St. Gregory’s University
Pay structures are the initial step to ensure a company can and will be successful. Companies must decide whether or not to use a base pay structure, person base structure, or a combination of both. By selecting the correct pay structure it allows them tom to maximize their profit as well as hopefully maximizing the employees overall income.
Comparison of Pay Structures A company's pay structure is the method of administering its pay philosophy. The two leading types of pay structures are the internal equity method, which uses a tightly constructed grid to ensure that each job is compensated according to the jobs above and below it in a hierarchy, and market pricing, where each job in an organization is tied to the prevailing market rate . A company must establish job descriptions for all jobs within the organization so employees know where their jobs begin and end with in the organization chart. Pay structures eliminate questions about who is who, their role and why compensation is different for other individuals. When a company establishes how many different jobs there are within the organization they must then decide how much funds they should allocate to each job description, then compare as many jobs as possible This includes the benefits within the job such as: medical, PTO, sick leave, stock options, bonuses, and retirement. Comparing an internal job to an external job will allow the company to see if their pay structure is competitive or at a disadvantage. Below are the steps to comparing internal vs. external: Select surveys that are appropriate for the positions being surveyed: right job, right geographic area, right company size, etc.
Stay general. Job descriptors such as those found in compensation surveys and in Salary.com products are not intended to be all-inclusive job descriptions. They are generic descriptions that best describe the essential functions of a job, rather than the application of that job in a specific company.
Select job descriptors based on content, rather than job title.
Match closely. A job descriptor should be at least 70 percent of an incumbent's current job responsibilities.
Make as many matches as possible.
Match the job function, not the person.
Combine judiciously. Job descriptors can be blended, but no more than two descriptors per survey should be combined to represent an incumbent's job.
Review the level guide. Surveys have a variety of ways for describing and representing different levels for different jobs.
Involve employees as much as possible in benchmarking jobs .
Internal equity is an employees' perception of their responsibilities, rewards, and work conditions as compared with those of other employees in similar positions in the same organization . Before an organization can estimate the importance of each job, it must first determine the job-related factors that will be used for setting compensation levels, in short, compensable factors. Here are some typical compensable factors used for lower-level jobs:
Responsibility for equipment/materials.
Responsibility for the safety of others.
Accident or health hazards.
Manual dexterity .
Citizen Potawatomi Nation (CPN) uses this pay structure with each of their entities; however, in the casino they use both of these pay structures explained. Recently they have changed their job descriptions and expectations for potential employees. Entry level employees must have a high school diploma or GED (this is becoming more of requirement for all companies these days), Mid-level management is required to have a 2 year degree with 2 years’ experience in the specific field (The Associates degree is becoming more of