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Designing Pay Structure
Designing Pay Structure
INSTRUCTORS MANUAL
Instructors Manual
TOTAL REWARDS
2008 SHRM Lisa Burke, Ph.D., SPHR
INSTRUCTORS MANUAL
Learning Objectives
In this case, students will learn to design a pay structure. To do so, they will: Write a job description using the O*NET website. Use the point method to conduct a job evaluation. Analyze pay survey data for benchmark jobs. Create a market pay line in Excel. Create a pay policy line based on a stated pay-level strategy. Create pay grades. Establish pay ranges.
This case complements the first 40 percent or so of chapters in most compensation textbooks. The amount of time the case takes for students to complete will depend on students skills and education level. Time can be allotted during class in a computer lab so the instructor can facilitate students work on the associated exercises, but some outside-of-class work is also necessary.
Table of Contents
Case with teaching notes. .................................................................................................... 2 Possible solution for each case exercise.....................................................29 Student version of the case. ..........................................................................................45
INSTRUCTORS MANUAL
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Recommended Reading
Milkovich, G., and Newman, J. (2008). Compensation. McGrawHill Irwin. Chapters 1-8.
You can see from the list that there are several job families, including operations, HR, engineering, information systems and office support. You can now begin the process of designing a pay structure for the organization. Job analysis is central to many HR functions, including compensation, recruiting and training. You need to understand what tasks, duties and responsibilities various jobs will entail before you can assign fair and competitive pay rates.
Begin the process by gathering the needed job description information. To do so, you will combine information from O*NET (http://online.onetcenter.org), an online job analysis resource developed by the Department of Labor, and existing internal corporate HR documents (such as previous job descriptions). Each job description includes the job title; a job summary; essential job tasks; the jobs work context; and job-relevant knowledge and skills that an incumbent must possess. Benchmark jobs (jobs that are common and consistent across a wide range of employers) will be the focus of this exercise because they will be used to design the pay structure. Appendix A contains the job descriptions of the benchmark jobs. You have one description left to complete; your first task is to create a job description for the benefits manager position.
INSTRUCTORS MANUAL
Teaching Note Students answers for this first task may slightly vary; a possible job description is presented in the solution set. O*NET was developed for the U.S. Department of Labor by the National Center for O*NET Development. The website is free, easy to navigate, and has a wealth of information. As organizations become increasingly market-driven, job analysis is becoming less commonly performed. Instructors should note to students that it is extremely difficult to design a valid pay structure without accurate job descriptions. If job descriptions are not created, or are created incompletely, it is nearly impossible to create a sound and fair internal ranking or hierarchy of jobs. Also, because the term benchmark job may be new to some students, instructors can provide examples not necessarily found in this case, such as a first-line supervisor, accountant, marketing analyst, recruiter and financial analyst. Benchmark jobs are used to design pay structures because external market data about them is readily available. See Milkovich & Newman (2008) or any other basic compensation text for further discussion.
To design a pay structure, there must be a formal way to value the work inside the organization so that pay is awarded fairly. The job evaluation process will help develop this internal work hierarchy. Different evaluation methods, pay strategies, and pay structures will be used for different job families in the organization. You decide to use a job-based evaluation approach for the operations, office support, and HR job families. A skills-based approach will be used for information systems and engineering job families, although it is not included as a task in this case. The security guard and director of regional operations jobs will be assigned pay rates primarily using market pricing and slotted later into the pay structure.
Teaching Note To ensure students understand and remember the big picture for designing a pay structure, frequently remind them of the steps outlined at the beginning of the case. They will need to go through each step to complete their pay structure. To keep this case to a reasonable length yet expose students to the reality of many decisions involved in designing compensation systems, the present case has students execute a job evaluation, not a skills-based evaluation. Job evaluation is more common in the workplace because most pay structures are job-based. To illustrate that skills-based evaluation may be recommended or preferred in certain situations, the case discusses that certain job families, such as engineering and information systems (which are more skillsdriven), could be evaluated with a skills-based approach. See Milkovich and Newman (2008) or any other basic compensation text for further discussion of skills-based approaches. External market pricing can be used to establish pay rates for uncommon jobs in a specific organization (such as the security guard job in this case) and for jobs where competitive pay is critical to attracting and retaining talent (such as the director of regional operations job). After the pay structure is developed, these jobs would be slotted in later based mostly on relevant external competitors pay rates.
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Teaching Note There are a number of ways to design a pay structure. The organization should determine what approach is best for them based on business strategy, culture and work content. For example, students may recommend that if the administrative assistant in operations and the administrative assistant in HR perform functional tasks (e.g., operations tasks, HR tasks), that they be included in the respective job family. That would be fine. The front desk receptionist job would then likely be slotted later into the pay structure. Benchmark jobs should be identified throughout the internal structure as much as possible, not just at low or high levels of the organization, or else the pay structure may be biased toward the lower or higher job levels. It is important for students to understand that a pay structure should not be developed by one person (e.g., the HR manager) in isolation; input from internal stakeholders is useful in creating buy-in of the final pay structure. That is why a job evaluation committee is created in this case. You decide to use the point method for job evaluation for operations, HR, and office support job families because it is the most commonly used job evaluation method. Next, the compensable factors, degrees and weights of each factor must be determined. With input from the job evaluation committee and your knowledge of the organizations mission and work content, three common compensable factors are selected: skill, responsibility and effort, each having two specific sub-factors. For example, the compensable factor of skill is comprised of education level and the degree of technical skills. You recommend weighting the skill compensable factor at 50 percent because the organization is very knowledge-intensive and depends heavily on its human capital. Responsibility is weighted 30 percent because each job has the potential to affect other jobs, and effort is assigned 20 percent because problem solving and task complexity are integral across jobs in the organization.
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Compensable Factor
Skill (50%) -Education Level -Degree of Technical Skills Responsibility (30%) -Scope of Control -Impact of Job Effort (20%) -Degree of Problem Solving -Task Complexity 1 1 10% 10% 10 10 1 2 10% 20% 10 40 1 1 25% 25% 25 25
120 points
The next task is to calculate the job evaluation points for the remaining benchmark jobs using the established compensable factors and specified weights above. In other words, the degrees of each remaining benchmark job must be determined based on a logical rationale and then the total job evaluation points for each benchmark job can be calculated. To do so, consult the job descriptions in Appendix A.
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Teaching Note Students answers will vary based on the degrees (1 4) they assign to various factors for each benchmark job. See the proposed solution for possible answers for Task B. Instructors should ensure that students rationales for assigning points are logical and reasonable and that their basic math calculations are correct. Points are determined by multiplying the weights by the degrees. So in the above example, under the compensable factor of education level, a degree of 1 for the receptionist job multiplied by a weight of 25 percent leads to 25 points (1 * 25). A few important notes to highlight to students about the specific point scheme created above include: The high weight for the skills factor: Skills account for much of the variance in job content* and should probably be assigned a significant weight in a point method. The total number of compensable factors: Three factors should be sufficient for capturing variance in most job content.* Three are used here, but each is broken down into 2 sub-factors to capture the nuances of the various benchmark jobs. The number of degrees used: The number of degrees can vary for each compensable factor, as needed (e.g., 4 to 8 degrees or levels) based on the extent to which the respective factor varies across jobs.* For simplicity, four degrees are used for each factor in this job evaluation plan. To add a level of complexity to the case, instructors could require that students produce a degree key so that the assignment of degrees to various jobs is clearly thought-out and applied consistently (see the degree key for education presented in the case). *For general guidelines or further information regarding the point method, see Milkovich, G., & Newman, J. (2008) Compensation, McGraw-Hill Irwin, or any other basic compensation text. After determining the job evaluation points for the remaining benchmark positions, you meet with the president, the head of corporate HR in Indianapolis and the director of regional operations in Chattanooga to discuss a pay level strategy for each job family. One decision resulting from these meetings is that your organization will pay 3 percent above the market in base pay for the HR, operations and office support job families. The group realizes that this lead pay policy will help meet the firms customer-focus business strategy by attracting and retaining high-potential employees without incurring labor costs too far above their competitors. Top management also decides to match the market in benefits to contain benefit costs (e.g., health care costs). After analyzing web-based data about benefits offered in your industry by smaller organizations (retrieved from BenefitsLink, SHRM, and Employee Benefits Research Institute) you discern that on average, employee benefits costs are approximately 25 percent of total compensation. Once the pay structure is finalized, you will set benefits at a similar ratio of total compensation to achieve a matching benefits policy.
INSTRUCTORS MANUAL
INSTRUCTORS MANUAL
Second, calculate the weighted means (for base pay) for each benchmark job.
Teaching Note Students may be surprised that organizations would respond to a survey of this nature, so it can be helpful to remind them that participating organizations will get useful market data to use for their internal pay structure design and development. Pay data can also be purchased from HR consulting firms and other vendors. Purchasing the data could help avoid price fixing lawsuits in which organizations are alleged to have worked together to set labor prices. Survey base pay data from the responding companies for each benchmark job are located in the next table -- you should choose just enough organizations to meet your goals; too much data will be overwhelming. For Task C, students should first identify what they would do with any extreme data points (outliers) in the salary data. Outliers are addressed by examining the number of job incumbents and the min/max pay data. For example, if one of the employers had 240 administrative assistants, that would not be representative of other organizations numbers of job incumbents in this job category. Or if one employer had salaries for operations analysts that ranged from a minimum of $35,000 to a maximum of $129,000, that would not be representative of other pay ranges for this job in the pay data. Outliers should be eliminated because they would not be representative of the sample; i.e., they would be extreme data points to be considered separately, if at all. In this set of data, there are no extreme outliers to be concerned about. [If instructors would like to add another layer of complexity to this case, they could add some extreme outliers to test students ability to identify and eliminate them.] Weighted means of base pay should be calculated for each benchmark job from the survey data. Weighted means, as compared to simple means, are calculated to better represent the market data (Milkovich & Newman, 2008). A simple mean would be calculated by adding up the average base pay rates and dividing by the number of organizations (six in this case); but small and large companies would both be given the same weight if using a simple mean. A weighted mean gives equal weight to each job incumbents wage and thus is more representative of the data. For example: Mean Co. A Co. B $30,000 $15,000 # of employees 2 10
The simple mean salary is $22,500. [(30000 + 15000) / 2 = 22500] But the weighted mean salary is $17,500. [(2/12 * 30000) + (10/12 * 15000) = 17500]
If we examine the raw data (i.e., the number of employees making various salaries), we can see that the weighted mean is more representative of the data presented. See the proposed solution for the weighted mean answers in this case.
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Task D: Conduct a simple regression in Excel to create a market pay line by entering the job evaluation points (on the X axis) and the respective weighted average market base pay (on the Y axis) for each benchmark job.
Identify the slope and y-intercept and write the equation for the market pay line.
Teaching Note Answers to Task D will vary depending on the assigned job evaluation points; a potential answer is presented in the solution set. This exercise assumes that students are familiar with using Excel to run a simple regression (although instructors may need to remind students how to interpret Excels regression results). Regression creates a line of best fit by merging the job evaluation points (X) and the external salary data (Y). The resulting regression line is used to predict the base pay (Y) for a specific number of job evaluation points (X). The equation for the simple regression line (as it is for any line) can be represented as: y=mx+b; in which: y =the predicted base pay m =the slope of the line x =the job evaluation points b =the y-intercept So, for example, if the regression results show that m = 400 and b is -20000, then the equation is y=400(x) 20000 and the predicted pay rate for a job assigned 100 points would be y= 400(100)-20000, or $20,000. The regression output will also show information about how good the regression line fits the data. Specifically, look at the R squared in the regression output. Generally, the R squared, referred to as variance explained, should be .95 or higher. If R squared is significantly lower than this, there may be problems stemming from the job evaluation step. For example, the points assigned to certain benchmark jobs may be off i.e., not make sense given the level of tasks, duties and responsibilities required for the job and the knowledge, skills and abilities needed by the job incumbent. If this is the case, re-examine the job descriptions and reconsider the points assigned to the benchmark jobs. Alternatively, there may be errors in the weighted average calculations. After conducting the regression again, examine the new R squared.
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Teaching Note The multiple R squared will indicate the amount of variance explained in Y (pay) by X (job evaluation points). The variance explained should be sufficiently high to ensure that the regression line fits the input data fairly well. A multiple R of .98 would produce an R squared of .96 [.98*.98 = .96.], indicating that X (i.e., your job evaluation points) explains about 96% of the variance in Y (i.e., the market pay). The .95 guidepost for variance explained is a general guideline (see Milkovich, G., & Newman, J. (2008) Compensation, McGrawHill Irwin). It is useful to note that the multiple R in a simple regression will be equal to the correlation coefficient between X and Y. Thus, if students want to double-check their regression output, ask them to run a simple correlation between X and Y in Excel; their correlation coefficient should be the same number as the Multiple R. In Task E, students who haphazardly assigned points to the benchmark jobs (in the job evaluation step) may have a low R squared in their regression output. They may ask the instructor for help. Typically, a review of their point method will reveal problems and a lack of integrity (e.g., they may have the payroll assistant assigned more job points than any other benchmark job, or the operations assistant job may have significantly more points than the benefits manager job, which requires supervisory responsibilities). Discuss any questions you have about their assigned points and let them repeat that part to ensure learning.
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Task F: Calculate the predicted base pay for each benchmark job.
Teaching Note These calculations are pretty straightforward. Students should use their regression output, which will include a slope and y-intercept, and insert their job evaluation points for each benchmark job to determine the jobs predicted base pay. Students answers to this task will vary; the case solution set presents a possible response based on the inputs to earlier tasks. For example, with a slope of 250 and y-intercept of -1200, the 120 points assigned to the Front Desk Receptionist job would translate into a predicted base pay rate of $28,800. y=(250*120) 1200 = 28800. Students must accurately calculate the base pay rate for the remaining benchmark jobs using their regression output. Excel automates this type of simple math with the use of formulas. Ask students to submit their Excel files electronically so you can see the equations used to generate their answers.
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Task G: Because your company wants to lead in base pay by 3 percent, adjust the predicted pay rates to determine the base pay rate you will offer for each benchmark job.
Teaching Note Students answers to Task G will vary based on their earlier responses in the case, but the solution set presents a possible response. To determine base pay rates given a 3 percent lead pay strategy across the job families, use Excel to multiply the predicted pay rates for each benchmark job by 1.03. This calculation will produce pay rates that are 3 percent above market. Mathematically, the slope of the line will not change since the 3 percent pay lead strategy will apply to the operations, office support, and HR job families. One thing to remember is that these new pay rates will become the midpoints of the established pay grades. A pay grade is a grouping of jobs that are considerably similar for pay purposes in other words, they are of similar value to the organization. A pay line always runs through the midpoint of a pay grade.
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Task H: Create pay grades by combining any benchmark jobs that are substantially comparable for pay purposes. Clearly label your pay grades and explain why you combined any benchmark jobs to form a grade.
Teaching Note Similar to other case tasks, students answers will vary based on their earlier responses. However, some pay grades may make more sense than others; see the proposed solution for a possible response. Pay grades (e.g., Pay Grade A, Pay Grade B, Pay Grade C) represent groups of jobs that are substantially similar for pay purposes (Milkovich & Newman, 2008). That is, the jobs in one pay grade may have comparable job evaluation points (i.e., ratings on compensable factors) and be of similar value to the firm. All jobs in a pay grade share the same pay range (minimum and maximum pay rates). For a more extensive discussion on pay grades and pay ranges, see Milkovich, G., & Newman, J. (2008) Compensation, McGrawHill Irwin, or any other basic compensation text.
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Task I: Use your answer to Task H to determine the pay range (i.e., minimum and maximum) for each pay grade.
Teaching Note The percent guidelines used in this case for the various job categories are a judgment call, but are consistent with general guidelines presented by Milkovich, G., & Newman, J. (2008), Compensation, McGraw-Hill Irwin. The size of pay ranges, reflected by the minimum and the maximum, can be influenced by several factors, such as the career and promotion path expected for jobs in a pay grade. A larger pay range (e.g., for management positions) presumes more pay growth potential and career opportunities for such positions. Clerical jobs would be considered office/clerical positions and analyst jobs would be considered professional positions. There are no executive-level benchmark jobs in this case, but they would likely fall into a separate category with a larger pay range, e.g., 40-60 percent above and below the midpoint. Note: Because all jobs in a pay grade share the same minimum and maximum pay, students can simply average the pay rates among the benchmark jobs for each grade and then determine the minimum and maximum.
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Teaching Note These last questions are designed to have students reflect on their case solution from a holistic HR and business perspective. Possible answers are provided in the case solution. At this point, the instructor should review the learning objectives of the case and remind students of what they have accomplished.
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Relevant Websites
WorldAtWork: www.worldatwork.org. Society for Human Resource Management: www.shrm.org. Economic Research Institute: www.eridlc.com.
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APPENDIX A
Job Summary Answer inquiries and obtain information for general public, customers, visitors and other interested parties. Provide information regarding activities conducted at establishment; location of departments, offices, and employees within organization. Essential Job Tasks Operate telephone to answer, screen and forward calls, providing information, taking messages and scheduling appointments. Greet persons entering establishment, determine nature and purpose of visit, and direct or escort them to specific destinations. Hear and resolve complaints from customers and public. Transmit information or documents to customers, using e-mail, mail or fax machine. Analyze data to determine answers to questions from customers or members of the public. Provide information about the establishment, such as location of departments or offices, employees within the organization, or services provided. Job Context Indoor, environmentally controlled; telephone; contact with others. Knowledge, Skills and Abilities Knowledge of principles and processes for providing customer and personal services. This includes customer needs assessment, meeting quality standards for services and evaluation of customer satisfaction. Knowledge of administrative and clerical procedures and systems such as word processing, managing files and records, taking and organizing messages, and other office procedures and terminology. Awareness of others reactions and understanding why they react as they do. Gives full attention to what other people are saying, taking the time to understand the points being made, asking questions as appropriate and not interrupting at inappropriate times. Actively looks for ways to help people. Manages ones own time and the time of others. Talks to others to convey information effectively. Knowledge of the English language including the meaning and spelling of words, rules of composition, and grammar. Understands written sentences and paragraphs in work-related documents. Communicates effectively in writing as appropriate for the needs of the audience.
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There are multiple solutions to Task B. If students totally disregard the job descriptions, their job evaluation points will not make sense. One possible solution for this is as follows:
Administrative Assistant
Degree (1, 2, 3, 4) Skill (50 percent) -Education level -Degree of technical skills Responsibility (30 percent) -Scope of control -Impact of job Effort (20 percent) -Degree of problem solving -Task complexity 1 1 10% 10% 10 10 1 2 10% 20% 10 40 1 2 25% 25% 25 50 Weight Points
145 points
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175 points
Operations Analyst
Degree (1, 2, 3, 4) Skill (50 percent) -Education level -Degree of technical skills Responsibility (30 percent) -Scope of control -Impact of job Effort (20 percent) -Degree of problem solving -Task complexity 2 2 10% 10% 20 20 1 2 10% 20% 10 40 3 2 25% 25% 75 50 Weight Points
215 points
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245 points
Students assigned points may vary for each job, but the ranking of overall job evaluation points across jobs will probably follow in order from lowest to highest: front desk receptionist, administrative assistant, payroll assistant, operations analyst, benefits manager. Instructors should analyze the rationale provided by students for assigning degrees to ensure that they are logical. In this case, for example, the four degrees for education level are identified as: 1=High School/GED 2=Associates 3=Bachelors 4=Masters/Graduate
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APPENDIX A
It could be reasonably argued that there are no extreme data points in these case data. An outlier would be an extreme data point that would stick out and need to be eliminated and/or analyzed because it would not be representative of the sample data. For example, if Company Bs average base pay for the benefits manager position was $145,000, that would be an outlier. Second, calculate the weighted means (for base pay) for each benchmark job. Weighted means are calculated to better represent the labor market data. A simple mean would be calculated by adding up the average base pay rates and dividing by the number of companies. In a simple mean, small and large companies are given the same weight. A weighted mean gives equal weight to each job incumbents wage and thus is more representative of the data. [Note: Milkovich and Newman (2008) also recommend the use of a weighted mean.] To find the weighted average base pay using the front desk receptionist job as an example, in which there are nine job incumbents across the six companies surveyed, the calculation is: (1/9 * 21000)+(2/9 * 22000)+(1/9 * 18000)+(2/9 * 21000)+(2/9 * 18500)+(1/9 * 17500) = $19944.44. [The simple mean for the front desk receptionist is $19,666.66.] The weighted means for the sample data in this case are: Front desk receptionist Administrative assistant Operations analyst Payroll assistant Benefits manager $19,944.44 $29,458.33 $56,875.00 $34,000.00 $62,900.00
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Identify the slope and y-intercept and write the equation for the market pay line. Students answers will vary based on their input data to the regression. The slope of the market pay line is located in the Excel regression output as the Coefficient of the X Variable. The y-intercept is located in the regression output as the Coefficient of the Intercept. Be sure students accurately identify these two numbers in their regression output and write out their regression equation appropriately. Excel output generated using the job evaluation points proposed in Task B and the weighted mean base pay rates in Task C is located on the next page. Using this Excel output, the regression equation for the market pay line is represented as: Y = m(x)+b Y = 360.33(x) -24324.19 This means that each job evaluation point is worth $360.33.
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SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations ANOVA df Regression Residual Total 1 3 4 Coefficients Intercept X Variable 1 -23699.88959 357.4191311 SS 1315808883 40699390.76 1356508274 Standard Error 6737.090029 36.29231857 t Stat -3.517822901 9.848341059 P-value 0.038978132 0.002225831 Lower 95% -45140.33698 241.9206676 Upper 95% -2259.442208 472.9175946 Lower 95.0% -45140.33698 241.9206676 Upper 95.0% -2259.4422087 472.9175946 MS 1315808883 13566463.59 F 96.98982161 Significance F 0.002225831 0.98488423 0.969996946 0.959995928 3683.268058 5
RESIDUAL OUTPUT Observation 1 2 3 4 5 Predicted Y 19190.40614 28125.88441 38848.45834 53145.22359 63867.79752 Residuals 754.0338641 1332.445587 -4848.458345 3729.776413 -967.7975194
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For the regression output used here, the R squared or variance explained is 97.1 percent. Yes, it is sufficient to proceed. Students answers will vary but the variance explained (i.e., R squared) from the Excel output should be around .95 or higher. [See Milkovich, G., and Newman, J. (2008) Compensation. McGraw-Hill Irwin]. Dissuade students from just plugging in various numbers to get a variance explained of .95 or higher. There should be a method or logical rationale for changes they make in their assigned points to benchmark jobs. Typically, a review of their initial point method will reveal problems and a lack of integrity for example, students may assign the payroll assistant more job points than other benchmark jobs in the case. The tasks, duties, responsibilities and KSAs (knowledge, skills and abilities) associated with the payroll assistant job are not the most extensive of the jobs listed, however, and this would create problems in the integrity of their job evaluation plan.
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Answers will vary depending on the market line created in the students regression output. Be sure the basic math is done accurately, y=mx+b, where x is the job evaluation points, b is the y-intercept, and m is the slope coefficient. You may also want to require students to submit their Excel file electronically so you can view their calculations of the base pay for each benchmark job. For the regression output in this case solution, and applying the formula Y = 360.33(x) -24324.19, the predicted base pay for each benchmark job is as follows:
Job Receptionist Administrative Asst. Payroll Asst. Operations Analyst Benefits Mgr.
Calculations Y = 357.42(120) -23699.89 Y = 357.42(120) -23699.89 Y = 357.42(120) -23699.89 Y = 357.42(120) -23699.89 Y = 357.42(120) -23699.89
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The easiest way to accomplish this in Excel is to multiply the predicted market pay rates by 1.03. In other words, you want to know pay rates your organization will pay based on a specific pay level strategy of 3 percent above market (i.e., 103 percent of the market). Again, ensure the basic math is right for each students response. For the regression output presented in this case solution, and applying the formula of the jobs predicted rate * 1.03, the answers are: Job Receptionist Administrative Asst. Payroll Asst. Operations Analyst Benefits Mgr. Pay Lead Policy ($) 19766.23 28969.79 40014.07 54739.77 65784.05 Calculations Jobs Predicted Pay Rate * 1.03 Jobs Predicted Pay Rate * 1.03 Jobs Predicted Pay Rate * 1.03 Jobs Predicted Pay Rate * 1.03 Jobs Predicted Pay Rate * 1.03
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Student responses may vary a bit, but some pay grades will likely make more sense than others. For example, putting the benefits manager job in the same pay grade as the front desk receptionist job is problematic, because of the difference in job content and relative value to the organization. These jobs also have widely different pay rates. More typical solutions might be the following suggested pay grades: Pay Grade A Front Desk Receptionist Rationale: This is a front office job with little technical skill required. Pay Grade B A dministrative Assistant, Payroll Assistant Rationale: These are clerical jobs of comparable value to the organization, i.e., with comparable job evaluation points. Pay Grade C O perations Analyst, Benefits Manager Rationale: Both of these jobs are professional-level jobs, have comparable job evaluation points, are more technical than jobs in Grade B and are of similar value to the organization.
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The solution provided below presumes the pay grades identified in Task H: Pay Grade A: Front Desk Receptionist Pay Grade B: Administrative Assistant, Payroll Assistant Pay Grade C: Operations Analyst, Benefits Manager Because all jobs in a pay grade have the same minimum and maximum, first average the pay rates among the benchmark jobs for each grade. There is only one benchmark job in pay grade A: Front Desk Receptionist $19,766.23 AVERAGE: $19,766.23
The average pay rate for pay grade B: Administrative Asst. Payroll Asst. $28,969.79 $40,014.07 AVERAGE: $34,491.93
The average pay rate for pay grade C: Operations Analyst Benefits Mgr. $54,739.77 $65,784.05 AVERAGE: $60,261.91
Next, apply the percent guidelines provided in the case to determine the pay ranges: Pay grades A and B include clerical/office positions, so the pay range for each will be 10 percent above and below the midpoint. Pay grade C includes professional and management positions, so the pay range will be 30 percent above and below the midpoint.
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Pay Range for Pay Grade B: Maximum (10 percent above): Midpoint: Minimum (10 percent below): $37,941.12 [110 percent of the midpoint] $34,491.93 $31,042.74 [90 percent of the midpoint]
Pay Range for Pay Grade C: Maximum (30 percent above): Midpoint: Minimum (30 percent below): $78,340.48 [130 percent of the midpoint] $60,261.91 $42,183.34 [70 percent of the midpoint]
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