Transcript Building Internally Consistent Compensation Systems (Part 1)

Building MarketCompetitive Compensation
Systems
MGT 4543
Compensation Management
Chapter 7
Fixed
Pay
Variable
Pay
Class Activity:
Using Salary.com to gather compensation data
Http://www.salary.com/category/salary/
Information on salary (national & local)
Information on benefits
Information on cost of living
Questions to answer:
What is the base pay?
What are the pay incentives?
What are benefits worth?
View results then
skip advertisement
What is the
median salary?
Go to the benefits
tab
What is the base pay?
What are the pay incentives?
What are benefits worth?
What is the total
compensation?
Cost of Living
Calculator
http://swz.salary.com/costoflivingwizard/l
ayoutscripts/coll_start.aspx
• It will compare salary & cost of living in
two locations
• It will tell you how much you would
have to earn in a new location to
maintain the same standard of living.
Cost of Living Calculator
– enter median salary & 2 locations
What is the net
change in
income?
What is the
typical salary in
location 1?
What is the
typical salary in
location 2?
Market-Competitive Pay
Systems
Why is it important to have market-competitive pay
systems?
What is a strategic analysis?
What is a compensation survey?
What is a compensation plan?
Compensation Surveys
Preliminary considerations
What are some things that companies hope to gain
from compensation surveys?
What are the the reasons companies choose not to
develop and implement their own compensation
surveys?
Compensation Surveys
Using published compensation survey data
Explain the difference between focusing the survey on
core or employee benefits
What are some sources of published compensation
survey data? Why would a company want to use more
than one source?
Compensation Surveys
What is the BLS?
What type of information is offered by the BLS?
Strategic Considerations for
Compensation Surveys
What is the relevant labor market?
What is a benchmark job? Why can it be hard to find a
perfect match?
Compensation Survey Data
Survey data characteristics
Amount of information
Timeliness of information
Compensation Survey
Statistics
What is central tendency?
Describe the following measures of central tendency:
Mean
Median
Compensation Survey
Statistics
What is variation?
Explain these measures of variation
Standard deviation
Quartile
Percentile
Updating Survey Data
Why update survey data?
What is the Consumer Price Index (see Table 7-8)
Integrating Internal Job
Structures with External Market
Pay Rates
Explain regression analysis (see glossary).
What two sets of information are needed before
performing regression analysis to establish pay rates?
Pay Structure
$37,000
Pay Grade 3
Annual Salary
$32,000
P
a
y
$30,000
Pay Grade 2
$27,000
$25,000
Pay Grade 1
R
a
n
g
e
$20,000
200-400
401-600
601-800
Job evaluation points
Integrating Internal Job
Structures with External Market
Pay Rates
What is the market pay line?
What is R2?
What does an R2 of 0 mean?
What does an R2 of .52 mean?
What does an R2 of 1.00 mean?
Compensation Policies and
Strategic Mandates
Explain:
Market lead policy
Market lag policy
Market match policy
Questions on Compensation
Policies and Strategic
Mandates
Which pay policy best fits a company using a cost
leadership strategy?
Which pay policy best fits a company using a
differentiation strategy?
What is a pay mix policy?