CHAPTER 11 ESTABLISHING A PAY STRUCTURE

Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

FUNDAMEN

TALS

OF

HUMAN RESOURCE

MANAGEMENT

5TH E

DITIO

N

BY R

.A. N

OE, J.

R. HOLL

ENBECK, B

.

GERHART, A

ND P.M. W

RIGHT

CHAPTER 1

1 ESTA

BLISHIN

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A PAY

STRUCTU

RE

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Decisions About Pay

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Legal Requirements for Pay:Equal Employment Opportunity

• Employers must not base differences in pay on an employee’s age, sex, race, or other protected status.

• Any differences in pay must be tied to such business-related considerations as job responsibilities or performance.

• The goal is for employers to provide equal pay for equal work.

• Employers must not base differences in pay on an employee’s age, sex, race, or other protected status.

• Any differences in pay must be tied to such business-related considerations as job responsibilities or performance.

• The goal is for employers to provide equal pay for equal work.

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Legal Requirements for Pay:Minimum Wage

Minimum wage –lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour.

Minimum wage –lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour.

Fair Labor Standards Act (FLSA) – federal law that establishes a minimum wage and requirements for overtime pay and child labor.

Fair Labor Standards Act (FLSA) – federal law that establishes a minimum wage and requirements for overtime pay and child labor.

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Legal Requirements for Pay:Overtime PayOvertime rate under FLSA is 1½ times employee’s usual hourly rate, including any bonuses, and piece-rate payments.•Exempt employees – managers, outside salespeople, and other employees not covered by FLSA requirement for overtime pay.•Nonexempt employees – employees covered by FLSA requirements for overtime pay.

Overtime rate under FLSA is 1½ times employee’s usual hourly rate, including any bonuses, and piece-rate payments.•Exempt employees – managers, outside salespeople, and other employees not covered by FLSA requirement for overtime pay.•Nonexempt employees – employees covered by FLSA requirements for overtime pay.

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Employee Judgments About Pay Fairness Employees compare their pay and

contributions against three yardsticks:1. What they think employees in other

organizations earn for doing the same job.2. What they think other employees holding

different jobs within the organization earn for doing work at the same or different levels.

3. What they think other employees in the organization earn for doing the same job as theirs.

Employees compare their pay and contributions against three yardsticks:1. What they think employees in other

organizations earn for doing the same job.2. What they think other employees holding

different jobs within the organization earn for doing work at the same or different levels.

3. What they think other employees in the organization earn for doing the same job as theirs.

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Pay Equity

If employees conclude that they are under-rewarded, they are likely to make up the difference in one of three ways:

1. They might put forth less effort (reducing their inputs).2. They might find a way to increase their outcomes (e.g.,

stealing).3. They might withdraw (by leaving the organization or

refusing to cooperate).•Employees’ beliefs about fairness also influence their willingness to accept transfers or promotions.

If employees conclude that they are under-rewarded, they are likely to make up the difference in one of three ways:

1. They might put forth less effort (reducing their inputs).2. They might find a way to increase their outcomes (e.g.,

stealing).3. They might withdraw (by leaving the organization or

refusing to cooperate).•Employees’ beliefs about fairness also influence their willingness to accept transfers or promotions.

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Job Structure: Relative Value of Jobs

Administrative procedure for measuring relative internal worth of the organization’s jobs.

Administrative procedure for measuring relative internal worth of the organization’s jobs.

5 characteristics of a job that the organization values and chooses to pay for.

1. Experience2. Education3. Complexity4. Working conditions5. Responsibility

5 characteristics of a job that the organization values and chooses to pay for.

1. Experience2. Education3. Complexity4. Working conditions5. Responsibility

Job Evaluation Compensable Factors

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Job Structure: Defining Key Jobs

Key Jobs – jobs that have relatively stable content and are common among many organizations.•Organizations can make the process of creating the job and pay structures more practical by defining key jobs.•Research for creating the pay structure is limited to key jobs that play a significant role in the organization.

Key Jobs – jobs that have relatively stable content and are common among many organizations.•Organizations can make the process of creating the job and pay structures more practical by defining key jobs.•Research for creating the pay structure is limited to key jobs that play a significant role in the organization.

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Pay Structure: Putting It All Together