Human Resource Management 4: Fundamentals of
Human Resource Management 4: Fundamentals of
Human Resource Management 4: Fundamentals of
CHAPTER 11
Establishing a Pay Structure
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All Rights Reserved. 11-1
What Do I Need to Know?
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What Do I Need to Know? (continued)
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Your Opinion
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Introduction
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Decisions About Pay
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Figure 11.1:
Issues in Developing a Pay Structure
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Legal Requirements for Pay
Minimum wages
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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.
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• Two employees who do the
same job cannot be paid
different wages because of
gender, race, or age.
• It would be illegal to pay
these two employees
differently because one is
male and the other is
female.
• Only if there are differences
in their experience, skills,
seniority, or job
performance are there legal
reasons why their pay might
be different.
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Legal Requirements for Pay:
Minimum Wage
• Minimum wage – the • Fair Labor Standards
lowest amount that Act (FLSA) – federal law
employers may pay that establishes a
under federal or state minimum wage and
law, stated as an requirements for
amount of pay per hour. overtime pay and child
labor.
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Minimum Wage (continued)
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Legal Requirements for Pay:
Overtime Pay
• The overtime rate under the FLSA is 1½ times
the employee’s usual hourly rate, including
any bonuses, and piece-rate payments.
• Exempt employees – managers, outside
salespeople, and other employees not covered
by the FLSA requirement for overtime pay.
• Nonexempt employees – employees covered
by the FLSA requirements for overtime pay.
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Figure 11.2: Computing Overtime Pay
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Overtime Pay (continued)
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Economic Influences on Pay
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• There is currently a strong demand for nurses in
the labor market.
•Hospitals will have to pay competitive wages and
other perks to attract and retain staff.
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Tech Workers Out-Earn Managers
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Pay Level: Deciding What to Pay
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Gathering Information About Market Pay
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Employee Judgments About Pay Fairness
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Pay Equity (continued)
• 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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Test Your Knowledge
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Job Structure: Relative Value of Jobs
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Table 11.1: Job Evaluation of Three Jobs
with Three Compensable Factors
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Job Structure: Defining Key Jobs
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Pay Structure: Putting It All Together
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Figure 11.5:
Sample Pay
Grade Structure
Pay grades – sets
of jobs having
similar worth or
content, grouped
together to
establish rates of
pay.
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Pay Ranges
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Test Your Knowledge
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Pay Differentials
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• Night hours are less desirable for most workers.
• Therefore, some companies pay a differential for
night work to compensate them.
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Alternatives to Job-Based Pay
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Figure 11.6:
IBM’s New Job Evaluation Approach
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Pay Structure and Actual Pay
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Figure 11.7: Finding a Compa-Ratio
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Current Issues in Pay
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Figure 11.8: Average CEO Pay in S&P 500
Companies
Bonus
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Summary
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Summary
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Summary (continued)
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Summary (continued)
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