Human Resource
Management
1
ELEVENTH EDITION
GARY DESSLER
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
trends in compensation.
© 2008 Prentice Hall, Inc. All rights reserved.
11–2
Basic Factors in Determining
Pay Rates
Employee
Compensation
Direct Financial
Payments
(wages, salaries, incentives ,
commission , and bonuses)
© 2008 Prentice Hall, Inc. All rights reserved.
Indirect Financial
Payments
(financial benefits ,like
employer-paid insurance and
vacation)
11–3
Equity and Its Impact on Pay Rates
Forms of Equity
External
Equity
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Internal
Equity
Individual
Equity
Procedural
Equity
11–4
Addressing Equity Issues
Salary Surveys
Methods to
Address Equity
Issues
Job Analysis and
Job Evaluation
Performance Appraisal
and Incentive Pay
Communications, Grievance
Mechanisms, and Employees’
Participation
© 2008 Prentice Hall, Inc. All rights reserved.
11–5
The Salary Survey
Step 1. The Wage Survey:
Uses for Salary Surveys
To price
benchmark
jobs
© 2008 Prentice Hall, Inc. All rights reserved.
To marketprice wages
for jobs
To make
decisions
about benefits
11–6
Sources for Salary Surveys
Sources of Wage and
Salary Information
Consulting
Firms
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Professional
Associations
Government
Agencies
The
Internet
11–7
Establishing Pay Rates (cont’d)
Skills
Effort
Step 2. Job Evaluation:
Identifying
Compensable Factors
Responsibility
Working Conditions
© 2008 Prentice Hall, Inc. All rights reserved.
11–8
Establishing Pay Rates (cont’d)
Methods for
Evaluating Jobs
Ranking
Job
Classification
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Point
Method
Factor
Comparison
11–9
Establishing Pay Rates (cont’d)
Point Method
Step 3. Group
Similar Jobs
into Pay Grades
Ranking Method
Classification Methods
© 2008 Prentice Hall, Inc. All rights reserved.
11–10
Pricing Managerial and Professional Jobs
Compensating Executives
and Managers
Base
Pay
© 2008 Prentice Hall, Inc. All rights reserved.
Short-term
Incentives
Long-Term
Incentives
Executive
Benefits and
Perks
11–11
Competency-Based Pay (cont’d)
Why Use CompetencyBased Pay?
Support HighPerformance
Work Systems
© 2008 Prentice Hall, Inc. All rights reserved.
Support
Strategic Aims
Support
Performance
Management
11–12
Other Compensation Trends
• Broadbanding
Consolidating salary grades and ranges into just a
few wide levels or “bands,” each of which contains a
relatively wide range of jobs and salary levels.
Pro and Cons
More flexibility in assigning workers to different job grades.
Provides support for flatter hierarchies and teams.
Promotes skills learning and mobility.
Lack of permanence in job responsibilities can be unsettling
to new employees.
© 2008 Prentice Hall, Inc. All rights reserved.
11–13
KEY TERMS
employee compensation
direct financial payments
indirect financial payments
salary compression
salary survey
benchmark job
job evaluation
© 2008 Prentice Hall, Inc. All rights reserved.
compensable factor
ranking method
job classification (or grading) method
classes
grades
point method
factor comparison method
pay grade
wage curve
competencies
broadbanding
11–14
