Topic: Characteristics of good pay structure

Prepared by:
Faima Leo
Ahad Saleem
Danyal Bhatti
Hassan Ali Sheikh
Wajahat John
Explanation

► Pay structure
► Background of pay structure
► The components of pay structure
► Importance of Good Pay Structure
► Characteristics of good pay structure
Pay structure

A salary range structure (or salary structure) is a hierarchal

group of jobs and salary ranges within an organization.
Salary structures often are expressed as pay grades or job
grades that reflect the value of a job.
Background of pay structure

► In 2002, Gregory A. Stoskopf identified a trend of

employers to align their salary structures to the competitive
values of jobs in the appropriate labor market. Salary range
minimums were being aligned to approximately the 25th
percentile of the market data, midpoints were being aligned
to market medians, and maximums were being aligned to
the 75th percentile of the market data. In an article
published by WorldatWork
The components of pay structure are:
► Basic Salary.
► Compensatory Allowance.
► Medical Allowance.
► Special Allowance.
► Uniform Allowance.
► Cost of Living Allowance.
► Medical allowances.
Importance of Good Pay Structure

► Companies attract, motivate, and retain through

total compensation
► The purpose of a good compensation philosophy is to
attract, retain, and motivate good people. To accomplish
these goals, companies use a mixture of the three main
components of compensation: Base pay, also called
salary; incentive pay, whether in the form of cash or
non-cash award such as stock; and benefits, or
non-financial rewards.
Characteristics of good pay structure
► 1. Fairness in paying wage
► Reasonable wages should be paid to the workers. Wage is determined on the
basis of scientific time and motion study. It is fair to both employers and
employees.
► 2. Minimum Wage Guarantee
► An employer should pay minimum wages to workers as per the provisions
of Minimum Wages Act. Over the minimum wages, an employer can fix the
wages and guaranteed by considering the cost of living.
► 3. Link Between Effort and Remuneration
► Remuneration is fixed only on the basis of the efforts required to complete
such a job or order. If so, an employee gets high remuneration for taking
high or more efforts and vice versa.
 Characteristics of good pay structure
► 4. Satisfaction of Workers
► A wage system should satisfy the workers. If so, there will be high
morale and low labor turnover among workers.
► 5. Conforming Trade Agreements
► Some organizations may enter into an agreement with trade union
regarding wage payment. If so, the provisions of such trade agreements
should be considered and reflected in the wage system
► 6. Work Guarantee
► An employee prefers to work in all the working days. No worker prefers
to work only in few days and idle for many days. Hence, the
management should make an arrangement in which the work is
available to all the workers continuously in all working days.
Characteristics of good pay structure
► 7. Restricted Provision
► A worker may be paid on the basis of output. If so, he/she may
produce more number of units to earn more. This will lead to over
production, inferior quality in production, more wastage, spoilage,
scraps, defectives, too much depreciation of machine, break down of
machine, health problem of workers etc., Hence, the output level is
fixed for a specified time of working hours.
► 8. Cost of Implementation
► The cost of implementation of wage system must be as low as
possible.
► 9. Flexibility
► The wage system should not be rigid. If the situation changes, some
change may be incorporated in the wage system without much
difficulty.
►