Building Our Workforce
Compensation Base Pay
KS Strategy Map:
Strengthen The People
2
HR’s Role To
Strengthen The People
Strengthen The People
3
Compensation Program Characteristics
Characteristics of an Ideal Compensation Program:
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Internal Equity
External Competitiveness
Affordability
Legally Defensible
Understandable/Saleable
Efficient to Administer
Safeguards the Organization’s Resources
Flexible
Meets the Organization’s Unique Needs
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Base Pay System Types
Single or Flat-Rate System:
!! Each incumbent of a job has the same rate of pay
regardless of performance or seniority.
!! Typically used for elected officials or union hourly workers.
Pro
"! Works well for routine, simple
jobs.
"! Easy to administer.
Con
"! Does not reflect individual
performance or skill
differences.
Base Pay System Types
Time-Based Step-Rate System:
!! Rate is based on longevity in the job.
!! Pay increases occur on a predetermined schedule.
Pro
Con
"! Best suited to routine jobs where "! Does not reflect varying rates of
qualifications of incumbents
incumbents proficiency.
increase with time.
"! Does not reflect performance
"! Enables organization to reward
differences.
long-term employment.
"! Can raise average pay levels
over time even if performance
is below average.
Base Pay System Types
Performance Based/Merit Pay System:
!! Individual’s performance is basis for amount/timing of pay
increases.
Pro
"! Works best where individual
performance is valued and
accurately measured.
"! Rewards and encourages
superior performance.
Con
"! Requires good performance
appraisal systems.
"! Can be manipulated by
supervisor to benefit certain
employees.
"! May discriminate against
protected classes because of
subjectivity.
Base Pay System Types
Productivity-Based System:
!! Pay is determined by the employee’s output.
!! Typically used for production, warehouse type workers.
Pro
Con
"! Works best where emphasis is on "! May sacrifice quality of work
quantity of work and outputs can
without careful supervision.
be accurately measured.
"! May lead to inflexibility in
workforce because employees
"! Encourages high level of
employee productivity.
may want to stay with the job
for which they are paid the
"! Ties pay to the value of the work
most.
performed.
Base Pay System Types
Person-Based System:
!! Knowledge-based system (scientists or teachers).
!! Skill-based system (production environment, assembler).
!! Competency-based system (professional employees).
Pro
"! Works best where skill/
knowledge levels are well defined
and development of employees is
valued.
"! Encourages a flexible and bettertrained workforce.
"! May reduce the need for
specialists.
"! Allows for the use of work teams
that are highly interdependent.
"! Emphasizes cooperation and
teamwork.
Con
"! Can be costly in terms of both
administration and training.
"! Generally results in higher pay
rates.
"! Skills/knowledge must be
effectively utilized to provide
the organization with an offset
to the higher pay rates.
"! May be more difficult to
institute cost controls.
Base Pay Increase Types
Base Pay Increase Types:
General Increase – across-the board increases.
Performance/Merit Increase – based on performance.
Cost-of Living Adjustment (COLA) – based on CPI.
Seniority Increase – time spent in organization or job.
Equity Adjustment – based on internal fairness or external
(market) competitiveness.
!! Promotion Increase – due to promotion into higher valued
level or job.
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Schedule “A” Pay
System - Currently
Knowledge-Based & Time-Based Step Rate System:
!! Pay is based on employees time in profession, time with
the organization, and level of education.
!! Pay increases are pre-determined and a flat rate.
!! Pay increases are based on time in job and additional
education acquired.
!! General across the board increases are given for the new
school year (structure increase).
!! Seniority increases are given for the new school year
(move to higher step).
!! Promotional increases are given when higher level of
education is acquired.
SR Pay System Currently
Performance Based/Merit Pay System:
!! Pay is based on pay grade.
!! Pay grade is determined by evaluating the job considering
job content, market data and internal job comparisons.
!! Pay increases are based on performance or promotion.
!! Pay grade structures have a minimum, middle (midpoint),
and maximum point on the pay range.
!! Placement in the pay range is between minimum to
midpoint considering experience, learning curve, and
internal-pay relationship to comparable jobs.
!! Pay is targeted at midpoint and only a minority of salaries
fall in the upper or maximum end of the range.
!! Merit increase amounts consider current pay, performance
and merit increase guidelines.
Conclusion
!! There are various base pay systems and options to
consider.
!! The chosen base pay system either can support or inhibit
the achievement of the organization’s strategic
compensation, human resources and business goals and
objectives.
!! Implementing an appropriate, effective base pay system
can have a number of positive organizational effects.
!! Implementing an inappropriate, ineffective base pay
system poorly suited to the organization, outdated or
improperly designed can have a negative organizational
effect.
!! Given the impact of base pay systems, the first step is to
determine the desired objectives before designing a new
or revised pay structure.