PowerPoint PresentationEquity TheoryDeveloping Pay LevelsDeveloping Pay Levels-Market PressuresLabor Cost ComponentsEmployees as ResourcesDeciding What to PayMarket Pay SurveysDeveloping Job StructureDeveloping Pay StructurePay Grade StructureCurrent ChallengesSlide 13Comparable WorthWage LawsFLSA: OvertimeEEO – Pay GapsSlide 18Slide 19How Companies Pay Employees: Pay Structure Decisions11-2Equity TheoryPeople evaluate fairness of their situations by comparing to other peoples’ situationsEmployees often evaluate their pay relative to that of other employeesHow do you determine if your pay is equitable?2Developing Pay Levels•Pay structure - relative pay of different jobs (job structure) & how much they are paid (pay level)oJob structure - relative pay of jobs or range of pay often expressed by salary gradesoPay level - average pay of jobs in an organization, including wages, salaries & bonuses.•Pay policies are attached to jobs, not individuals, to make the process more manageable and equitable11-3Developing Pay Levels-Market PressuresCompetitive Market Challenges in Pay Decisions:Product-market competition - sell goods and services at a quantity and price that will bring a ROI.Labor-market competition - amount an organization must pay to compete against other organizations that hire similar employees.Companies with higher labor costs than competitors must charge higher prices for their products/services11-5Labor Cost ComponentsEmployees as ResourcesA philosophy that considers employees to be an investment that will yield valuable returnsControlling costs through noncompetitive pay can result in low employee productivity and qualityPay policies and programs are important HR tools for encouraging desired behaviors and discouraging undesired behaviors.Must constantly evaluate pay in terms of cost and ROI from employees11-6Deciding What to PayDeciding pay levels is discretionary and based on broad range of factorsThe organization decides whether to pay at, below, or above market average then decides which jobs this applies to11-7Market Pay SurveysBenchmarking - procedure by which an organization compares its own practices against the competition.Consider before using pay surveys:oWhich employers to include in the surveyoWhich jobs to include in the surveyoIf multiple surveys used, how rates of pay are weighted and combined11-8Developing Job StructureJob structure - relative pay of jobs in organizations often determined by worth of that job internallyJob evaluation - administrative procedure used to measure internal job worthoEvaluation process composed of compensable factors which are characteristics of jobs an organization values and chooses to pay foroJob evaluators apply weighting scheme to account for differing importance of compensable factors11-9Developing Pay StructurePay-Setting Approaches:Market Survey Approach – emphasizes external comparisons based pay on market surveys that cover as many key jobs as possiblePay Policy Line – mathematical expression that describes the relationship between a job’s pay and its job evaluation pointsPay Grades - Grouping jobs of similar worth or content together for pay administration purposesosome jobs may be underpaid while others in same grade are overpaid11-1011-11Pay Grade StructurePay GradeMinimum Midpoint Maximum1 $20,000 $23,220 $26,2202 $26,000 $28,440 $30,4213 $30,000 $34,150 $38,1004 $38,000 $40,140 $44,5605 $44,000 $47,190 $51,16311-11Current ChallengesJob-based pay structures can create problems:oReinforces top-down decision making as well as status differentialsoBureaucracy, time and cost required to generate and update job descriptions can become a barrier to changeoJob-based structure may not reward desired behaviors, where the knowledge, skills, and abilities needed yesterday may not be helpful today and tomorrowoEncourages promotion-seeking behavior, but discourages lateral movement11-1211-13Dealing with Pay Structure IssuesComparable WorthComparable worth (or pay equity) is a public policy that advocates remedies for any undervaluation of women's jobs.oIndividuals should obtain equal pay, not just for jobs of equal content, but for jobs of equal value or worthoCourts consistently ruled that using the going market rates of pay is acceptable defense in comparable worth litigation suits11-14Wage LawsFair Labor Standards Act (FLSA) of 1938 established a minimum wage and overtime pay rate.oMinimum Wage: lowest amount employers are legally allowed to payFederal is $7.25/hr., has not increased since 20092017 NYS is $10.50 (<10 ees), $11 (>11 ees) 2018 NYS is $12 (<10 ees), $13 (>11 ees) 2019 NYS is $13.50 (<10 ees), $15 (>11 ees) 2020 NYS is $15oExempt: employees not covered by the FLSA and not eligible for overtime payExecutiveProfessionalAdministrativeOutside sales11-1511-16FLSA: OvertimeThe FLSA requires that employees be paid at a rate of one and a half times their hourly rate for each hour of overtime worked beyond 40 hours in a week. The hourly rate includes base wage plus other components such as bonuses and piece-rate payments.Overtime pay is required for any hours beyond 40 in a week that an employer “suffers or permits” the employee to perform, regardless of whether the work is done at the workplace or whether the employer explicitly asked or expected the employee to do it.11-17EEO – Pay Gaps•Gender pay gap: difference between median earnings of women and men•Avg. US pay by gender in 2016•Women earned 81.9% of men’s salaries based on median weekly earnings for FT employees (after controlling for race and ethnicity, education, experience, and location)•Avg. US pay by age groupoWomen 20-24 earn 90% of men’s earningsoWomen 55-64 earn 84% of men’s earnings•Avg. US pay by ethnicityoAsian-American women earn 90% of white male’s earningsoWhite women earn 76% oAfrican-American women earn 62% oHispanic women earn 54%11-1811-19Mothers must work an extra 155 days to catch up to their male counterparts, since working mothers typically receive 70 cents for every dollar working fathers