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Human Resource

Management
1

ELEVENTH EDITION

GARY DESSLER

Part 4 | Compensation

Chapter
11

2008 Prentice Hall, Inc.


All rights reserved.

Establishing Strategic Pay Plans


PowerPoint Presentation by Charlie Cook
The University of West Alabama

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.

2008 Prentice Hall, Inc. All

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Basic Factors in Determining


Pay Rates
Employee
Compensation

Direct Financial
Payments

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Indirect Financial
Payments

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Legal Considerations in Compensation


Davis-Bacon Act (1931)

Equal Pay Act (1963)

Walsh-Healey Public
Contract Act (1936)

Employee Retirement
Income Security Act (ERISA)

Title VII of the 1964


Civil Rights Act

Employee
Compensation

Age Discrimination in
Employment Act

Fair Labor Standards Act


(1938)

Americans with
Disabilities Act

The Family and Medical


Leave Act

The Social Security Act of


1935 (as amended)

Workers Compensation

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Equity and Its Impact on Pay Rates

Forms of Equity

External
Equity

Internal
Equity

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Individual
Equity

Procedural
Equity

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Addressing Equity Issues


Salary Surveys

Job Analysis and


Job Evaluation

Methods to
Address Equity
Issues

Performance Appraisal
and Incentive Pay
Communications, Grievance
Mechanisms, and Employees
Participation

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The Salary Survey

Step 1. The Wage Survey:


Uses for Salary Surveys

To price
benchmark
jobs

To marketprice wages
for jobs

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To make
decisions
about benefits

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Sources for Salary Surveys

Sources of Wage and


Salary Information

Employer SelfConducted
Surveys

Consulting
Firms

Professional
Associations

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Government
Agencies

The
Internet

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Establishing Pay Rates (contd)


Skills

Step 2. Job Evaluation:


Identifying
Compensable Factors

Effort

Responsibility

Working Conditions

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Establishing Pay Rates (contd)


Methods for
Evaluating Jobs

Ranking

Job
Classification

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Point
Method

Factor
Comparison

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Establishing Pay Rates (contd)

Point Method
Step 3. Group
Similar Jobs
into Pay Grades

Ranking Method

Classification Methods

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Pricing Managerial and Professional Jobs


Compensating Executives
and Managers

Base
Pay

Short-term
Incentives

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Long-Term
Incentives

Executive
Benefits and
Perks

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Competency-Based Pay (contd)


Why Use CompetencyBased Pay?

Support HighPerformance
Work Systems

Support
Strategic Aims

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Support
Performance
Management

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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.

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KEY TERMS
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

2008 Prentice Hall, Inc. All

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

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Human Resource
Management
ELEVENTH EDITION

GARY DESSLER

Part 4 | Compensation

Appendix for
Chapter 11

Quantitative Job Evaluation Methods

2008 Prentice Hall, Inc.


All rights reserved.

PowerPoint Presentation by Charlie Cook


The University of West Alabama

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
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