Chapter 11Outline of Chapter 11Slide 3Slide 4Slide 5Slide 6After Studying This Chapter You Should Be Able To:Strategic OverviewDetermining Pay RatesEmployee CompensationFactors Influencing PayLegal ConsiderationsSlide 13Slide 14Other Legislation Affecting PayCorporate Policies and Competitive StrategyImportant Policy IssuesSlide 18PowerPoint PresentationSalary InequitiesEstablishing Pay PlansThe Salary SurveyUses of Salary SurveysCommercial, Professional and Government Salary SurveysDoing an Internet Based Salary SurveyJob EvaluationCompensable FactorsPreparing for the Job EvaluationJob Evaluation CommitteesJob Evaluation Method 1:RankingMethod 2: Job ClassificationWays to Categorize JobsMethod 3: PointMethod 4: Factor ComparisonComputerized Job EvaluationsGroup Similar Jobs Into Pay GradesPrice Each Pay Grade -Wage CurvesFine Tune Pay RatesCorrecting Out-of-Line RatesDeveloping a Workable Pay PlanPricing Managerial and Professional JobsCompensating ManagersWhat Really Determines Executive Pay?Compensating ProfessionalsCompensation TrendsWhy Pay Employees by Skill Levels?Skill-based Pay versus Evaluation-based PayHigh Performance InsightBroadbandingStrategic HR – IBM StudyCompensation Plans in PracticeCompensation Plans for Dot-com CompaniesDot.Com Research InsightComparable WorthChapter 11 SummarySlide 56Slide 57© 2003 Prentice Hall, Inc.11-1Instructor presentation questions: [email protected] 11Establishing Pay Plans© 2003 Prentice Hall, Inc.11-2Outline of Chapter 11Determining pay ratesLegal considerations in compensation1938 Fair Labor Standards Act1963 Equal Pay Act1974 Employee Retirement Income Security Act (ERISA)Other legislation affecting compensationUnion influences on compensation decisionsCorporate policies and competitive strategyCompensating expatriate employeesEquity and its impact on pay rates© 2003 Prentice Hall, Inc.11-3Outline of Chapter 11Establishing pay ratesStep 1. The salary surveyUsing the internet to do compensation surveysHR.NetStep 2. Job evaluationCompensable factorsPreparing for the job evaluationJob evaluation methods: RankingJob evaluation methods: Job classificationJob evaluation methods: Point methodJob evaluation methods: Factor comparisonComputerized job evaluations© 2003 Prentice Hall, Inc.11-4Outline of Chapter 11Establishing pay rates Step 3. Group similar jobs into pay gradesStep 4. Price each pay grade—wage curvesStep 5. Fine-tune pay ratesDeveloping pay rangesCorrecting out-of-line ratesDeveloping a workable pay plan© 2003 Prentice Hall, Inc.11-5Outline of Chapter 11Pricing managerial and professional jobsCompensating managersWhat really determines executive pay?Managerial job evaluationCompensating professional employeesCompensation trendsSkill-based payHigh-performance insightIssues in skill-based pay© 2003 Prentice Hall, Inc.11-6Outline of Chapter 11Compensation trendsBroadbandingIBM’s pay plan supports its new strategyCompensation plans in practiceCompensation plans for dot-com companiesResearch insightComparable worthSummary© 2003 Prentice Hall, Inc.11-7After Studying This Chapter You Should Be Able To:List the basic factors in determining pay ratesExplain in detail how to establish pay ratesDescribe how to price managerial and professional jobsDiscuss current trends in compensationEstablish a pay plan© 2003 Prentice Hall, Inc.11-8Strategic OverviewChapter purposes:Job evaluation techniques Conducting on and offline salary surveys Pricing the jobs in your firm Focus on pay for performance and incentive plans© 2003 Prentice Hall, Inc.11-9Determining Pay RatesEmployee compensation refers to all forms of pay or rewards going to employees and arising from their employment. It consists of 2 parts:Direct financial payments Indirect financial payments DefinitionDefinitionCan you name examples of direct and indirect payments?© 2003 Prentice Hall, Inc.11-10Employee CompensationDirect or Indirect compensation is given based on:Increments of timeHourlySalariedPerformancePieceworkCommission© 2003 Prentice Hall, Inc.11-11Factors Influencing Pay Legal considerationsUnion membershipCompany policyCompetitive strategyEquity© 2003 Prentice Hall, Inc.11-12Legal ConsiderationsThe 1931 Davis-Bacon Act sets wages for laborers working for contractors federally employed contractors The 1936 Walsh-Healy Public Contract Act setBasic labor standardsMaximum hoursSafety/health standards© 2003 Prentice Hall, Inc.11-13Legal ConsiderationsTitle VII of the 1964 Civil Rights Act makes it unlawful for employers to discriminate against any individual The 1938 Fair Labor Standards Act provides for minimum wages, maximum hours, overtime pay and child labor protection© 2003 Prentice Hall, Inc.11-14Legal ConsiderationsThe 1963 Equal Pay Act establishes equity between employees of different sex doing the same workThe 1974 Employee Retirement Income Security Act (ERISA) protects employees against the failure of their employers pension plan© 2003 Prentice Hall, Inc.11-15Other Legislation Affecting PayAge Discrimination in Employment ActAmericans Disabilities ActFamily and Medical Leave ActLabor Relations Act of 1935 (Wagner Act)Created National Labor Relations Board—NLRB© 2003 Prentice Hall, Inc.11-16Corporate Policies and Competitive Strategy To remain competitive, compensation plans must reward strategy that furthers the firm’s strategy aims by asking:1. What are our key competitive success factors?2. What actions implement this competitive strategy?3. What compensation program reinforces those behaviors? 4. What requirement should each pay element meet?5. How well do the current reward programs match these requirements?© 2003 Prentice Hall, Inc.11-17Important Policy IssuesIn writing the pay plan, ask the following:1. Will we be a pay leader or a follower?2. Will we emphasize seniority or performance?3. What pay cycle?24%5%22%49%WeeklyBiweekly2x monthlyMonthly© 2003 Prentice Hall, Inc.11-18Important Policy Issues4. How do we fix salary compression?5. How should we compensate based on geography or overseas employees?6. Is the pay rate equitable with rates in other organizations outside the firm?© 2003 Prentice Hall, Inc.11-19Overseas employees have special compensation