay given to an individual establish on his/her inputs. These outputs include honorarium received in accordance to company policy, contract and work done tune security Employee benefits Recognition for work done Responsibility entrusted upon an individual Praise received Examining EquityThe process of assessing internal equity can serve to highlight many organizational riddles. First compensation philosophies need to be identified and examined for fit with internal equity adjustment plans. Next, managers need to know whether the organization has the currency to implement such a plan. Questions that managers may need to consider are Is the pay structure properly defined or is it inadequate? What are employees making in comparison to those with identical accomplishments and equally eventful experience? How are employees compensated for internally developed experience versus external experience brought with them to the organization? Is length of service valued? What is the turnover rate and what, if any, tint does internal equity have on it? Is the organization unable to attract candidates to a position because it cannot maintain market-competitive salaries? Has the organization needed to increase compensation for a position, resulting in it being higher paid than the same type of jobs with more skills or responsibilities, thus throwing salaries out of alignment? Does the organization have consistent hiring and promotion practices? ESTABLISHING STRATEGIC PAY PLANS metre 1 profit SURVEY SALARY SURVEY Organizations have to bridge the gap between the industry standards and their salary packages.They cannot provide compensation packages that are all less than the industry standards or are very higher than the market rates. For the purpose they undertake the salary survey. The Salary survey is the research done to read the industry standards to set up the compensation strategy for the organization. Organizations can either proceed the survey themselves or they can purchase the survey reports from a reputed research organization. These reports constitute the last 2-5 years or more compensation figures for the motley positions held by the organizations. The analysis is done on the basis of certain factors defined in the objectives of the research. Uses of salary surveySalary surveys are a consultative puppet that employers and associations use to come up salary discipline that is useful in determining the competitive wage rates needed to attract and retain skilled employees. Employers can use surveys in different ways as well as establishing a competitive salary structure, they can use the surveys to affirm their job military rank system. When job military rank and survey data are used jointly, internal and external equity are mutually reinforced. The focus of surveys tends to be on collecting base salary information and they can also be an effective means of researching trends in the design of benefits packages and pay systems. This explains how to identify salary surveys which are relevant to the needs of organizations within the not-f or-profit sector, and specifically within community-based agencies.It also provides information on the meaning of some survey terms and discusses the value of survey participation. Objectives of Salary Survey To gather information regarding the industry standards To know more about the market rate i. e. compensation offered by the competitors To design a fair compensation system To design and implement most competitive reward strategies To benchmark the compensation strategies Commercial, pro and Government Salary Surveys BLS gives Area wage surveys Industry wage surveys PATC surveys clannish consultants Hay Associates, Heidrickand Struggles, and Hewitt Associates publish data covering compensation for top and diaphragm managementTypes of Compensation Surveys There are two types of compensation surveys undertaken by the organizations. received Surveys Standard surveys are undertaken by organizations on a regular basis. These surveys are conducted annually based on the organiz ational objectives. These surveys attempt to cover the same companies every year and provide the same time of analysis. The reports are make annually by the research organizations. The organizations willing to formulate their compensations strategies based on the surveys purchase the reports from the research organization. Custom Surveys At times, a few organizations need to know some specific information.The surveys which cater this need are known as custom surveys. The organizations either higher research organizations to conduct theses surveys for them or they themselves conduct the survey by sampling few of the competitors on their own. These surveys do not have any time interval. They are undertaken as the need arises. Survey Reports The survey reports consist of the analysis and shutting drawn from the critical data based on the objectives of the study. The reports also include the data, facts and figures to support the analysis and conclusion. The supportive data and annex ure provided in the report form the basis for the un-biased conclusion and validation of the analysis. BENCHMARK stockSA benchmark job is one well-known in the company industry and one performed by a large number of employees. In addition to surveys, there are other ways to obtain compensation data. Some professional organization periodically conducts survey, as do several(prenominal) industry associations. The compensation Survey contains pays and benefits information. Compensation data are presented by worker traits and by characteristics of the establishment. The survey attempts to respond to common examination from employers such as What is the average salary for administrative assistants in my area? How have wage cost changed over the past year? How pay benefit cost, and specially health care cost, changed over the past year?What is the average employer cost for a benefit plan as strange to a defined contribution plan? Useful Online Sources for Collecting and Analyzing Salar y Survey Data This section lists websites which can be useful for managers in community-based organizations in Canada who are seeking salary survey data that is already published or available by subscription or who wish to conduct or commission a survey. Some sites offer information at no cost. Others require payment. Canadian Society of Association Executives (CSAE) at www. csae. com economical Research Institute at www. erieri. ca and, www. salariesreview. com Human Resources Internet conduce at www. hr-guide. com Peter T.Boland & Assoc. Inc. at http//ptbaconsulting. com/NonProfitSurvey. html Statistics Canadas Labour draw in Surveys are available at www. statcan. ca Toronto Board of Trade at www. bot. com Vault Employer Research at www. vault. com STEP 2 JOB EVALUATIONS JOB EVALUATION affair Evaluation involves determination of relation worth of to all(prenominal) one job for the purpose of establishing wage and salary differentials. Relative worth is determined mai nly on the basis of job description and job spec only. undertaking Evaluation helps to determine wages and salary bods for all jobs. Employees need to be compensated depending on the social classs of jobs which they occupy.Remuneration also involves fringe benefits, bonus and other benefits. Clearly remuneration must be based on the relative worth of each job. Ignoring this basic principle results in inequitable compensation. A perception of inequity is a sure way of de-motivating an employee. military control rating is a process of analyzing and assessing the various jobs systematically to ascertain their relative worth in an organization. Jobs are evaluated on the basis of content, placed in order of richness. This establishes Job Hierarchies, which is a purpose of fixation of fair to middling wage differentials among various jobs. Jobs are ranked (not jobholders) Scope of Job EvaluationThe job evaluation is done for the purpose of wage and salary differentials, demand fo r and supply of labour, ability to pay, industrial parity, collective bargaining and the like. Methods of Job Evaluation uninflected Methods point be Methods Different factors are selected for different jobs with accompanying differences in degrees and menstruums. In the point method, rates assign numerical values to specific job factors, such as knowledge required and the sum of these values provides a valued assessment of a jobs relative worth. We will walk though an example of how the point method works. Select job clod Let us assume that we are going to develop a point system for an administrative job cluster. Identify Compensable FactorThe next selects the factors for measuring job value. These factors become the standards used for the evaluation of jobs. assure Degrees and desex each paying(prenominal) Factors The next consideration is to determine the number of degrees for each compensable job factor. Degrees represent the number of distinct level associated with a particular factor. The number of degrees needed for each factor depends on job requirements. If a particular cluster required virtually the same level of formal education fewer degrees would be appropriate than if some jobs in the cluster required advanced degrees. Evaluator must divided each factor into number of degrees. Determine Factor ladingsThe committee must then establish factor freights according to their relative importance in the job to be evaluated. In our example let us example let us assume that the committee believes that education is quite important for the administrative job cluster and sets the weight for education at 35 percent. The weight of the other four factor were determined by the committee Job noesis-25 Contact 18 Complexity of duties 17 and Initiate 5. The percent total is ascorbic acid percent. Determine Factor Point Values The committee than determines the total number of point for the plan. The number may vary, but 500 or 1,000 points may work we ll. Our committee has determined that 500- point system will work fine Job Evaluation Worksheet (500-Point System) Job Factor Weight 1 2 3 4 5 Education 35% 35 70 105 140 175 Job Knowledge 25% 25 50 75 100 125 Contacts 18% 18 36 54 72 90 Complexity of Duties 17% 17 51 85 Initiative 5% 5 10 15 20 25 Factor Comparison Method The important factors are selected which can be assumed to be common to all jobs. Each of these factors are then ranked with other jobs. The worth of the job is then taken by adding together all the point values. Non-Analytical Methods be Method Jobs are ranked on the basis of its title or contents. Job is not broken down into factors etc. Job rank Method It is based on the job as a whole and the differentiation is made on the basis of job classes and configurations.In this method it is important to form a grade description to cover discernible differences in skills, responsibilities and other characteristics. Compensable Factors are the most important characteristics of a given job, on which pay rates are established and relative worth evaluated. They are determined by their ability to further an organizations strategy and relate directly to the work itself. The four major criteria most often used to measure jobs are skill, effort, responsibility and working conditions. Job Evaluation Process The job-evaluation process starts with defining objectives of evaluation and ends with establishing wage and salary differentials ObjectivesThe main objective of job evaluation, as was studied earlier, is to establish satisfactory wage and salary differentials. Job analysis precedes the actual programme of evaluation. Job Analysis It provides job-related data which would be useful in drafting job description and job specification. Job description provides the information relating to duties and responsibilities. Job specification provides information relating to the minimum acceptable quality of an employee Job Evaluation A job-evaluation pro gramme involves answering several questions. The major ones are i. Which jobs are to be evaluated? ii. Who should evaluate the job? iii. What training do the evaluators need? iv.How much time is involved? v. What should be the criteria of evaluation? vi. What methods of evaluation are to be employed? Wage Survey Now that the job hierarchy has been established with the help of evaluation methods, it is time to fix wage and salary differentials. Before fixing such differentials, the wage rate must be ascertained. It is here that wage survey assumes relevance. Employee compartmentalization The last phase in the job evaluation process is to establish classification. Employee classification is the process of assigning a job title to every employee in the organization. Computerized Job Evaluations Other methods can be time consuming CAJE or computer automated job evaluation streamlines things Simplifies job analysis Increases objectivity Manages data Uses structured questionnaire an d statistical models STEP 3 GROUP SIMILAR JOB PAY GRADE A pay grade is comprised of jobs of approximately equal difficulty or importance as established by job evaluation. Point method the pay grade consists of jobs falling within a range of points. Ranking method the grade consists of all jobs that fall within two or three ranks. Classification method automatically categorizes jobs into classes or grades Pay Structure Pay Structure is a hierarchy of jobs within an organization. Jobs are ranked based on content and value to the organization.The pay structure includes all the pay rates for different jobs within a single organization, factoring in the number of pay grades/levels with or without ranges, differences between grades/levels, and the criteria used to determine the differences. Pay Grade Pay Grade is a grouping of jobs of the same or comparable value to the organization. Each job within a pay grade will have the same pay range minimum, midpoint, maximum. front to another grade is through promotions or demotions. Pay Range Pay Range is the upper and lower limit of pay rates to be paid for jobs in a pay grade, from minimum to maximum. Movement through a pay range is a result of experience, seniority, training, etc. large banding Broad banding is the condensing of multiple salary grades into several broad and wide ranging grades.Benchmark (or key) job is a standard job from either within the organization or outside the organization used as a reference point for pay comparisons. These jobs have relatively the same job content and there is not much difference in their rates of pay. Hierarchy (or Job Structure )is a ranking of jobs based on their value to the organization STEPS 4 PRICE each PAY GRADE THE WAGE CURVE The relationship between the relative worth of jobs and their wage rates can be represented by mean of a wage curve. This curve may indicate the rates currently paid for jobs within an organization, the new rate resulting from job evaluation, or the rates for similar jobs currently being paid by other organizations within the labor market..A curve may be constructed graphically by preparing a scatter gram consisting of a series of dots that represent the current wage rate Developing a wage curve involves the following Find the average pay for each pay grade spot the pay rates for each pay grade Fit the line called a wage line through the points just plotted monetary value the jobs STEP 5 FINE TUNE PAY RATE Correcting Out-of-Line order The wage rate for a particular job may fall well off the wage line or well outside the rate range for its grade, as shown. This means that the average pay for that job is currently too high or too low, relative to other jobs in the firm. You should raise the wages of underpaid employees to the minimum of the rate range for their pay grade. PAY RANGES A grade is a horizontal grouping of different job that are considered substantially equal for pay purpose ? Grades enhance an organizat ion ability to move people among jobs within a grade with no change in pay. ? The objective is for all the jobs that are similar for pay purpose to be placed within the same grade ? How many pay grades? A. Number of Jobs B. Organization hierarchy C. Reporting Relationships ? Pay ranges refer to the vertical dimension of the pay structure ? Each pay grade will have associated with it a pay range consisting of a midpoint and a specified maximum and minimum. ? Midpoints correspond to the competitive pay policy. ? Midpoints are the control point of range. The midpoints represent base pay for a seasoned employee. ? The midpoint can be determined as soon as the pay grade limit are set. ? Find the Job Evaluation point value in the centre of the pay grade. ? complete that point value for x in your equation of the pay line ? Solve the equation for Y. this value is the midpoint of the range. Range send is a based on some judgement about how the ranges support life path, promotions & other organization system. Range spreads vary between 10 to one hundred fifty percent. Once the midpoint (based on the pay policy line) and range spread (based on Judgement) are specified, minimum & maximum are calculated Minimum = midpoint / 1+ (1/2 range spread)Maximum = Minimum + range spread x Minimum Pay ranges are a series of steps or levels in a pay grade, usually based on years of service example pay grade schedule PRING MANAGERIAL AND PROFESSIONAL JOBS What Determines Executive Pay? CEO pay is set by the board of directors taking into account factors such as the business strategy, corporate trends, and where they want to be in the short and long term. CEOs can have considerable influence over the boards that determine their pay. Firms pay CEOs based on the complexity of the jobs they fill. Shareholder activism and disposal oversight have tightened the restrictions on what companies pay top executives. Boards are step-down the relative importance of base salary while boos ting the emphasis on performance based pay. Compensating Professional Employees Compensating professional employees, like engineers and scientists, presents unique problems. Analytical jobs like these emphasize creativity and problem solving, compensable factors not considerably compared or measured. Determining professional compensation presents another question how is ? performance? to be defined and measured? Compensable factors focus on problem solving, creativity, job scope, and technical knowledge and expertise. Firms use the point method and factor comparison methods, although job classification is most popular. COMPENSATING BASED PAY MEANINGCompetencybased pay means the company pays for the employees range, depth, and types of skills and knowledge, rather than for the job title he or she holds. Experts variously call this force -, knowledge, or skill -based pay. Why Use Competency ground Pay? pic CompetencyBased Pay in Practice Main elements of skill/competency/kno wledge based pay programs 1. A system that defines specific skills 2. A process for tying the persons pay to his or her skill 3. A training system that lets employees seek and acquire skills 4. A formal competency testing system 5. A work design that lets employees move among jobs to brook work assignment flexibility pic - 10 9. 0 8. 0 7. 0 WAGE RATES 100 200 300 400 invest VALUE OF JOBS Salary Survey FACTOR COMPARISONRATE Extrinsic Reward Intrinsic Reward Compensation JOB RANKING INTERNAL EQUITY top dog SYSTEM JOB CLASSIFICATION ORGANISATIONAL FAIRNESS MARKET RATE assiduity STANDARDD COMPETITORS RATE EXTERNAL EQUITY Determine Degrees and Define each compensable Factors Identify Compensable Factor Select job Cluster Determine Factor Point Values Determine Factor Weights Validate Point System Object of Job Evaluation Job Specification Job Analysis Job Description Job Evaluation ProgrammeWage Survey Employee Classification ESTABLISHING STRATEGIC PAY PLAN Job Evaluation Pay grade g rouping Price Pay Grade- Wage Curve Fine cable Pay Rates Tune Rates Compensating Executives And Managers BASIC PAY short Incentives Long term Incentives Executive Benefits/perks Competency-Based Pay Supports High-Performance Work Systems Strategic Aims Performance Management PAY GRADE STRUCTURE 8 7 6 5 4 3 2 1 100 150 200 250 300 350 I II III IV V PAY POLICY LINE Our Monthly salary (000) PAY Our Job Evaluation Points EASTABLISHING PAY PLAN