COMPENSATION MANAGEMENT
Development of Salary Administration Plan
1
Develop a program outline.
?
Set an objective for the program.
Establish target dates for implementation and completion.
?
?
Determine a budget
2
Develop a compensation philosophy.
?
Form a compensation committee (presumably consisting of officers or at least including one officer of the company).
Decide what, if any, differences should exist in pay structures for executives, professional employees, sales employees, and so on (e.g., hourly versus salaried rates, ) Determine whether the company should set salaries at, above, or below market. Decide the extent to which employee benefits should replace or supplement cash compensation
?
?
?
3
Conduct a job analysis of all positions
?
Conduct a general task analysis by major departments. What tasks must be accomplished by whom?
Get input from senior vice presidents of marketing, finance, sales, administration, production, and other appropriate departments to determine the organizational structure and primary functions of each. Interview department managers and key employees, as necessary, to determine their specific job functions. Decide which job classifications should be exempt and which should be nonexempt.
4
?
?
?
?
CONTD…..
?
Develop model job descriptions for exempt and nonexempt positions and distribute the models to incumbents for review and comment; adjust job descriptions if necessary. Develop a final draft of job descriptions. Meet with department managers, as necessary, to review job descriptions. Finalize and document all job descriptions.
5
?
?
?
Evaluate jobs.
?
Rank the jobs within each senior vice president's and manager's department, and then rank jobs between and among departments.
Verify ranking by comparing it to industry market data concerning the ranking, and adjust if necessary. Prepare flow charts of all ranks for each department for ease of interpretation and assessment. Present data and charts to the compensation committee for review and adjustment
6
?
?
?
Determine grades.
?
Establish the number of levels - senior, junior, intermediate, and beginner - for each job family and assign a grade to each level.
?
Determine the number of pay grades, or monetary range of a position at a particular level, within each department.
7
Establish grade pricing and salary range
?
a trend line in accordance with company Establish benchmark (key) jobs.
Review the market price of benchmark jobs within the industry. Establish philosophy (i.e., where the company wants to be in relation to salary ranges in the industry
8
?
?
Develop a salary administration policy.
? ?
Develop and document the general company policy.
Develop and document specific policies for selected groups.
?
Develop and document a strategy for merit raises and other pay increases, such as cost-of-living adjustments, bonuses, annual reviews, and promotions.
Develop and document procedures to justify the policy (e.g., performance appraisal forms, a merit raise schedule). Meet with the compensation committee for review, adjustments, and approval.
9
?
?
Obtain top executives' approval of the basic salary program.
?
Develop and present cost impact studies that project the expense of bringing the present staff up to the proposed levels.
Present data to the compensation committee for review, adjustment, and approval. Present data to the executive operating committee (senior managers and officers) for review and approval
?
?
10
Communicate the final program to employees and managers.
?
Present the plan to the compensation committee for feedback, adjustments, review, and approval.
Make a presentation to executive staff managers for approval or change, and incorporate necessary changes. Develop a plan for communicating the new program to employees, using slide shows or movies, literature, handouts, etc. Make presentations to managers and employees. Implement the program.
?
?
?
11
CONTD…
?
Design and develop detailed systems, procedures, and forms.
Work with HR information systems staff to establish effective implementation procedures, to develop appropriate data input forms, and to create effective monitoring reports for senior managers. Have the necessary forms printed
12
?
?
?
CONTD…
?
Develop and determine format specifications for all reports.
?
Execute test runs on the human resources information system.
?
Execute the program.
13
Monitor the program
?
Monitor feedback from managers.
?
Make changes where necessary.
?
Find flaws or problems in the program and adjust or modify where necessary.
14
The Nine Criteria for Developing a Compensation Plan (Challenges)
1. Internal versus External Equity Will the compensation plan be perceived as fair within the company, or will it be perceived as fair relative to what other employers are paying for the same type of labor? 2. Fixed versus Variable Pay Will compensation be paid monthly on a fixed basis —through base salaries —or will it fluctuate depending on such preestablished criteria as performance and company profits? 3. Performance versus Membership Will compensation emphasize performance and tie pay to individual or group contributions, or will it emphasize membership in the organization —logging in a prescribed number of hours each week and progressing up the organizational ladder?
18
The Nine Criteria for Developing a Compensation Plan (cont.)
4. Job versus Individual Pay Will compensation be based on how the company values a particular job, or will it be based on how much skill and knowledge an employee brings to that job? 5. Egalitarianism versus Elitism Will the compensation plan place most employees under the same compensation system (egalitarianism), or will it establish different plans by organizational level and/or employee group (elitism)? 6. Below-Market versus Above-Market Compensation Will employees be compensated at below-market levels, at market levels, or at above-market levels?
19
The Nine Criteria for Developing a Compensation Plan (cont.)
7. Monetary versus Nonmonetary Awards Will the compensation plan emphasize motivating employees through monetary rewards like pay and stock options, or will it stress nonmonetary rewards such as interesting work and job security? 8. Open versus Secret Pay Will employees have access to information about other workers’ compensation levels and how compensation decisions are made (open pay) or will this knowledge be withheld from employees (secret pay)? 9. Centralization versus Decentralization of Pay Decisions Will compensation decisions be made in a tightly controlled central location, or will they be 20 delegated to managers of the firm’s units?
The Key Steps in Creating Job-Based Compensation Plans
Job Evaluation for Internal Equity
2. Job Descriptions Identify Compensable Factors 4. Rate Worth of All Jobs Using a Predetermined System 5. Job Hierarchy 6. Classify Jobs by Grade Levels 1. Job Analysis 3. Job Specifications
Market Surveys for External Equity Within-Pay-Range Positioning Criteria for Individual Equity
© 2001 by Prentice Hall
1. Check Market Value Using Benchmark or Key Jobs
Criteria for Pay Positioning Within Range for Each Job • Experience • Seniority 23 • Performance © 1998 by Prentice Hall
7. Establish Final Pay Policy Individual Pay Assignment
10-23
Skill-based Pay and Job-based Pay
Factors Pay-structure Job- Based Based on performance Skill-based Based on ability to perform
Employer’s focus
Employee linked to job, job carries wage
Job promotion to earn greater pay
Employee linked to skills, employees carries wage
Skills acquisition to earn greater pay Value skills
Employees focus
Procedures required Value jobs
24
Pay Structure of a Large Restaurant Developed Using a Job-Based Approach
Jobs
GRADE 6 GRADE 5 GRADE 4 GRADE 3 Chef Manager Sous-Chef Assistant Manager Lead Cook Office Manager General Cook Short Order Cook Assistant to Lead Cook Clerk Server Hostess Cashier Kitchen Helper Dishwasher Janitor Busser Security Guard
Number of Positions
2 1 1 2 2 1 5 2 2 1 45 4 4 2 3 2 6 2
Pay
$20.00-$31.00/hr. $11.50-$21/hr. $7.50-$12.00/hr. $6.50-$8.00/hr.
GRADE 2 GRADE 1
$6.00-$7.00/hr. $5.50-$6.25/hr.
25
Pay Schedule of a Large Restaurant Designed Using a Skill-Based Approach
Skill Block
5
Skill • Create news items for menu
Pay
$23.00/hr.
4
3
• Find different uses for leftovers (e.g., hot dishes, buffets) • Coordinate and control work of all employees upon manager’s absence • Cook existing menu items following recipe $17.00/hr • Supervise kitchen help • Prepare payroll • Ensure quality of food and adherence to standards • Schedule servers and assign workstations $10.50/hr • Conduct inventory • Organize work flow on restaurant floor
26
Pay Schedule of a Large Restaurant Designed Using a Skill-Based Approach (cont.)
Skill Block
2
Skill s • Greet customers and organize tables
Pay
$7.50/hr.
1
• Take orders from customers • Bring food to tables • Assist in kitchen with food preparations • Perform security checks • Help with delivery • Use dishwashing equipment • Use chemicals/disinfectants to clean premises • Use vacuum cleaner, mop, waxer, and other cleaning equipment • Clean and set up tables • Perform routine kitchen chores (e.g., making coffee)
$6.00/hr.
27
Hierarchy of Clerical Jobs, Pay Grades, and Weekly Pay Range for a Hypothetical Office
1 Points
Customer Service Rep. Executive Secretary/Admin. Asst. Senior Secretary Secretary Senior General Clerk Credit and Collection Accounting Clerk General Clerk Legal Secretary/Assistant Senior Word Processing Operator Work Processing Operator Purchasing Clerk Payroll Clerk Clerk-Typist File Clerk Mail Clerk Personnel Clerk Receptionist 300 298 290 230 225 220 175 170 165 160 125 120 120 115 95 80 80 60
2 Grade
5 4 3
3 Weekly Pay Range
$500-$650 $450-$550 $425-$475
2
$390-$430
1
$350-$400
28
doc_613212872.ppt
Development of Salary Administration Plan
1
Develop a program outline.
?
Set an objective for the program.
Establish target dates for implementation and completion.
?
?
Determine a budget
2
Develop a compensation philosophy.
?
Form a compensation committee (presumably consisting of officers or at least including one officer of the company).
Decide what, if any, differences should exist in pay structures for executives, professional employees, sales employees, and so on (e.g., hourly versus salaried rates, ) Determine whether the company should set salaries at, above, or below market. Decide the extent to which employee benefits should replace or supplement cash compensation
?
?
?
3
Conduct a job analysis of all positions
?
Conduct a general task analysis by major departments. What tasks must be accomplished by whom?
Get input from senior vice presidents of marketing, finance, sales, administration, production, and other appropriate departments to determine the organizational structure and primary functions of each. Interview department managers and key employees, as necessary, to determine their specific job functions. Decide which job classifications should be exempt and which should be nonexempt.
4
?
?
?
?
CONTD…..
?
Develop model job descriptions for exempt and nonexempt positions and distribute the models to incumbents for review and comment; adjust job descriptions if necessary. Develop a final draft of job descriptions. Meet with department managers, as necessary, to review job descriptions. Finalize and document all job descriptions.
5
?
?
?
Evaluate jobs.
?
Rank the jobs within each senior vice president's and manager's department, and then rank jobs between and among departments.
Verify ranking by comparing it to industry market data concerning the ranking, and adjust if necessary. Prepare flow charts of all ranks for each department for ease of interpretation and assessment. Present data and charts to the compensation committee for review and adjustment
6
?
?
?
Determine grades.
?
Establish the number of levels - senior, junior, intermediate, and beginner - for each job family and assign a grade to each level.
?
Determine the number of pay grades, or monetary range of a position at a particular level, within each department.
7
Establish grade pricing and salary range
?
a trend line in accordance with company Establish benchmark (key) jobs.
Review the market price of benchmark jobs within the industry. Establish philosophy (i.e., where the company wants to be in relation to salary ranges in the industry
8
?
?
Develop a salary administration policy.
? ?
Develop and document the general company policy.
Develop and document specific policies for selected groups.
?
Develop and document a strategy for merit raises and other pay increases, such as cost-of-living adjustments, bonuses, annual reviews, and promotions.
Develop and document procedures to justify the policy (e.g., performance appraisal forms, a merit raise schedule). Meet with the compensation committee for review, adjustments, and approval.
9
?
?
Obtain top executives' approval of the basic salary program.
?
Develop and present cost impact studies that project the expense of bringing the present staff up to the proposed levels.
Present data to the compensation committee for review, adjustment, and approval. Present data to the executive operating committee (senior managers and officers) for review and approval
?
?
10
Communicate the final program to employees and managers.
?
Present the plan to the compensation committee for feedback, adjustments, review, and approval.
Make a presentation to executive staff managers for approval or change, and incorporate necessary changes. Develop a plan for communicating the new program to employees, using slide shows or movies, literature, handouts, etc. Make presentations to managers and employees. Implement the program.
?
?
?
11
CONTD…
?
Design and develop detailed systems, procedures, and forms.
Work with HR information systems staff to establish effective implementation procedures, to develop appropriate data input forms, and to create effective monitoring reports for senior managers. Have the necessary forms printed
12
?
?
?
CONTD…
?
Develop and determine format specifications for all reports.
?
Execute test runs on the human resources information system.
?
Execute the program.
13
Monitor the program
?
Monitor feedback from managers.
?
Make changes where necessary.
?
Find flaws or problems in the program and adjust or modify where necessary.
14
The Nine Criteria for Developing a Compensation Plan (Challenges)
1. Internal versus External Equity Will the compensation plan be perceived as fair within the company, or will it be perceived as fair relative to what other employers are paying for the same type of labor? 2. Fixed versus Variable Pay Will compensation be paid monthly on a fixed basis —through base salaries —or will it fluctuate depending on such preestablished criteria as performance and company profits? 3. Performance versus Membership Will compensation emphasize performance and tie pay to individual or group contributions, or will it emphasize membership in the organization —logging in a prescribed number of hours each week and progressing up the organizational ladder?
18
The Nine Criteria for Developing a Compensation Plan (cont.)
4. Job versus Individual Pay Will compensation be based on how the company values a particular job, or will it be based on how much skill and knowledge an employee brings to that job? 5. Egalitarianism versus Elitism Will the compensation plan place most employees under the same compensation system (egalitarianism), or will it establish different plans by organizational level and/or employee group (elitism)? 6. Below-Market versus Above-Market Compensation Will employees be compensated at below-market levels, at market levels, or at above-market levels?
19
The Nine Criteria for Developing a Compensation Plan (cont.)
7. Monetary versus Nonmonetary Awards Will the compensation plan emphasize motivating employees through monetary rewards like pay and stock options, or will it stress nonmonetary rewards such as interesting work and job security? 8. Open versus Secret Pay Will employees have access to information about other workers’ compensation levels and how compensation decisions are made (open pay) or will this knowledge be withheld from employees (secret pay)? 9. Centralization versus Decentralization of Pay Decisions Will compensation decisions be made in a tightly controlled central location, or will they be 20 delegated to managers of the firm’s units?
The Key Steps in Creating Job-Based Compensation Plans
Job Evaluation for Internal Equity
2. Job Descriptions Identify Compensable Factors 4. Rate Worth of All Jobs Using a Predetermined System 5. Job Hierarchy 6. Classify Jobs by Grade Levels 1. Job Analysis 3. Job Specifications
Market Surveys for External Equity Within-Pay-Range Positioning Criteria for Individual Equity
© 2001 by Prentice Hall
1. Check Market Value Using Benchmark or Key Jobs
Criteria for Pay Positioning Within Range for Each Job • Experience • Seniority 23 • Performance © 1998 by Prentice Hall
7. Establish Final Pay Policy Individual Pay Assignment
10-23
Skill-based Pay and Job-based Pay
Factors Pay-structure Job- Based Based on performance Skill-based Based on ability to perform
Employer’s focus
Employee linked to job, job carries wage
Job promotion to earn greater pay
Employee linked to skills, employees carries wage
Skills acquisition to earn greater pay Value skills
Employees focus
Procedures required Value jobs
24
Pay Structure of a Large Restaurant Developed Using a Job-Based Approach
Jobs
GRADE 6 GRADE 5 GRADE 4 GRADE 3 Chef Manager Sous-Chef Assistant Manager Lead Cook Office Manager General Cook Short Order Cook Assistant to Lead Cook Clerk Server Hostess Cashier Kitchen Helper Dishwasher Janitor Busser Security Guard
Number of Positions
2 1 1 2 2 1 5 2 2 1 45 4 4 2 3 2 6 2
Pay
$20.00-$31.00/hr. $11.50-$21/hr. $7.50-$12.00/hr. $6.50-$8.00/hr.
GRADE 2 GRADE 1
$6.00-$7.00/hr. $5.50-$6.25/hr.
25
Pay Schedule of a Large Restaurant Designed Using a Skill-Based Approach
Skill Block
5
Skill • Create news items for menu
Pay
$23.00/hr.
4
3
• Find different uses for leftovers (e.g., hot dishes, buffets) • Coordinate and control work of all employees upon manager’s absence • Cook existing menu items following recipe $17.00/hr • Supervise kitchen help • Prepare payroll • Ensure quality of food and adherence to standards • Schedule servers and assign workstations $10.50/hr • Conduct inventory • Organize work flow on restaurant floor
26
Pay Schedule of a Large Restaurant Designed Using a Skill-Based Approach (cont.)
Skill Block
2
Skill s • Greet customers and organize tables
Pay
$7.50/hr.
1
• Take orders from customers • Bring food to tables • Assist in kitchen with food preparations • Perform security checks • Help with delivery • Use dishwashing equipment • Use chemicals/disinfectants to clean premises • Use vacuum cleaner, mop, waxer, and other cleaning equipment • Clean and set up tables • Perform routine kitchen chores (e.g., making coffee)
$6.00/hr.
27
Hierarchy of Clerical Jobs, Pay Grades, and Weekly Pay Range for a Hypothetical Office
1 Points
Customer Service Rep. Executive Secretary/Admin. Asst. Senior Secretary Secretary Senior General Clerk Credit and Collection Accounting Clerk General Clerk Legal Secretary/Assistant Senior Word Processing Operator Work Processing Operator Purchasing Clerk Payroll Clerk Clerk-Typist File Clerk Mail Clerk Personnel Clerk Receptionist 300 298 290 230 225 220 175 170 165 160 125 120 120 115 95 80 80 60
2 Grade
5 4 3
3 Weekly Pay Range
$500-$650 $450-$550 $425-$475
2
$390-$430
1
$350-$400
28
doc_613212872.ppt