2 Agenda Case study assignment SAP Exercise 3 In-class writing Pay system design Internal vs. external equity
3 Case Study Assignment Read Harvard Business Review case study “When Salaries Aren’t Secret” Answer two questions Relationship with equity theory Recommendation for actions the company should take Approximately 2-3 pages long Due Wednesday April 6 in class
4 SAP Exercise 3 Accessing and using performance appraisal information Limited to Division 1 of NCCC Assignment due Friday April 8, 3:00, my office
5 In-class writing What is the difference between internal and external equity approaches to compensation? Which is more important?
6 Consider the following pay structure… North Country Cabinet Company JobAnnual Salary President$15,000 Maintenance mechanic$130,000 Production supervisor$20,000 Milling operator$75,000 What ’ s wrong with this picture? Why?
7 Pay System Goals Support strategic objectives May include organizational change Attract, retain, motivate employees Fairness Compliance What are we paying for? Skills? Performance? Time at the office?
8 Fair Labor Standards Act Minimum wage Overtime Must be paid to non-exempt employees for hours worked over 40 per week Exempt employees (management, professionals, administrative) not eligible for overtime Hourly employees tend to be non-exempt, but guidelines for determining this are complex Child labor Does not mandate vacation, holiday, or sick pay, pay raises, or fringe benefits
9 Equal Pay Act Equal pay for equal work Covers only differences between men and women Other protected classes covered under Civil Rights Act more generally What are legitimate reasons for paying people in the same job differently?
10 2000 Median Annual Earnings of Year-Round, Full-Time Workers All Men All Women $37,339 (100%) $27,355 (73%) Men Women White $38,869 White $28,080 Black $30,409 Black $25,117 Asian & Pacific Asian & Pacific Islander $40,946* Islander $31,156* Hispanic $24,638 Hispanic $20,527 * Due to the small size of the survey sample, these data may not be representative. Source: US. Census Bureau, Current Population Reports, Series P-60
11 Pay Differences by Occupation Occupation Men Women Computer Programmer$59,852$52,312 HR Managers$65,468$49,816 Lawyers$88,920$65,260 Physical Therapists$49,660$46,800 Receptionists$23,608$24,076 Annual salaries based on Bureau of Labor Statistics weekly earnings data. http://www.bls.gov/cps/home.htm
12 Forms of Compensation Base wage or salary (fixed) Performance-based (variable or at-risk) Merit Incentives Commissions Piece rates Attraction and retention bonuses Benefits
13 A question of equity Internal vs. external – what is the difference? Strategic decisions related to external equity: Lead Lag Meet the market In-class writing question: Which is more important? Can you maintain both?
14 Job Evaluation Assessing the relative internal worth of the organization’s jobs. Note: Job evaluation is not the same thing as performance evaluation.
15 Two Common Job Evaluation Methods Ranking Method Compare one job with the others Simplest and quickest job evaluation approach Most useful for a small number of jobs Downsides of using this method? Point method Assigns a numeric score to a job based upon levels of compensable factors in job Highly stable, valid over time Hay system is one of the most popular
16 Compensable Factors The characteristics of a job that the organization values and chooses to pay for Examples: Degree of responsibility Years of schooling or experience Discretion in performing work How can compensable factors be determined? What data would be used?
17 Back to the example How would you evaluate the four jobs: Using the ranking method? Based on Hay factors? Remember, Hay profiles are based on know-how, problem solving, and accountability Company president Production supervisor Maintenance mechanic Milling operator
18 For next class Topics: More on pay structures Rewards in addition to base pay Return exam Read Chapter 12 How do rewards fit within the overall pay structure? Links with motivation theories