Establishing Pay Plans by Dr. G C Mohanta

Establishing Pay PlansDr. G C Mohanta, BE, MSc(Engg), MBA,

PhD(Mgt)Professor

Al-Qurmoshi Institute of Business Management Hyderabad

Purpose of Compensation

Saturday, April 8, 2023 2

Motivate & Retain Staff

Attract talent

Contribution based Remuneration

Administratively Efficient

Reward Valued Behavior

Effective Compensation

Ensure Equity

Institutionalized Processes

Legal Compliance

Establishing Pay Plans


Business GoalsBusiness Goals

Business Strategy

Business Strategy

CE

OC

EO

Compensation Philosophy/ activities

serve Business Objectives

Compensation Philosophy/ activities

serve Business Objectives

Business Strategy – This defines the direction in which organization is going in relation to its environment in order to achieve its objectives.

Compensation Philosophy – Consists of a set of beliefs which underpin the reward/compensation strategy of the organization and govern the reward policies that determine how reward processes operate




Business Strategy

Business Strategy

Compensation Plan

Compensation Plan

CompensationStrategy


Non-FinancialRewards


Org.StructureOrg.Structure

CE

OC

EO

HR

Hea

dH

R H

ead

Compensation activities serve Business Objectives

Compensation activities serve Business Objectives

Compensation strategy is periodically reevaluated and

the Compensation plan periodically developed

Compensation strategy is periodically reevaluated and

the Compensation plan periodically developed

Compensation Strategy – defines the intentions of the organization on reward policies, processes and practices required to ensure that it has the skilled, competent and well-motivated workforce it needs to achieve its business goals




Business Strategy

Business Strategy

Compensation Plan

Compensation Plan






CE

OC

EO

HR

Hea

dH

R H

ead

Compensation activities serve

Business Objectives


Business Objectives

Compensation strategy is periodically

reevaluated and the Compensation plan

periodically developed




A strategic perspective on compensation takes the position that how employees are compensated can be a source of sustainable competitive advantage




Business Strategy

Business Strategy

Compensation Plan

Compensation Plan

Market SurveysMarket Surveys



Job EvaluationJob Evaluation

Unit InputsUnit Inputs

Total remuneration

Total remuneration

Performance ManagementPerformance Management




Performance linked Pay

Performance linked Pay

Individual PayIndividual Pay

Contribution/outputs

Contribution/outputs

Internal EquityInternal Equity External EquityExternal Equity

CE

OC

EO

HR

Hea

dH

R H

ead

Em

plo

yee

Em

plo

yee

C &

B/S

MC

& B

/S M

Pay levels /structures

Pay levels /structures


Business Objectives


Business Objectives







Compensation Manager, along with

team is responsible for carrying out

compensation related activities

Compensation Manager, along with

team is responsible for carrying out

compensation related activities


Compensation Plan Design

Job Analysis

Job Description

Market Wage Survey

Job Evaluation

Pay Structure

7

Job Analysis• Process to identify & determine particular job duties and requirements • Relative importance of duties• Judgments are made about data collected on job • Used in compensation to identify or determine:

•skill levels •compensable job factors •work environment•responsibilities•required level of education

8

Job Description

- Output from job analysis used to develop job description and its specification- Summarize job analysis information in readable format - Provide basis for job-related actions - Identify individual jobs by providing documentation- Identify tasks, duties and responsibilities of a job- Describes what is done, why it is done , where it is done, and how it is done .

9

Job Evaluation

The methods and practices of ordering jobs or positions with respect to their value or worth to the organization.

10

Market Wage Surveys

- Goal of market wage surveys is to find data from employers with whom organization competes for employees - Data collected & analyzed - Simplest analysis involves comparing going market rate & approximating this rate within organization's own pay structure

11

Methods of Wage SurveysGenerally three methods are

employed for wage surveys;• Personal Interviews• Mailed Questionnaires• Telephone Inquiries

12

Pay Structure

-Basis for establishing pay plan is pay structure - Hierarchy of jobs with pay ranges and/or rates assigned - Pay structures designed so that greater the worth of a job, higher the pay grade and range

13

Objectives of Pay Plans• Internal equity. • External equity (or competitiveness), • Individual equity, • Process equity, • Performance or productivity incentives, • Maximum use of financial resources, • Compliance with laws and regulations,

and • Administrative efficiency

14