Review Case Study and Integrated Application Exercises Designing A Pay Structure By Lisa A. Burke, Ph.D., SPHR
Complete the following task:
Task F: Calculate the predicted base pay for each benchmark job.
Next, adjust the market pay line based on the organization's lead pay level strategy; this will create the pay policy line. Since the organization wants to lead the market by 3 percent across the operations, office support and HR job families, adjust the market pay
line accordingly (by 3 percent). In other words, each predicted pay rate can be multiplied by 1.03 to get a new base pay rate that is
3 percent above market.
Task G: Because your company wants to lead in base pay by 3 percent, adjust the predicted pay rates to
determine the base pay rate you will offer for each benchmark job.
Next, create pay grades for the pay structure. Pay grades represent groupings of jobs that are similar for pay purposes (i.e., of similar value to the organization). All the jobs in a pay grade share the same pay range (minimum and maximum pay rates).
Examine the benchmark jobs in this case again and determine which ones are sufficiently similar for compensation purposes. Do this by revisiting the job evaluation results.
Task H: Create pay grades by combining any benchmark jobs that are substantially comparable for pay purposes. Clearly label your pay grades and explain why you combined any benchmark jobs to form a grade.
The final step to designing the pay structure is to set the pay ranges for each pay grade. Pay ranges create upper and lower pay rates (on the Y axis) for each job in the pay grade. Each pay grade will have a minimum and maximum pay rate. It is important to
remember that all jobs in a pay grade will have the same minimum and maximum pay rates.
Percent guidelines are used to determine how far above and below the midpoint the pay range will reach. For example, the maximum might be 10 percent above the midpoint and the minimum might be 10 percent below the midpoint.
The percent guidelines, based on input from the job evaluation committee, are:
• Clerical and office positions: 10 percent above and below the midpoint.
• Entry to mid-level professional and management positions: 30 percent above and below the midpoint.
Task I: Use your answer to Task H to determine the pay range (i.e., minimum and maximum) for each pay grade.
Task J: Given the pay structure you have generated, consider the following:
Does this pay structure make good business sense? Do you think it is consistent with the organization's business strategy?
What are the implications of this pay structure for other HR systems, such as retention and recruiting?