BASE WAGE AND SALARY SYSTEM. PRESENTED TO: Mr. Haroon Hafeez BY:

Transcription

1 BASE WAGE AND SALARY SYSTEM PRESENTED TO: Mr. Haroon Hafeez BY: Hafiz Abdul Basit Muhammad Ibraheem MT MT-06-40

2 Learning Objectives Define base wage and salaries Objective of base wage and salary system Define job evaluation Four basic methods of job evaluation Explain the concept of job cluster and compensable factors Pricing the job Wage and salary surveys Wage and salary curves

3 1- How we define base wage and salaries It is hourly, weekly or monthly pay which employees receive in exchange of their work Negative Effects: Absenteeism, turnover, strikes etc.

4 2- Objective of Base Wage And Salary System 1) To gather data and information relating to job description, job specification and employee specifications for various jobs in an organization. 2) To compare the duties, responsibilities and demands of a job with that of other jobs. 3) To determine the ranks or grades of various jobs. 4) To ensure fair and equitable wages on the basis of relative worth or value of jobs. 5) To minimize wage discrimination based on sex, age, caste, region, religion etc.

5 Forms of Equity External equity How a job s pay rate in one company compares to the job s pay rate in other companies. Method: Salary Surveys Internal equity How fair the job s pay rate is, when compared to other jobs within the same company Method: Job Evaluation

6 Job Evaluation A systematic comparison done in order to determine the worth of one job relative to another. Note Job evaluation programme, the jobs are ranked and not the jobholders. Jobholders are rated through performance appraisal.

7 Methods for Evaluating Jobs Ranking Job Classification Point Method Factor Comparison

8 1- Ranking Method Job evaluation method that ranks jobs in order of their difficulty from simplest to more complex.

9 Advantages: 1. Simple to use if there is a small number of jobs 2. Requires little time 3. Minimal administration required Disadvantages: 1. Criteria for ranking not understood 2. Increases possibility of evaluator bias 3. Very difficult to use if there is a large number of jobs 4. Rankings by different evaluators are not comparable 5. Distance between each rank is not necessarily equal 6. May invite perceptions of inequity

10 Job Ranking by Olympia Health Care

11 2- Job Classification Method Define number of classes or grades to describe group of jobs Compare job description with class description Class description that most closely agrees with job description determines job classification

12 Classification Method Advantages Uses job families/groups instead of individual jobs May produce same results as Point Method, but is less costly Disadvantages Not useful when jobs are very different from each other May be confusing to employees about why jobs are included in a class

13 Point Method Job evaluation method in which a quantitative point scale is used to evaluate jobs on a factor-by-factor basis. Different scales are used for different jobs

14 Procedure for Establishing Point Method of Job Evaluation Select Job Cluster Identify Compensable Factors Determine Degrees and Define Each Compensable Factors Determine Factor Weights Determine Factor Point Values Validate Point System

15 A Point Method Example Select Job Cluster - Assume we are going to develop point system for the administrative job cluster Identify Compensable Factors - Assume compensable factors identified are education, job knowledge, contacts, complexity of duties, and initiative

16 Determine Degrees and Define Each Compensable Factors - In administrative job cluster, Education, Job Knowledge, and Initiative have been determined to have five degrees; Contacts has four; and Complexity of Duties has three

17 Determine Factor Weights - Assume the committee believes that education is quite important for administrative job cluster and sets the weight for education at 35%. The weights of other four factors were determined by the committee to be: Job Knowledge 25 Contacts 18 Complexity of Duties 17 Initiative 5 The percent total is 100%

18 Job Evaluation Worksheet (500-Point System) Degree of Factor Job Factor Weight Education 35% Job Knowledge 25% Contacts 18% Complexity of Duties 17% Initiative 5%

19 Validate Point System - Each committee member should take a random sample of jobs within chosen job cluster and calculate weights for each job selected Point total for Administrative 2 job is determined to be 239 points

20 Job Evaluation Worksheet for Administrative 2 Position Degree of Factor Job Factor Weight Education 35% Job Knowledge 25% Contacts 18% Complexity of Duties 17% Initiative 5% Total Job Value 239

21 4- Factor Comparison Method Job evaluation method which uses a monetary scale for evaluating jobs on a factor by factor basis.

22 Procedure for Establishing Factor Comparison Method of Job Evaluation Select Job Cluster Identify Compensable Factors Rank Compensable Factors For each Job Allocate the Wage Salary for Each Job Addin Amount for Each Compensable Factor

23 Pricing The Job In general, job evaluation cannot be used to set the wage rate; however, it provides the basis for this determination. To ensure the external factors like Labor market condition Prevailing wage rates Living costs Are recognized in wage scales information about these factors must be gathered.

24 Pricing The Job Only the factors comparison method relates the work of jobs to a monetary scale but the results are derived primarily from the wage scale tge organization currently uses

25 Wage and Salary Surveys Used to collect comparative information on the policies, practices, and methods of wage payment from selected organizations in a given geographic location or particular type of industry.

26 Wage and Salary Surveys Knowledge about market Correct employees misconception Positive impact on employee motivation

27 Surveys Surveys as a respondent for information using verbal or written questioning

28 Ways to Conduct Surveys Two basic ways to obtain information on wage or salary surveys: Conducting your own survey Purchasing or accessing a wage/salary survey undertaken by another party

29 Conducting your own survey It can be very expensive to conduct your own survey. It s a large and time consuming task. May be worth it if you need to Control the data sought or Maintain confidentiality of results

30 Conducting a Wage/Salary Survey Employer-initiated Surveys: Scope of the survey Decide on information to collect: wages/ benefits/ pay policies etc.. Method of gathering data Choosing the factors of job evaluation Consider 30% of jobs in the organization Select key jobs.

31 Conducting a Wage/Salary Survey Determine geographic area Size of geographic area Cost of living index for the area Organization Similar labor market Data collection Results

32 Methods Of Survays PERSONAL INTERVIEWING TELEPHONE INTERVIEWING MAIL SURVEYS WEB SURVEYS

33 Personal Interviews

34 PERSONAL INTERVIEWS ADVANTAGES: Generally yields highest cooperation and lowest refusal rates Allows for longer, more complex interviews High response quality Takes advantage of interviewer presence Multi-method data collection DISADVANTAGES: Most costly mode of administration Longer data collection period Interviewer concerns

35 Telephone Surveys

36 TELEPHONE INTERVIEWS ADVANTAGES: Less expensive than personal interviews Samples of general population Shorter data collection period than personal interviews Interviewer administration (vs. mail) Better control and supervision of interviewers (vs. personal) Better response rate than mail for list samples DISADVANTAGES: Biased against households without telephones, unlisted numbers Nonresponse Questionnaire constraints Difficult to administer questionnaires on sensitive or complex topics

37 Mail Surveys

38 MAIL SURVEYS ADVANTAGES: Generally lowest cost Can be administered by smaller team of people (no field staff) Access to otherwise difficult to locate, busy populations Respondents can look up information or consult with others DISADVANTAGES: Most difficult to obtain cooperation No interviewer involved in collection of data Need good sample More likely to need an incentive for respondents Slower data collection period than telephone

39 Additional Survery Technique WEB SURVEYS ADVANTAGES: Lower cost (no paper, postage, mailing, data entry costs) Can reach international populations Time required for implementation reduced Complex skip patterns can be programmed Sample size can be greater DISADVANTAGES: Approximately 40% of homes own a computer; 30% have home Representative samples difficult - cannot generate random samples of general population Differences in capabilities of people's computers and software for accessing Web surveys Different ISPs/line speeds limits extent of graphics

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41 Purchasing or accessing a wage/salary survey Government surveys Internet data Online survey sites Surveys by Private Organizations Computer data banks Research outsourcers Consulting firms

42 Government Surveys Free and statistically reliable May not be sufficiently timely or specific to meet needs

43 Internet Data Internet compensation data comes in three forms: 1. Free salary sites 2. Online survey reports 3. Computer data banks Remember you get what you pay for!

44 Computer Data Banks Computer data banks let you tap into their data files to make your own survey. Expensive, but less so than conducting your own custom survey.

45 Surveys by Private Organizations A large number of trade associations, industry groups, professional societies and consulting organizations conduct wage and salary surveys. Some are free and some cost several thousand dollars.

46 Pitfalls and Guidelines Wage and salary surveys can be quite helpful if conducted and interpreted properly. If not done properly, they can cause distortion and inaccurate information and a subject for much criticism on following points

47 Too many surveys Quality of resultant data Difficult to interpret Negative impact on merit pay plans Job categories too broad Industry categories too broad Company type/size difficult to relate to own Samples of firms too small

48 Guidelines should be followed Assess the participating companies for comparability Compare more than base wage or salary Consider variations in job discriptions Correlate survey data with adjustments

49 Comparable worth theory Comparable worth theory holds that every job should be compensated on the basis of its value to he employer and society (chapter 3 and 12).

50 Wage and salary curves Wage and salary curves graphically show the relationship between the relative worth of job and their wage or salary rates These curves van be used to indicate pay classes and ranges for the jobs.

51 Figure 9.7

52 Wage and salary curves To ensue the final wage structure with both the job evaluation and the wage survey data, it is sometimes desirable to construct one wage curve based on present wages and one based on the survey data and compare the two. Any discrepancies can be quickly detected and corrected.

53 Pay Grades Pay Grades and Ranges Groups of jobs within a particular class that are paid the same rate. Pay Ranges A range of rates for each pay grade that may be the same for each grade or proportionately greater for each successive grade.

54 Why Use Pay Grades and Ranges? An organization may use differences in rates to pay employees on the same job. A pay range exists whenever two or more rates are paid to employees in the same job. Thus, Ranges group jobs on the vertical axis Hence, ranges provide managers the opportunity to Recognize individual performance differences with pay. Meet employees expectations that their pay will increase over time.

55 Common Characteristics of Pay Grades Provides for a range of pay within each grade Each grade has a minimum, maximum, and midpoint The range spread from minimum to maximum varies from grade to grade. The rule of thumb is lower grades have 20% range, increasing to 50% for the highest grade Best to use the upper part of the grade to reward meritorious performance or some performance-based incentive increases Steps within grades are also possible, but not required; most common are 3-6 steps per grade Adjoining pay grades normally overlap (more on this later!)

56 Scatter Diagram of Evaluated Jobs Illustrating Wage Curve, Pay Grades, and Pay Ranges Average Pay per Hour (Current Rates or Market Rates) $ Wage Curve Evaluated Points Pay Grades Pay Ranges for Pay Grades Summary Evaluated Points Pay Grade Minimum Midpoint Maximum $12.00 $13.30 $

57 What We Have Discussed Definition and Objective of base wage and salaries Job Evaluation Four basic methods of job evaluation Ranking Method Classification Method Point Method Factor Comparison Method Pricing the job Wage and salary surveys Wage and salary curves

58 ANY QUESTIONS PLZ. ASK