Building Internally Consistent
Compensation Systems
Example of Internally Consistent
Compensation Structure
Average Annual Salary
$60,000
$50,000
$40,000
There is a positive relationship
between job worth and salaries!
Manager of Benefits
($58,000)
Benefits Counselor III
($40,000)
$30,000
$20,000
Benefits Counselor II
($26,000)
Benefits Counselor I
($20,000)
Job Worth (skill, effort, responsibility, working conditions)
Example of Internally IN-Consistent
Compensation Structure
Average Annual Salary
$60,000
There is no relationship between job
worth and salaries!
$50,000
$40,000
$30,000
$20,000
Benefits Counselor II
($45,000)
Benefits Counselor I
($32,000)
Manager of Benefits
($39,000)
Benefits Counselor III
($28,000)
Job Worth (skill, effort, responsibility, working conditions)
Figure 7-1
Internally Consistent Compensation
Structure (2 of 3)
• Benefits Counselor I
– Provides basic counseling services to employees and
assistance to higher-level personnel in more-complex
benefits activities. Works under general supervision of
higher-level counselors or other personnel.
• Benefits Counselor II
– Provides skilled counseling services to employees
concerning specialized benefits programs or complex areas
of other programs. Also completes special projects or
carries out assigned phases of the benefits counseling
service operations. Works under general supervision from
Benefits Counselor IIIs or other personnel.
Figure 7-1
Internally Consistent Compensation
Structure (3 of 3)
• Benefits Counselor III
– Coordinates the daily activities of an employee benefits
counseling service and supervises its staff. Works under
direction from higher-level personnel.
• Manager of Benefits
– Responsible for managing the entire benefits function from
evaluating benefits programs to ensuring that Benefits
Counselors are adequately trained. Reports to the Director
of Compensation and Benefits.
Aspects of Job Evaluation
Job Evaluation is:
Assumption
A measure of job
content
Content has an innate value outside of external market.
A measure of relative
value.
Relevant groups can reach consensus on relative value
Link with external
market
Job worth cannot be specified without external market
information.
Measurement device
Honing instruments will provide objective measures.
Negotiation
Puts face of rationality to a social / political process.
Establishes rules of the game.
Invites participation.
Figure 7-1
Phases of the Job Evaluation
Process
•
•
•
•
•
•
•
Choose & train the job evaluation committee.
Select benchmark jobs.
Choose compensable factors.
Define factor degrees.
Determine point values for each factor.
Validate factor degrees and point values.
Evaluate all jobs.
Table 7-10
Characteristics of Benchmark Jobs
• The contents are well known, relatively stable over
time, and agreed upon by the employees involved.
• The jobs are common across a number of different
employers.
• The jobs represent the entire range of jobs that are
being evaluated within a company.
• The jobs are generally accepted in the labor market
for the purposes of setting pay levels.
Source: G.T. Milkovich and J.M. Newman, Compensation 5th ed. (Homewood, IL: Richard D. Irwin, 1996).
Table 7-13
Federal Government Factor Evaluation System (1 of 2)
• 1. Knowledge required by the position
– a. Nature or kind of knowledge and skills needed
– b. How the skills and knowledge are used in doing the work
• 2. Supervisory controls
– a. How the work is assigned
– b. The employee’s responsibility for carrying out the work
– c. How the work is reviewed
• 3. Guidelines
– a. The nature of guidelines for performing the work
– b. The judgment needed to apply the guidelines or develop
new guides
Compensable Factors A Definition (1 of 2)
• Compensable factors are paid-for, measurable
qualities, features, requirements, or constructs
that are common to many different kinds of jobs.
• These factors are qualities intrinsic to the job
and must be addressed in an acceptable
manner if the job is to be performed
satisfactorily.
Compensable Factors A Definition (2 of 2)
• In addition to being quantifiable, compensable
factors should be relatively easy to describe
and document.
• Those involved in using compensable factors
to measure job worth should consistently arrive
at similar results.
Universal Compensable Factors
• Skill: the experience, training, ability, and
education required to perform a job under
consideration - not with the skills an employee
may possess
Universal Factor - Skill
•
•
•
•
•
•
•
•
Technical Know-how
Specialized Knowledge
Organizational Awareness
Educational Levels
Specialized Training
Years of Experience Required
Interpersonal Skills
Degree of Supervisory Skills
Universal Compensable
Factors
• Effort: the
measurement of the
physical or mental
exertion needed for
performance of a job
Universal Factor - Effort
• Diversity of Tasks
• Complexity of Tasks
• Creativity of Thinking
• Analytical Problem Solving
• Physical Application of Skills
• Degree of Assistance Available
Universal Compensable
Factors
• Responsibility: the extent to which an
employer depends on the employee to
perform the job as expected, with emphasis
on the importance of job obligation.
Universal Factor Responsibility
• Decision-making Authority
• Scope of the organization under control
• Scope of the organization impacted
• Degree of integration of work with others
• Impact of failure or risk of job
• Ability to perform tasks without supervision
Universal Compensable
Factors
Working Conditions:
• hazards
• physical surroundings
of the job.
Universal Factor - Working
Conditions
• Potential Hazards Inherent in Job
• Degree of Danger Which Can be Exposed to
Others
• Impact of Specialized Motor or Concentration
Skills
• Degree of Discomfort, Exposure, or Dirtiness in
Doing Job
Table 7-13
Federal Government Factor Evaluation System (2 of 2)
• 4. Complexity
– a. The nature of the assignment
– b. The difficulty in identifying what needs to be done
– c. The difficulty and originality involved in performing the
work
• 5. Scope and effect
– a. The purpose of the work
– b. The impact of the work product or service
• 6. Personal contacts
• 7. Purpose of contacts
• 8. Physical demands
• 9. Work environment
Source: US Civil Service Commission, Instructions for the factor evaluation system ( Washington,
D.C.: US Government Printing Office, 1977).
Example of pay structure
$80
Salary
$40
Job title
Points
Salary
Computer
Programmer
240
$60k
Computer
Service
180
$30k
Systems
Analyst
330
$70k
Computer
Operator
210
$37k
Data Entry
Clerk
150
$33k
0
200
Points
400