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Establishing a Pay Structure

31 important questions on Establishing a Pay Structure

What are the 2 aspects of pay structure?

1. Job structure - Relative pay for different functions within the organisation
2. Pay level - Average amount the organisation is going to pay a specific job

What 3 factors influence pay structure?

1. Legal requirements
2. Market forces
3. Organisation's goals

What is the comparable worth public policy?

Uses job evaluation to establish the worth of an organisation's jobs in terms of their difficulty and importance to the company. Scores are compared and pay adjusted accordingly

What is the Lilly Ledbetter Fair Pay Act?

Act that allows employees claiming discrimination to treat each pay-check as an instance of discrimination

What forces decide the upper and lower bound of pay level respectively?

Upper: the product market competition
Lower: Labour market

What is the equity theory?

Theory that states that employees look at their own ratio of outputs in comparison to that of other workers, and that their conclusions depend on what they choose as a standard of comparison

What 3 reactions to employees have to under-rewarding?

1. Put forth less effort
2. Find a way to increase their outcomes
3. Withdraw by leaving or refusing to cooperate

What is a market pay policy line?

A mathematical expression that describes the relationship between a job's pay and its job evaluation points, which line is used to estimate the market pay level for a job

What are pay grades?

Sets of jobs having similar worth or content grouped together to establish rates of pay

What are the requirements of an effective incentive pay plan?

1. Performance measures are linked to organisation's goals
2. Employees believe they can meet performance standards
3. Organisation gives employees the resources needed to meet goal
4. Employees value rewards given
5. Employees think reward system is fair
6. Pay plan takes into account that employees may ignore goals that are not awarded

What are the 3 categories of incentive pay?

1. Incentives linked to the individual
2. Incentives linked to the group
3. Incentives linked to organisational performance

What is a piecework rate?

When companies pay employees per unit produced

What is the difference between a straight piecework plan and a differential piece rate?

In a straight plan the firm always pays the same rate per piece, in a differential plan the rate rises and falls depending on the amount produced

What is the standard hour plan incentive?

Quantity-oriented way that pays workers extra for work done in less than a preset standard time

What is a merit pay incentive?

System of linking pay/bonus increases to ratings on performance appraisals. Using a merit increase grid for this

What is a merit increase grid?

Grid that lists which performance is linked to which compa-ratio, and uses this to establish size and frequency of pay increases

What is a retention bonus?

Paying a bonus to employees you wish to keep in turbulent times

What is a straight commission plan?

Plan in which employees earn only based on commission

What are the 3 main forms of team incentives?

1. Gainsharing
2. Bonuses
3. Team awards

What are the necessary conditions for gain sharing to succeed?

1. Management commitment
2. Need for change/ strong commitment to continuous improvement
3. Management acceptance and encouragement of employee input
4. High levels of cooperation and interaction
5. Employment security
6. Information sharing on productivity and costs
7. Goal setting
8. Commitment of all involved parties to the process of change and improvement
9. Performance standard/calculation that employees understand and find fair
10. Employees who value working in groups

What is the Scanlon plan?

Gainsharing program in which employees receive a bonus if the ratio of labour costs to sales value of production is below a set standard

What is profit sharing?

Compensation plan in which payments are a % of the organisation's profits and do not become part of the employees' base salary

What are the 2 forms of stock compensation plans?

1. Giving stock options to employees
2. Employee stock ownership plans - give employers tax/financial advantages when stock is granted to employees

What is a balanced scorecard?

Combination of performance measures directed towards the company's long- and short-term goals that is used as a basis of awarding incentive pay

What are the short- and long-term executive incentives respectively?

Short:
1. Bonuses based on yearly profits
2. Return on investment

Long:
1. Stock options
2. Stock purchase plans

Long-term is associated with greater profitability

What are the 3 categories of rewards?

1. Financial incentives
2. Non-financial tangible rewards
3. Intangible rewards

What are the 4 reward methods to attract new graduates?

1. High pay (materialistic nature)
2. Individual pay (individualism)
3. Fixed pay (risk-aversion)
4. Flexible benefits (internal locus of control)

What is the HR attribution theory?

Employees will seek out explanations for why HR practices are in place. This informs their reactions

What are the 4 attributions of a commitment and control based strategy?

1. Wellbeing (commitment, to help you feel more satisfied at work)
2. Performance (commitment, to help you be more effective)
3. Cost-saving (control, to save operational costs)
4. Exploitation (control, to force you to work harder)

What 2 things do employees base their evaluation of compensation on?

1. Satisfaction
2. Fairness

What are the 3 drivers of pay satisfaction?

1. Pay raise (not significant)
2. Discrepancy
3. Interpersonal

The question on the page originate from the summary of the following study material:

Human Resource Management

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