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Human Resource Management



Part 4 | Compensation

Chapter 11

Establishing Strategic Pay Plans
© 2008 Prentice Hall, Inc. All rights reserved. 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 competencytrends in compensation.

© 2008 Prentice Hall, Inc. All rights reserved.


Labor laws   the Payment of Wages Act 1936 for certain classes of persons employed in the industry. Protection against irregularity in payment of wages in a particular form and at regular intervals the Minimum Wages Act. 1948 enabled central and state Government to fix minimum rates of wages payable to employees .

  . Equal Remuneration Act. the Payment of Gratuity Act 1972 provides payments of gratuity to employees after they attain superannuation. provides payment of equal remuneration to men and women workers for same or similar work. the Payment of Bonus Act 1965 provides payment of a specified rate of bonus to employees in certain establishments. 1976. 1976.

‡ . the quality may be compromised piecebut the workers may get extra income that will motivate them . In time-rate. quality can be maintained. In piece-rate.TimeTime-Rate and Piece-Rate Wages Piece‡ Employees prefer time-rate while employers timeprefer piece-rate piece‡ . but the timeexpected level of production may not be delivered by the employees.

‡ If the actual output is less than the standard output. 11±6 . then the employee will be paid lower rate (as disincentive © 2008 Prentice Hall. Inc.Taylar piece base system ‡ If the actual output exceeds or equals the standard output then the employee will be paid higher rate (as incentive). All rights reserved.

Living Wages and Fair Wages ‡ Minimum wages. etc. fuel and miscellaneous items . medical care.Minimum Wages. light.It must provide not only for the wagesbare sustenance of life but for the preservation of the efficiency of the workers by providing some measures of education. Criteria: It must be calculated for a family of 4 units (numbers) ‡ It must be able to provide 2700 calories per adult per day ‡ It should be sufficient for 18 yards of cloth per unit per annum ‡ There should be a provision for reasonable house rent.

Living Wages and Fair Wages ‡ Living wages. but also for comfort.It is in-between minimum wages wagesinand living wages.Minimum Wages. protection against ill-health. social needs and insurance for old age ‡ Fair wages. but below the living wage . illdecency.It is not only for the bare wagesessentials for the worker and his family.

11±9 .Basic Factors in Determining Pay Rates Employee Compensation Direct Financial Payments Indirect Financial Payments © 2008 Prentice Hall. Inc. All rights reserved.

All rights reserved.Equity and Its Impact on Pay Rates Forms of Equity External Equity Internal Equity Individual Equity Procedural Equity © 2008 Prentice Hall. Inc. 11±10 .

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

Inc. The Wage Survey: Uses for Salary Surveys To price benchmark jobs To marketprice wages for jobs To make decisions about benefits © 2008 Prentice Hall. All rights reserved. 11±12 .The Salary Survey Step 1.

Inc. All rights reserved. 11±13 .Sources for Salary Surveys Sources of Wage and Salary Information Employer SelfConducted Surveys Consulting Firms Professional Associations Government Agencies The Internet © 2008 Prentice Hall.

Inc. All rights reserved.Establishing Pay Rates (cont¶d) Skills Effort Step 2. 11±14 . Job Evaluation: Identifying Compensable Factors Responsibility Working Conditions © 2008 Prentice Hall.

Establishing Pay Rates (cont¶d) Methods for Evaluating Jobs Ranking Job Classification Point Method © 2008 Prentice Hall. 11±15 . Inc. All rights reserved.

Inc. All rights reserved. 11±16 .Establishing Pay Rates (cont¶d) Point Method Step 3. Group Similar Jobs into Pay Grades Ranking Method Classification Methods © 2008 Prentice Hall.

Inc. 11±17 .Pricing Managerial and Professional Jobs Compensating Executives and Managers Base Pay Short-term Incentives Long-Term Incentives Executive Benefits and Perks © 2008 Prentice Hall. All rights reserved.

11±18 .CompetencyCompetency-Based Pay (cont¶d) Why Use CompetencyBased Pay? Support HighPerformance Work Systems Support Strategic Aims Support Performance Management © 2008 Prentice Hall. All rights reserved. Inc.

PowerPoint Presentation by Charlie Cook The University of West Alabama . All rights reserved. Inc.Human Resource Management 1 ELEVENTH EDITION GARY DESSLER Part 4 | Compensation Appendix for Chapter 11 Quantitative Job Evaluation Methods © 2008 Prentice Hall.

All rights reserved. Use the job-comparison scale job© 2008 Prentice Hall. Construct the job-comparison scale jobStep 8. 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. 11±20 . Rank key jobs by factor Step 4. Inc. Distribute wage rates by factors Step 5.Quantitative Job Evaluation Methods ‡ Factor Comparison Job Evaluation Method Step 1. Obtain job information Step 2. Select key benchmark jobs Step 3.