1. PowerPoint Presentation by Charlie Cook
The University of West Alabama
1
Human Resource
Management
ELEVENTH EDITION
G A R Y D E S S L E R
© 2008 Prentice Hall, Inc.
All rights reserved.
Establishing Strategic Pay Plans
Chapter 11
Part 4 | Compensation

2. © 2008 Prentice Hall, Inc. All rights reserved. 11–2
After studying this chapter, you should be able to:
1. List the basic factors in determining pay rates.
2. Explain in detail how to establish pay rates.
3. Explain how to price managerial and professional jobs.
4. Discuss competency-based pay and other current
trends in compensation.

3. © 2008 Prentice Hall, Inc. All rights reserved. 11–3
Basic Factors in Determining
Pay Rates
Direct Financial
Payments
Indirect Financial
Payments
Employee
Compensation

4. © 2008 Prentice Hall, Inc. All rights reserved. 11–4
Legal Considerations in Compensation
Employee
Compensation
Equal Pay Act (1963)
Employee Retirement
Income Security Act (ERISA)
Age Discrimination in
Employment Act
Americans with
Disabilities Act
Davis-Bacon Act (1931)
Walsh-Healey Public
Contract Act (1936)
Title VII of the 1964
Civil Rights Act
Fair Labor Standards Act
(1938)
The Family and Medical
Leave Act
The Social Security Act of
1935 (as amended)
Workers’ Compensation

5. © 2008 Prentice Hall, Inc. All rights reserved. 11–5
Equity and Its Impact on Pay Rates
External
Equity
Procedural
Equity
Internal
Equity
Individual
Equity
Forms of Equity

6. © 2008 Prentice Hall, Inc. All rights reserved. 11–6
Addressing Equity Issues
Salary Surveys
Job Analysis and
Job Evaluation
Performance Appraisal
and Incentive Pay
Communications, Grievance
Mechanisms, and Employees’
Participation
Methods to
Address Equity
Issues

7. © 2008 Prentice Hall, Inc. All rights reserved. 11–7
The Salary Survey
To price
benchmark
jobs
To make
decisions
about benefits
Step 1. The Wage Survey:
Uses for Salary Surveys
To market-
price wages
for jobs

8. © 2008 Prentice Hall, Inc. All rights reserved. 11–8
Sources for Salary Surveys
Employer Self-
Conducted
Surveys
Government
Agencies
Consulting
Firms
Sources of Wage and
Salary Information
Professional
Associations
The
Internet

9. © 2008 Prentice Hall, Inc. All rights reserved. 11–9
Establishing Pay Rates (cont’d)
Skills
Effort
Responsibility
Working Conditions
Step 2. Job Evaluation:
Identifying
Compensable Factors

10. © 2008 Prentice Hall, Inc. All rights reserved. 11–10
Establishing Pay Rates (cont’d)
Ranking
Factor
Comparison
Job
Classification
Methods for
Evaluating Jobs
Point
Method

11. © 2008 Prentice Hall, Inc. All rights reserved. 11–11
Establishing Pay Rates (cont’d)
Point Method
Ranking Method
Classification Methods
Step 3. Group
Similar Jobs
into Pay Grades

12. © 2008 Prentice Hall, Inc. All rights reserved. 11–12
Pricing Managerial and Professional Jobs
Base
Pay
Executive
Benefits and
Perks
Short-term
Incentives
Long-Term
Incentives
Compensating Executives
and Managers

13. © 2008 Prentice Hall, Inc. All rights reserved. 11–13
Competency-Based Pay (cont’d)
Support High-
Performance
Work Systems
Support
Performance
Management
Why Use Competency-
Based Pay?
Support
Strategic Aims

14. © 2008 Prentice Hall, Inc. All rights reserved. 11–14
Other Compensation Trends
• Broadbanding
 Consolidating salary grades and ranges into just a
few wide levels or “bands,” each of which contains a
relatively wide range of jobs and salary levels.
 Pro and Cons
 More flexibility in assigning workers to different job grades.
 Provides support for flatter hierarchies and teams.
 Promotes skills learning and mobility.
 Lack of permanence in job responsibilities can be unsettling
to new employees.

15. © 2008 Prentice Hall, Inc. All rights reserved. 11–15
K E Y T E R M S
employee compensation
direct financial payments
indirect financial payments
Davis-Bacon Act (1931)
Walsh-Healey Public Contract Act
(1936)
Title VII of the 1964 Civil Rights Act
Fair Labor Standards Act (1938)
Equal Pay Act (1963)
Employee Retirement Income
Security Act (ERISA)
salary compression
salary survey
benchmark job
job evaluation
compensable factor
ranking method
job classification (or grading) method
classes
grades
grade definition
point method
factor comparison method
pay grade
wage curve
pay ranges
competency-based pay
competencies
broadbanding
comparable worth

16. PowerPoint Presentation by Charlie Cook
The University of West Alabama
1
Human Resource
Management
ELEVENTH EDITION
G A R Y D E S S L E R
© 2008 Prentice Hall, Inc.
All rights reserved.
Quantitative Job Evaluation Methods
Appendix for Chapter 11
Part 4 | Compensation

17. © 2008 Prentice Hall, Inc. All rights reserved. 11–17
Quantitative Job Evaluation Methods
• Factor Comparison Job Evaluation Method
Step 1. Obtain job information
Step 2. Select key benchmark jobs
Step 3. Rank key jobs by factor
Step 4. Distribute wage rates by factors
Step 5. Rank key jobs according to wages
assigned to each factor
Step 6. Compare the two sets of rankings to
screen out unusable key jobs
Step 7. Construct the job-comparison scale
Step 8. Use the job-comparison scale