Establishing Pay Plans

1. Establishing Pay Plans
Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management
Hyderabad

2. Purpose of Compensation
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Motivate &
Retain Staff
Attract talent
Contribution based
Remuneration
Administratively
Efficient
Reward Valued
Behavior
Effective
Compensation
Ensure Equity
Institutionalized
Processes
Legal
Compliance

3. Establishing Pay Plans
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Business GoalsBusiness Goals
Business
Strategy
Business
Strategy
CEOCEO
Compensation
Philosophy/ activities
serve Business
Objectives
Compensation
Philosophy/ activities
serve Business
Objectives
Business Strategy – This defines the direction in which
organization is going in relation to its environment in order
to achieve its objectives.
Compensation Philosophy – Consists of a set of beliefs
which underpin the reward/compensation strategy of the
organization and govern the reward policies that determine
how reward processes operate

4. Establishing Pay Plans
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Business GoalsBusiness Goals
Business
Strategy
Business
Strategy
Compensation
Plan
Compensation
Plan
Compensation
Strategy
Compensation
Strategy
Non-Financial
Rewards
Non-Financial
Rewards
Org.StructureOrg.Structure
CEOCEOHRHeadHRHead
Compensation activities
serve Business Objectives
Compensation activities
serve Business Objectives
Compensation strategy is
periodically reevaluated and
the Compensation plan
periodically developed
Compensation strategy is
periodically reevaluated and
the Compensation plan
periodically developed
Compensation Strategy – defines the intentions of the
organization on reward policies, processes and practices
required to ensure that it has the skilled, competent and
well-motivated workforce it needs to achieve its business
goals

5. Establishing Pay Plans
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Business GoalsBusiness Goals
Business
Strategy
Business
Strategy
Compensation
Plan
Compensation
Plan
Compensation
Strategy
Compensation
Strategy
Non-Financial
Rewards
Non-Financial
Rewards
Org.StructureOrg.Structure
CEOCEOHRHeadHRHead
Compensation
activities serve
Business Objectives
Compensation
activities serve
Business Objectives
Compensation strategy
is periodically
reevaluated and the
Compensation plan
periodically developed
Compensation strategy
is periodically
reevaluated and the
Compensation plan
periodically developed
 A strategic perspective on compensation takes the
position that how employees are compensated can
be a source of sustainable competitive advantage

6. Establishing Pay Plans
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Business GoalsBusiness Goals
Business
Strategy
Business
Strategy
Compensation
Plan
Compensation
Plan
Market SurveysMarket Surveys
Compensation
Strategy
Compensation
Strategy
Job EvaluationJob Evaluation
Unit InputsUnit Inputs
Total
remuneration
Total
remuneration
Performance
Management
Performance
Management
Non-Financial
Rewards
Non-Financial
Rewards
Org.StructureOrg.Structure
Performance
linked Pay
Performance
linked Pay
Individual PayIndividual Pay
Contribution
/outputs
Contribution
/outputs
Internal EquityInternal Equity External EquityExternal Equity
CEOCEOHRHeadHRHeadEmployeeEmployeeC&B/SMC&B/SM
Pay levels /
structures
Pay levels /
structures
Compensation
activities serve
Business Objectives
Compensation
activities serve
Business Objectives
Compensation strategy
is periodically
reevaluated and the
Compensation plan
periodically developed
Compensation strategy
is periodically
reevaluated and the
Compensation plan
periodically developed
Compensation
Manager, along with
team is responsible for
carrying out
compensation related
activities
Compensation
Manager, along with
team is responsible for
carrying out
compensation related
activities

7. Establishing Pay Plans
Compensation
Plan Design
Job Analysis
Job
Description
Market Wage
Survey
Job
Evaluation
Pay Structure
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8. Job Analysis
• Process to identify & determine particular job duties and
requirements
• Relative importance of duties
• Judgments are made about data collected on job
• Used in compensation to identify or determine:
•skill levels
•compensable job factors
•work environment
•responsibilities
•required level of education
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9. Job Description
- Output from job analysis used to develop job
description and its specification
- Summarize job analysis information in readable
format
- Provide basis for job-related actions
- Identify individual jobs by providing
documentation
- Identify tasks, duties and responsibilities of a job
- Describes what is done, why it is done , where it is
done, and how it is done .
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10. Job Evaluation
The methods and practices of ordering jobs or
positions with respect to their value or worth to
the organization.
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11. Market Wage Surveys
- Goal of market wage surveys is to find data from
employers with whom organization competes for
employees
- Data collected & analyzed
- Simplest analysis involves comparing going market
rate & approximating this rate within organization's
own pay structure
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12. Methods of Wage Surveys
Generally three methods are employed for
wage surveys;
• Personal Interviews
• Mailed Questionnaires
• Telephone Inquiries
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13. Pay Structure
-Basis for establishing pay plan is pay
structure
- Hierarchy of jobs with pay ranges and/or
rates assigned
- Pay structures designed so that greater the
worth of a job, higher the pay grade and range
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14. Objectives of Pay Plans
• Internal equity.
• External equity (or competitiveness),
• Individual equity,
• Process equity,
• Performance or productivity incentives,
• Maximum use of financial resources,
• Compliance with laws and regulations, and
• Administrative efficiency
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