Ch 7: Creating Market Competitive Pay plans Flashcards
What are the 4 building blocks of market competitive pay plans
Conducting Strategic Analysis
Assessing competitor’s pay practices with comp. Surveys
Aligning internal job structure with external rates
Determining pay policies
What is a strategic analysis?
Examination of company external context and internal factors
What are compensation surveys?
Process used to collect competitor compensation practices (wage/salary rates and benefits)
What are two preliminary considerations when doing a compensation survey
What companies hope to gain( comp practices, employee preference of benefit in ec. Downturn, comp mix practices)
Develop one from scratch or use established survey( development is ideal, but companies often choose not to as they dont have qualified staff, competitors dont want to give info, and it can be costly)
Give 3 sources of pi listed surveys
Society of Inductrial Psychologists
BLS
Give the 1 employee cost trends
Employee Cost Index - quarterly measure of labour costs
What is the NCS about?
National Comoensation Surveys
What are the two strategic consideration for compensation surveys
Defining the relevant labour market
Choosing benchmark jobs(jobs used to compare the value of other jobs- get understanding from ch 6)
*The contents are well known, relatively stable over time, and agreed upon by the employees involved.
*The jobs are common across a number of different employers.
*The jobs represent the entire range of jobs that are being evaluated within a company.
*The jobs are generally accepted in the labour market for the purposes of setting pay levels
Describe defining the relevant market
represent the fields of potentially qualified candidates for particular jobs
Relevant labor markets are defined on the basis of occupational classification(blue collar vs white), geography, and product or service market competitors
What are the 3 compensation data characteristics
Comp. Professionals should use statistics to describe large amounts of data efficiently
Survey data is outdated because of lag between when data collected and when employers implement their plan based on the data
Must use statistical analyses to integrate internal job structures(based on job evaluation points) with external market based on survey data
Using the appropriate statistics to summerize survey data and basic tabulation(converting data into tables)
Central Tendency: Mean(tells “typical salary”)and median-
gives undistorted values
Variation: amount of spread in data
Drawback of arithmetic mean
Gives distored values: so if there are wage rates that are too low, it will lower the mean which may cause setting salaries too low. Conversely, if there are high extremes, the mean will be too high and cause you to set salaries too high
What are the 3 most valuable measures of dispersion?
Standard deviation- lets us know whether individual salary departure below or above the mean is “typical” for the market (so basically if the internal deviations away from mean match market deviations
Also lets us know range for majority of salaries. Can use this range to judge their company ranges are similar to market ranges
Quartile- allows for description of the distribution of data (annual base pay amount for example) based on 4 groupings
Percentile- range within quartile
How often is CPI done?
Every month
How to integrate interal job structures with external market pay rates?
Regression analysis
