11 establishing strategic pay plan (revised)
TRANSCRIPT
Continuing Case:Carter Cleaning
Company
Prepared byGroup DynamicKelvin Lye, Wong Shwu Fen & Masood
Establishing Strategic Pay
Plan
Attracting – Developing - KEEPING
Case Details
Problem
Not using rate ranges
Not using compensable factors
No formal wage structure
Case Details
Not using rate ranges
Wage rates• Based on prevailing rates in the
surrounding community• An attempt by Jack to maintain some
semblance of equity between workers with different duties
Pay survey• No formal pay survey• Use want ads almost everyday• Conduct informal survey among
his friends in the trade association
Pay Policy• Paying 10% above what he feels
the prevailing rates• Reasons:
1. Reduce turnover2. Foster employee loyalty
His colleagues pay minimum rates
Case Details
Not using compensate factors
• Using informal policy of paying men about 20% more than women for the same job.
Jack’s Explanation?“They’re stronger and can work harder for longer hours and besides they all have families to support”
Question 3Similarly, is Carter’s male-female differential wise? If not, why not?
Questions
Question 1Is the company at the point where it should be setting up a formal salary structure based on a complete job evaluation? Why?
Question 2Is Jack Carter’s policy of paying 10% more than the prevailing rates a sound one, and how could that be determined?
Question 4Specifically, what would you suggest Jennifer do now with respect to her company’s pay plan?
Question 1Setting up a formal salary structure based on job evaluation? Why?
Need to set up a formal salary structure based on job evaluation
Why?
YES!
High staff turnover
Inconsistent pay rates compared to the market
Different pay rates for male and female workers• Address issues regarding
four forms of compensation equity among employees
Why?
Needs for job evaluation
Question 1Setting up a formal salary structure based on job evaluation? Why?
No employee involvement in setting up salary structure
• Maintain four forms of compensation equity among employees
Why? • No mechanism of communication to address employees’ problems regarding wages or salary
No job evaluation committee
• Employees can give different perspective regarding the nature of the jobs
• Ensure employees view pay process as transparent and procedurally fair
Problem?
What can this committee do?
Question 1Setting up a formal salary structure based on job evaluation? Why?
No compensable factors
• Maintain internal equity among employees
Why?• Evaluate and determine the
relative worth of each job compared to key jobs
• Categorize / rank / classify jobs into rate ranges or pay grades
• Ensure no discrimination in terms of gender, religion and race
• Related to employees’ capability and performance
Question 1Setting up a formal salary structure based on job evaluation? Why?
Purpose?
Skills
Working conditionsResponsibility
Effort
BACK
Question 2Paying 10% more than the prevailing rates a sound move? How to determine?
Paying 10% more
Jack believes that it•reduces turnover •fosters employee loyalty
• Reduce turnover of employees who only concern about the salary rate
• Indirect financial payments and other factors also influence the employees’ turnover
• Provide facts that employees are paid 10% more than prevailing rate
• Only loyal to high pay rate
Attract more applicants for job
BACK
Question 3Is Carter’s male-female differential wise? If not, why not?
Carter’s male-female differential wise?
• Should be based on performance, not gender
Disobey the Equal Pay Act (1963)
Does not maintain individual
equity
Discrimination against female
worker
Inefficient pay plan
NO!
Why?
Question 3Negative effects of male-female differential
Negative effects of male-female differential
Effect for female
Not perform in optimum performance
Increase in turnover
More grievance
More arguments for pay rate
Effect for male
Job dissatisfaction
Encourage counter
productivity
Work stoppages (stop working as part of a protest)
BACK
Question 4Suggestions with respect to CCC’s pay plan
• We suggest her to set up a logical pay plan properly . • This process is time-consuming and may need further
modification.
Jennifer and Jack shall take these steps to establish an efficient pay plan:
Conduct salary survey
Evaluate each job
Group jobs
Price pay grades
Question 4Suggestions with respect to CCC’s pay plan
Conduct salary survey
The best source of salary information in this case is:1.Self-conducted Survey2.Professional and governmental resources (with lower consideration)
Question 4Suggestions with respect to CCC’s pay plan
Conduct salary survey(Self-conducted survey)
Since it is not their first time to be in the market, John and other managers are already familiar with the salary survey. So: 1.First step is to price benchmark jobs.
• For each job in their company such as cleaner-presser, they finding a benchmark to evaluate the value of the job to company is necessary
2.Second Step is to compare each job pay rate with other companies• This is to determine the pay level of market (External Equity)
3.Third Step is collecting data on benefits such as insurance, vacation payment, and etc.
• It is very crucial to determine the employee’s benefits. • According to the Labor Acts, employee’s have certain rights, financial or
spiritual rights, which shall be compensated.
Question 4Suggestions with respect to CCC’s pay plan
Conduct Job Evaluation
There are various evaluation methods but the best job evaluation method for the job description of cleaner-spotters, pressers is Point Method
Definition Relative weight
Total point Minimum point value
1. Skill
The complexity of skill required for performing this job
35% 84 42
2. Effort
The level of physical or mental effort required
35% 84 42
3. Working Conditions
The working conditions, environment and stress level
10% 24 12
4. Responsibility
The level of responsibility of the employee for the job
5% 12 6
5. Education
The Level of education required for the job
5% 12 6
6. Work experience
The working experience of the worker in related fields
10% 24 12
Question 4Suggestions with respect to CCC’s pay plan
Grouping similar jobs into pay grades
There are four main jobs discussed in the case:Store managers, cleaner-spotters, pressers and counterpeople
Counterpeople, cleaner-spotters and pressers in
all branches in one Pay Grade.
Store managers in all branches
in one Pay Grade.
As we know pay grades are comprised of jobs with similar difficulty or importance, hence:
Question 4Suggestions with respect to CCC’s pay plan
The graph shows an example of wage curve for the store worker’s cluster (cleaner-spotters and pressers)
Price each pay grade by plotting wage curve
Acknowledgement
Thank You!