Research and Analysis
Assignment: Pay for Performance
Overview: RA 4 builds on your chapter readings on performance evaluation, managing compensation, and pay for performance.
A worksheet has been prepared for you listing your 12 employees, their current salaries and their annual performance ratings which you have determined. The current salary range for a Payroll Clerk 1 at the firm, Delta Business Services (a fictional company), is:
- Minimum $12.42/hr $25,833/annual
- Midpoint $14.90/hr $31,000/annual
- Maximum $17.39/hr $36,166/annual
The salary range for the Payroll Clerk I at Delta Business Services is competitive with the market, as a local survey reports an average median of $27,200 - $34,900 for this position.
As the Supervisor of this payroll unit, you have been given the task of recommending annual merit increases for your subordinates. Last month you completed annual performance discussions with each member of your unit. This month you are tasked with determining how best to distribute the merit budget, and prepare salary discussions for each of your employees.
You have been provided a 3% merit budget to award your team as you see fit. You have similarly been provided a graph illustrating performance vs. pay for your 12 employees. The graph notes how each employee's performance compares to the salary range. This illustration should be helpful in your understanding of how performance for each your employees compares to the pay they are currently receiving. This should be helpful in making award decisions. Consider presenting your work using the Excel worksheet provided. Insert new columns and/or rows as needed. Submit your work via the Assignments link in Bb.
Assignment requirements:
1. Calculate the 3% merit budget (merit pool is determined by computing 3% of the total salary of your team).
2. Compute each employee's compa-ratio (current salary divided by the midpoint). This value represents the relative position of the employee's current salary to the market (low, equal, high) and can be useful in making award decisions.
3. Determine how best to distribute the merit pool based on the principle of "pay for performance". Merit increases should be expressed both in dollars and as a percent of the employee's current base pay.
4. Compute the new salary (merit increase + current salary).
5. Compute the participation rate for the department (# of employees receiving merit increases divided by the total # of employees in the department). This value represents the % of employee in the department receiving an increase. Too high a percent infers that there is little performance/reward differentiation; too low a percent infers possibly an unrealistic performance/reward threshold. Both ends of the participation rate continuum could affect morale, performance, and result in turnover.
6. Prepare a statement for each of the 12 employees that affirms your decision to performance/award decision. Your message must reference data from the performance evaluation.
Attachment:- Pay for performance worksheet.xls