Building Market- Competitive Compensation Systems MGT 4543 Compensation Management Chapter 7

Class Activity: Using Salary.com to gather compensation data Information on salary (national & local) Information on benefits Information on cost of living Questions to answer: What is the base pay? What are the pay incentives? What are benefits worth?

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What is the median salary?

Go to the benefits tab

What is the base pay? What are the pay incentives? What are benefits worth? What is the total compensation?

Cost of Living Calculator ayoutscripts/coll_start.aspx It will compare salary & cost of living in two locations It will tell you how much you would have to earn in a new location to maintain the same standard of living.

Cost of Living Calculator – enter median salary & 2 locations

What is the net change in income? What is the typical salary in location 1? What is the typical salary in location 2?

Questions on Market- Competitive Pay Systems Why is it important to have market-competitive pay systems? Market-competitive pay systems are based on what four activities? Name and describe them.

Questions on Compensation Surveys What is a compensation survey? What is a strategic analysis?

Questions on Compensation Surveys Preliminary considerations What are some things that companies hope to gain from compensation surveys? What are the the reasons companies choose not to develop and implement their own compensation surveys?

Questions on Compensation Surveys Using published compensation survey data Explain the difference between focusing the survey on core or employee benefits What are some sources of published compensation survey data?

Questions on Compensation Surveys Explain the information provided by the following BLS online resources: National Compensation Survey Employment Cost Index

Questions on Strategic Considerations for Compensation Surveys What is the “ relevant labor market ” ? What is occupational classification? What is a benchmark job? Why can it be hard to find a perfect match?

Questions on Compensation Survey Data Explain these survey data characteristics and how they influence its interpretation Amount of information Timeliness of information

Questions on Compensation Survey Statistics What is central tendency? Describe the following measures of central tendency: Mean Median

Questions on Compensation Survey Statistics What is variation? Explain these measures of variation Standard deviation Quartile Percentile

Questions on Updating Survey Data Why update survey data? What is the Consumer Price Index (see Table 7-7)

Questions on Integrating Internal Job Structures with External Market Pay Rates Explain regression analysis (see glossary). What two sets of information are needed before performing regression analysis to establish pay rates?

Pay Structure $27,000 Pay Grade 1 $20,000 $32,000 Pay Grade 2 $25,000 $37,000 Pay Grade 3 $30,000 Pay RangePay Range Job evaluation points Annual Salary Market pay line

Questions on Integrating Internal Job Structures with External Market Pay Rates What is the market pay line? What is R 2 ? What does an R 2 of 0 mean? What does an R 2 of 1.00 mean?

Questions on Compensation Policies and Strategic Mandates Explain: Market lead policy Market lag policy Market match policy

Questions on Compensation Policies and Strategic Mandates Which pay policy best fits a company using a cost leadership strategy? Which pay policy best fits a company using a differentiation strategy? Can more than one pay policy be used simultaneously?