Base Wage and salary systems Definition: o Base wages and salaries are the hourly, weekly or monthly

y pay that employees receive in exchange for their work Objective: o Establish a structure for equitable compensation depending on their jobs and level of performance o Based on relative worth o Establishing different pay ranges Conventional Job Evaluation o Systematic and comparative to others o A) Identify requirements, b) contribution to the organization, c) classify IAW importance o Variations of 4 basic methods Job ranking Method o Oldest and simplest method o Ranking from simplest to more difficult o Only producers order Job Classification Method o Classes or grades identified by differences in duties, responsibilities, working cond. o Compare worth of job to class description o Assign job to appropriate class Point Method o Most widely used in the US o Quantitative point scale for job evaluated o Steps Selected key Jobs On each specific scale (20%), should be representative of span and each major internal variable Selecting Compensable Factors Those a company is willing to pay for. Specific to org and job (ex production vs manager). Subfactors and degree statements used as well Assigning Weights to Factors Depending on relative importance (skill vs responsibility). Points are then assigned (13-2). Quite time consuming Factor Comparison Method o Involves a monetary scale instead of a point scale o Key jobs are selected and rates of pay must be viewed as fair o Each compensable factor ranked IAW to importance in each job o Allocate a wage o Prepare a monetary scale (13.6) o Comparison Methods: Quantitative Plans: Point and Factor Comparison Qualitative Plans: Job Classification and Ranking Methods Pricing the Job

o Must take into consideration external factors (Labor market conditions, prevailing wage rates, living costs ets..) o Wage and Salary Surveys Collect comparative information on the policies and methods of wage payment from selected organizations in a given area or type of industry Conducting a Wage/Salary Survey Minimum 30% surveyed Generally competitors Done via a) personal interviews, b) telephone interviews and c) mailed questionnaires o Purchasing Wage/Salary Surveys Ex. Mercer, Watson Wayatt, PWC US Dept of Labor, Local Gov., Chambers of Com. o Wage and Salary Curves Graphs that show relationship between worth of jobs and wage/salary rates Compare before and after surveys Pay Grades and Ranges Simple method to group jobs of similar worth Used for pay purposes Ranges: used with minimum and maximum Ideally varied by performance, usually seniority o New Approaches Broad banding A base pay technique that reduces many salary categories to several broad bands Ex. From 30 to six Used better within horizontal orgs. o Skill-Based Pay Compensate on the skills they bring or acquire Use below market base pay o Competency-Based Pay Based on trait that is required by a job holder to perform a job well Identify those elements that predict success Put a $ amount behind what an org values o Market-Based Pay Focusing on external equity and operate without traditional pay grades and ranges