chapter 8 pt 1 - designing pay levels, mix and pay

Question 1

3. Select Relevant Labor Market (Competitors)

Answer 1

A relevant labor market includes employers who compete in one or more of the following areas:

1. Hire the same occupations or skills
   - Microsoft and Google include both product market and labor market competitors
2. Have employees in the same geographic area
   - As importance and complexity of qualifications increase, the geographic limits also increase
3. Develop/provide the same products and services
   - If the skills are tied to a particular industry, define the market by industry
   - International comparisons are improving, but use judgment

Question 2

3. Select Relevant Labor Market (Competitors) (IMAGE IS ON QUIZ FOR SURE)

Answer 2

LOOK AT NOTES AND WRITE THIS I WILL TYPE IT OUT IN THE NEXT CARD ANYWAY BUT STILL

Question 3

3. Select Relevant Labor Market (Competitors)

two approaches:
a) where you compete for talent and
b) where you compete as a company (peer group)

Answer 3

compete for talent:
1. occupation
2. geography/location

peer group:
1. company size - revenue, market cap, headcount
2. industry
3. company type - public/private, growing, mature

Question 4

Exhibit 8.3: Relevant Labor Markets by Geographic and Employee Groups

Answer 4

IMAGE ON QUIZ

pay differences by location: annual wage by metro area, computer programmer

Question 5

As the importance and complexity of the qualifications increase, the geographic limits also increase

Answer 5

THIS IMAGE WILL DEFINITELY BE ON THE WUIZ LOOK AT IT PLEASE

Question 6

4. Identify Benchmark Jobs

Answer 6

What is Benchmarking?
1. Identify your internal jobs that are standard across industries, relatively stable jobs, such as HR Generalist, Accountant, etc.
2. Then select jobs that are industry-specific, but are consistent across your industry
3. Using surveys (or other external market data, e.g., competing offers) to ensure pay levels are aligned to internal pay philosophy and/or market

Matching your jobs
1. Start with benchmark jobs
– Match job description: don’t match to title alone; look at scope of role and match to job descriptions
– Rule of thumb – 80% more better match of major job activities considered a good match
– Varies by company, generally 80-100% of jobs can be mapped to a benchmark job
2. Slot non-benchmark jobs: differences are quantified when job content does not sufficiently match survey jobs

Question 7

Exhibit 8.10: Advantages and DIsadvantages of Measures of Compensation

Answer 7

THIS IMAGE WILL FORSURE BE ON EXAM

BASE PAY
TOTAL CASH
TOTAL COMPENSATION

Question 8

Base pay is the best source of information reflecting the “value” of a job. Why?

Answer 8

The value of the job is in the task and duties of the job and how it is valued in the market

Question 9

Is there enough data? Number of datapoints

Answer 9

number of Data Points in Survey Data
– Sample size (“n”) is a significant consideration in evaluating survey data
– Generally, larger sample size, more valid the data
– Sample size includes both # of companies represented in the data and number of incumbents represented in the data
– Survey vendors have their own requirements for data sufficiency (typically 5 or more companies)
– Some surveys, like custom surveys, inherently may have small “n”

Question 10

Adjust Pay Level vs. Adjusting Pay Mix

Answer 10

Most organizations adjust pay levels on a regular basis

Such adjustments can be based on:
- The overall movement of pay rates caused by competition for people in the market
- Performance
- Ability to pay
Adjustments to the different forms of pay (pay mix) occur less frequently