Designing Pay Structure, Levels, and Mix
Designing Pay Structure, Levels, and Mix
Designing Pay Structure, Levels, and Mix
STRATEGI
C
POLICIES
ALIGNMENT
COMPETITIVENES
S
CONTRIBUTORS
STRATEGI
C
OBJECTIV
ES
TECHNI
QUES
Work
Descriptions
Evaluation/
INTERNAL Analysis
Certification
STRUCTURE
Market
Surveys
Definitions
STRUCTURE
Policy
Lines
Seniority
Performance
Merit
INCENTIVE Based
Based
Guidelines PROGRAMS
PAY
EFFICIENCY
Performance
Quality
Customers
Stockholders
Costs
FAIRNESS
ADMINISTRATION
COMPLIANC
E
Determining Externally
Competitive Pay Levels and
Structures
External
competitive
ness: Pay
relationship
s among
organizatio
ns
Merge
Internal
&
External
Pressure
Some Major Decisions in Pay Level
s
Set
Policy
Define
Market
Conduc
t
Survey
Draw
Policy
Lines
Determination
Competitiv
e Pay
Levels,
Mix and
Structures
Extrinsic:
All things onto
which we can
assign a rupee
value
Quality-of-Work &
-Life
Affiliation
Development
Security of
Employment
Other Non-Cash
Rewards
Cars
Clubs
Company Housing
Perquisites
Retirement
Health & Welfare
Time off w/Pay
Statutory Programs
Stock
Stock
Cash
AnnualIncentive
Basic Salary
Reimbursement +
Allow.
Insurance premiums
T O T A L
T O T A L
Benefits
LTA
Annual Variable
Base Cash
TOTAL
T
O
T
A
L
C
A
S
H
D
I
R
E
C
T
PA
Y
R
E
M
U
N
E
R
A
T
I
O
N
E
W
A
R
D
Salary Survey
A
Surveys
Adjust
Adjust
Pay Structure?
Special
Situations
Estimate
Employers
Employers
Total Cash
(base +
bonus)
Total
Compensatio
n
(base +
bonus +
stock options
+ benefits)
Scatterplot
7
survey
6
monthly
salary
5
(Rs.0000)
4
PAY
3
2
1
80
120
160
200
240
280
320
360
PAY
3
2
80
120
160
200
240
280
320
360
PAY
3
2
1
80
120
160
200
240
280
320
360
External Pressures:
a.
b.
Internal Pressures:
a.
b.
Constructing Ranges:
Develop Grades
A
Constructing Ranges:
Develop Grades
The
Pay
Constructing Ranges:
Establishing Midpoint,
Minimum, and Maximum
Constructing Ranges:
Establishing Midpoint,
Minimum, and Maximum
Midpoints
correspond to the
competitive pay policy
The point where the pay policy line
crosses each grade becomes the
midpoint of the pay range for that
grade
Midpoints are the control point of the
range
PAY
IV
III
II
100
150
200
250
300
350
DIFFERENT PAY
STRUCTURE
Spot Salaries
x
x
R
s
x
x
x
Broad Bands
Multiple Grades
x
x
R
Rs
Jobs
Jobs
Jobs
Number Bands
4-5 Bands
6 or more Grades
Range Width
100%
30%-50%
Overlap
50%
20% - 40%
Market Anchors
Pay Zones
Midpoints based on
market rates
Job Evaluation
Control
Market Anchors
Pay Zones
DIFFERENT PAY
STRUCTURE
Flexibility
Market Sensitive
Spot Salaries
R
s
xx x
x
x xxx
Broad Bands
Flexible
Responsive to the
market
s
Jobs
Risks
Multiple Grades
x
x
Jobs
Advantages
Control
Internal Equity
Enhances organisational
flexibility
Framework for managing pay
and career development
Allows for reward for growth
within band
Emphasis on individual
contribution and market
Can be used to determine
benefits eligibility
Could lead to issues with
internal relativities
Employees may perceive lack
of promotional opportunities
Jobs
Control Labour
Costs
Attract and
Retain
Employees
Market Match
Benefit
s 20%
Base
50%
Options
4%
Bonus
6%
Base
70%
Bonus
17%
Work - Life Balance
Benefit
s 30%
Base
50%
Options
10%
Bonus
10%
Security
(Commitment)
Benefit
s 20%
Base
80%