Market Rate Survey & Pay Structures

8/8/2019 Market Rate Survey & Pay Structures

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Definitions` Ed Schein

An unwritten set of expectations operating at times between everymember of an organisation and the various managers and others inthat organisation.

` D. Rousseau and Wade-Benonzi.K

Psychological contracts refer to beliefs that individual hold

regarding promises made, accepted and relied upon betweenthemselves and another «.. Because psychological contractsrepresent how people interpret promises and commitments, bothparties in the same employment relationship (employer andemployee) can have different views regarding specific terms.

` Definition by R. Sims

The set of expectations held by the individual employee

that specify what the individual and organization expect togive and receive from one another in the course of theirworking relationship.

Aspects of relationship

Employees Expectations

` How she/he is treated in terms of fairness, equity andconsistency:

` Security of employment:` Scope to demonstrate competence:

` Career expectations and the opportunity to develop skills;

` Involvement and influence;

` Trust in the organization to keep its promises;

` The expectation that she/he will be managed competently.

Aspects of relationship

Employers Expectations

` Competence:

` Effort:

` Compliance:

` Commitment:

` Loyalty

` Changing dimensions with

shorter careers, constant change in roles, leaner organisations,lateral growth, greater demands on employees

involves emotions, behavioural dimensions

` Types of Motivation

Intrinsic Motivation

- job content and empowerment orientedExtrinsic Motivation

action done to motivate people throughrewards«..

` Basic Concepts

Needs theory

Goals theory ( specific, reachable, reasonable, involves participation)

Reinforcement theory

Expectancy Theory( change in behaviour will lead to reward,

reward is worth the behaviour change)

Attribution Theory( people having the feeling that they can change

things and have control)

Self-efficacy ( belief in one·s ability to perform a task)

M oney and motivation

1. The ¶economic man· approach- money as the main motivator

2. Herzberg·s two factor model- money as a hygiene factor

( demotivates if not present but does not motivate on its own)

3. Instrumental Theory- money as an instrument

4. Equity Theory- money compared with what others get

5. Expectancy Model - motivation will be strong if employees expect that

their contributions will pay worthwile rewards

` Achievement

` Recognition

` Responsibility

Influence` Personal Growth

Intrinsic value

Internal & External relativities

Inflation & Market Movement

Business performance IR issues

` Market worth

` Skill level

` Performance level

` Expresses what the organisation values and is prepared to reward people for

- importance attached to pay

- use of non-financial or intrinsic rewards

- extent of differential according to performance or skill

- equity, flexibility,

- authority of line managers

` T he deliberate utilisation of the pay system as an essential

integrating mechanism through which the efforts of various sub-units and individuals are directed toward the achievement of anorganisation·s strategic objectives- Gomex-Mejia and Balkin

Why make market rate surveys?

1. To decide on starting rates

2. Modify and Design Pay structures3. Check what is acceptable

4. Understanding benefit systems.

1. Job title ² can be misleading

2. Job description with responsibility

3. Capsule job description

4. Full job description

5. Job evaluation

There is no definitive market rate for any job.There are bound to be variations in sample and job matching.

´ No salary can be Correctµ for any given job.

Market range will help you decide two things:-

1) Rate for ¶a· job

2)¶Pay range· for all individuals in the job

Market rate surveys are conducted by matching jobs in:

1. Function2.

Sector3. Industry Classification4. Location5. Size of organisation6. Range of responsibilities7. Level of responsibility

What are the sources of data

1. Published surveys2. Specialized surveys3. Company surveys4. Survey clubs5. Journal, newspaper, press6. Job ad analysis7. Market intelligence

8. Grapevine

Variables will be according to

Region Location

Industry

Size of Organisation

What type of data do Market rate surveys collect:-1.Base pay2.Cash bonuses3.Total earnings (What cash earnings)4.Employee benefits5.Other allowances6.Total remuneration7.Information on Salary structure

Material factor defense

Where difference in pay is due to discrimination

that cannot be justified by the employer, than itcannot be a material factor defence.

PROF. RITA RANGNEKAR

Provides a framework within which an

organisation defines the different levels ofpay.

Type of Pay Structures

1. Graded Pay structure2. Broadbanded Pay Structure

3. Job family structures

1. Individual job ranges2. Benefit grade structures3. Pay curves4. Spot rate structure5. Pay spines6. Pay structures for manual workers7. Intergrated pay structures8. Rate for wage scales

Pay structures

1. Internal Relativities

2. External Comparisons3. Individual Job Ranges

4. Benefit grade structure

WHY HAVE PAY STRUCTURES?

Good Pay Structures allow for

Flexibility, Mobility, Consistencyaccommodating performance and

rewards skill, contribution, competence

` Separate Pay range for each job

- For varied job sizes, job content

` Superimposed over and above individualstructures

` Consists of jobs in a function or discipline

` Eg ² scientists, specialists , teachers

` a development of job family structures

` May have different methods of handling paydetermination and pay progression

` Each family has different tracks to allow peopleto move according to their competence level

` Ad-hoc determination

` A series of incremental points extending fromthe lowest to the highest in a particular band inthe whole structure

` E.g. Government jobs

` Minimum no of grades

` Very straightforward and broad

` Very delicate

Lays down work units to be done

` Sequence of Job Grades with a pay rangeattached to each grade

Size of ranges as based

Minimum to maximum

Room for flexibility, progression andadjustment , performance

` Make-up

Semi-Structured

Fully Structured

Performance zonedProgression zoned

High performance/High reward zoned

` Progession zones Learning zone

Competent Zone

Premium Zone

` Advantages

` Disadvantages

Compression of a hierarchy of pay grades into asmall number of wide bands

` Broad grade Structure- a number of salary bands arecollapsed into 7 to 8 grades

` Career Band structures- only four or five bandsare used , focus in flexibility and individual career growth

` Not many bands

` Wide pay spans

` Lateral career development

Less hierarchy` Less concern for structure

` Pay decisions with line manager

` No pay limits in some bands

` No analysis or job evaluation

` Levels could be market driven

Why broadbanding?

Advantages Disadvantages

` Number of bands depend on value added tiersin the organisation

` Width of bands depends on types of roles

` Unstructured broad bands

` Target rates

` Pay zones (bands within bands????) ????

` Competence related progression

` Performance related progression

` Unstructured pay progression

` Equity

` Cost Control

` M ovement between bands

` Job family ² a group of jobs classified onfunction, nature or discipline

` Accountabilities

` Competencies

` T echnical knowledge

` Analyse and review current arrangements` Set objectives and time ²table` Consider costs and budget` Brief employees

` Choose structure` Check market rate` Prepare a detailed design` Communicate and train

` Basis for grading` Number of grades` Grade width` Pay range size

` Range reference pints` Market rates` Overlap` Pay progression

` Point Factor evaluation scheme

` Ranking/market rate method

` Individual job range structure design

` Job family structure design

` Pay curve structure design

` Pay spine structure design

` Pay related to individual performance, contribution,competence or skill

Rationale

` M otivation

` M essage

` Equity

` Contingent Pay critieria

` Individual criteria

` Line of sight criteria

` Why PRP? -

` Why not PRP????

` Culture

` Process

` Attitudes

` Skills and Resources

` Impact

` Assess reasons` Assess reaadiness` Decide` Defines objectives

` Design scheme` Brief and train` Implemnt` Monitor and Evlauae

` M ethod of rewarding people wholly or partly byreference to the level of competence

x Important points

Pay is related to competenceReward people by reference to level ofcompetence

Competence should be demonstrated

` Organisational core competence

` Generic competences ² branch managers ,ccountants etc

` Specific comepetences

` Achievement cluster

` Helping cluster

` Influence cluster

` Managerial cluster

` Cognitive thinking cluster

` Personal effectiveness cluster

` Links pay to the level of skills used in a job

Skill based job slotting

- M ethod of locating an individual in a pay and gradestructure

Eg: unskilled, skilled, semi-skilled

` Why skill based pay??

- Encourage acquisition of skills- Raise quality standards

- Reward learning- Encourage efficiency- Reward expertise- Flexibility

Decide rate of pay for each level

Define order in which kills must be acquired

Decide incremental rewards for acquisitio

Defined skill blocks

Number of Skill Blacks

Design structured trainingprogramme

` Individual piece-work

` Work measured schemes

` Measured Day Work

` Group Incentive schemes

Market Rate Survey & Pay Structures

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