Building Internally Consistent Compensation System

1. Building Internally Consistent
Compensation System
Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management
Hyderabad
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2. Components of Compensation System
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3. Types of Equity
 Internal Equity - Fairness of the pay
structure, relationship among jobs within a
single organization
 External Equity - Comparisons of similar
jobs in different organizations
 Individual Equity - Comparisons among
individuals in the same job within the same
organization
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4. Equity Theory
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5. Creating Internal Equity through
Job Analysis and Job Evaluation
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6. Internal Equity in Practice
Job analysis
Collecting data about jobs
Job evaluation
Valuing jobs
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7. Job Analysis
 The systematic, formal study of the duties and
responsibilities that comprise the job
 The process seeks to obtain important and relevant
information about the nature and level of the work
performed
 It Can be used to identify/determine:
• Skill levels
• Compensable job factors
• Work environment (e.g., hazards; attention; physical effort)
• Responsibilities (e.g., fiscal; supervisory)
• Required level of education
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8. Types of Data Collected Through Job
Analysis
 Work Activities – work activities and
processes; activity records; procedures used;
personal responsibility
 Worker-oriented activities – human
behaviours, such as, physical actions and
communications on the job; elemental motions
for methods analysis; personal job demands,
such as, energy expenditure
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9. Types of Data Collected Through Job
Analysis (Contd.)
 Machines, tools, equipment, and work aids
used
 Job-related tangibles & intangibles –
knowledge dealt with or applied; materials
processed; products made or services
performed
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10. Types of Data Collected Through Job
Analysis (Contd.)
 Work performance – error analysis; work standards;
work measurements, such as, time taken for a task
 Job context – work schedule; financial and nonfinancial
incentives; physical working conditions; organizational
and social contexts
 Personal requirements for the job – personal
attributes, such as, personality and interests; education
and training required; work experience
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11. Job Analysis Result
• Job Description
– Job based
– Tasks
– Work performed
• Job Specification
– Employee based
– Knowledge, skills & abilities
– Experience
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12. Job Description
 Output from job analysis used to develop job
description and job specification
 It defines the responsibilities, requirements,
functions, duties, location, environment, conditions
and other aspects of jobs
 It may be developed for jobs individually or for the
entire job families
 It describes and focuses on job itself and not on any
specific individual who might do the job
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13. Job Specification
 It defines worker characteristics (i.e.,
knowledge, skills and abilities) required to
perform the job competently
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14. Job Evaluation
 Methods and practices for ordering jobs or
positions with respect to their value or worth
to the organization
 A system for comparing jobs for purpose of
determining appropriate compensation
levels for individual jobs or job elements
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