CHAPTER 11

PAY STRUCTURE DECISIONS

Ms. Fatima Shamim
Pay Structure Decisions

■ Pay structure

■ Pay level

■ Job structure

Ms. Fatima Shamim

Equity Theory
■ People are motivated to get social equity in the rewards they received for performance

■ Belief that one is treated fairly relative to the treatment of others

■ Individuals compare their Job inputs and outcomes with others and try to eliminate

inequalities - Output/Input Ratio

■ Whom we compare ourselves are known as REFERENT OTHERS.

Ms. Fatima Shamim

Equity Theory (Contd..)
■ Four Referent Comparisons are done:

- Self inside

- Self outside

- Other outside

- Other inside

Ms. Fatima Shamim

Equity Theory (Contd..)
 When:

 One’s Outputs < Other’s Outputs  Inequity – Dis-satisfaction

 One’s Outputs = Other’s Outputs  Equity - Satisfaction

 One’s Outputs > Other’s Outputs  Inequity – Dis-satisfaction

 Inputs – effort, hard-work, loyalty, skills, abilities

 Outputs – financial benefits (Salary, benefits ,perks etc.), recognition,

responsibility, praise, job security, career growth

Ms. Fatima Shamim

Developing Pay Levels

■ Market pressures

■ Product market competition

■ Labour market competition

■ Employee as a resource

Ms. Fatima Shamim

Developing Pay Levels (Contd..)
■ Efficiency wage theory

■ Market pay surveys (Benchmarking)

■ Rate ranges

■ Key jobs & Non-key jobs

■ Job evaluation

Ms. Fatima Shamim

Thank You
Ms. Fatima Shamim