MGMT Managing Employee Reward Systems Salary Structures and Pay Grade Dimensions Pay Grade Width –Distance from min. to max. of range –Typical ranges are percent Midpoint to Midpoint Difference –Represents pay differential from one pay grade to the next one in a sequence –Must be Meaningful in amount –Ranges from 8 percent (non-exempts) to –12 percent (management and exempts)

MGMT Managing Employee Reward Systems Pay Grade Dimensions Pay Grade Overlap –Salaries that are Common to adjacent Pay Grades. –Overlap gives managers flexibility to move employees to higher grades when promoted without an overly generous pay raise. –Too much overlap leads to pay inequity, too little overlap causes barriers to promotion and inefficiencies Compa Ratio –The Average of all actual salaries in a pay grade divided by the midpoint of the range

MGMT Managing Employee Reward Systems Pay grade Dimensions Compa Ratio (Continued) –Compa Ratios let Compensation Managers view the distribution of salaries and identify grades that are out of control - too many above, or too many below the desired pay policy position in the market indicates a problem. –CR > 1.10 is quite high –CR <.90 is quite low –CR = 1.00 is the ideal Red Circle Pay Rates –Pay Rate above the maximum for special situations such as outstanding employee that requires executive approval