1. Chapter 11 Learning Objectives
Identify the kinds of decisions involved in establishing a pay structure.
Summarize legal requirements for pay policies.
Discuss how economic forces influence decisions about pay.
Describe how employees evaluate the fairness of a pay structure.

2. Chapter 11 Learning Objectives (continued)
Explain how organizations design pay structures related to jobs.
Describe alternatives to job-based pay.
Summarize how to ensure that pay is actually in line with the job structure.
Discuss issues related to paying employees serving in the military and paying executives.

3. Organizational Pay Considerations

4. Decisions About Pay

5. Issues in Developing a Pay Structure

6. Legal Requirements for Pay

7. Minimum Wage
At the federal level, the Fair Labor Standards Act establishes a minimum wage of:
$7.25 per hour as of July 2009
The FLSA also permits a lower “training wage”
Overtime is 1.5 times the rate after 40 hours
Child Labor provisions apply to children under 18 years of age

8. Legal Requirements for Pay: Prevailing Wages
Two federal laws govern pay policies of federal contractors:
Davis-Bacon Act of 1931
Walsh-Healy Public Contracts Act of 1936
Under these laws, federal contractors must pay their employees at rates at least equal to the prevailing wages in the area.
Prevailing Wage determinations

9. Economic Influences on Pay
Product Markets
Labor Markets
The organization’s product market includes organizations that offer competing goods and services.
Organizations compete on quality, service, and price.
The cost of labor is a significant part of an organization’s costs.
Organizations must compete to obtain human resources in labor markets.
Competing for labor establishes the minimum an organization must pay to hire an employee for a particular job.

10. Job Structure: Relative Value of Jobs
Job Evaluation
Compensable Factors
An administrative procedure for measuring the relative internal worth of the organization’s jobs.
The characteristics of a job that the organization values and chooses to pay for.
Experience
Education
Complexity
Working conditions
Responsibility

11. Job Evaluation Methods

12. Pay Structure: Putting It All Together

13. Pay Policy Line

14. Pay Grades and Ranges

15. Pay Range Factors Red Circle Rates Green Circle Rates
Pay differentials

16. Alternatives to Job-Based Pay
Skill-Based Pay Systems
Delayering
Reducing the number of levels in the organization’s job structure.
More assignments are combined into a single layer.
These broader groupings are called broad bands.
Pay structures that set pay according to the employees’ levels of skill or knowledge and what they are capable of doing.
This is appropriate in organizations where changing technology requires employees to continually widen and deepen their knowledge.

17. Current Issues in Pay Pay During Military Duty Pay for Executives
How should companies handle employees who are called for active duty in the military for extended time periods?
The Uniformed Services Employment and Reemployment Rights Act (USERRA)
Pay for Executives
Based on equity theory, how does executive compensation affect employees?

18. Average CEO Pay in S&P 500 Companies
Bonus