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SalarySurveybasedonHayMethodHayPointRangeUpperQuartile(Q3)SalaryFormula200-300144.89*HP-1648301-400165.55*HP-7845401-500195.67*HP-19,893501-600176.16*HP-10,140601-700194.51*HP-21,145701-800168.63*HP-3029InternalequityExternalequityEmployeeequityAdministrationConceptsCompensationTechniquesPlanning,Budgeting,Monitoring,EvaluatingJobAnalysisJobDescriptionJobEvaluationJobGradesMarketDefinitionsSalarySurveysPolicyLinesPayStructuresSeniorityIncreasesPerformanceEvaluationIncreaseGuidelinesCompensationObjectivesRoleclarityandaccountability.Facilitatesadministrationandperformancemanagement.Competitivewagepoliciesandpractices.Influenceemployees’workattitudesandbehaviour.Attracttalents.Retaintalents.Motivateemployees.Complywithregulations.Consistencyinpolicyadministration.TheStrategicCompensationModelCompensationManagementThefundamentalsofsalaryadministration Salaryadministrationisconcernedwithdecidinghowandwhatstaffshouldbepaidandwiththetechniquesandproceduresfordesigningandmaintainingsalarystructures,rewardingstaffandexercisingsalarycontrol.AimsOfSalaryAdministration
Thebasicaimsofsalaryadministrationaretoattract,
retainandmotivatestaffbydevelopingandmaintainingacompetitiveandequitablesalarystructure.Toensurethatasufficientnumberofsuitablestaffisattractedtojointheorganization;Toencouragesuitablestafftoremainwiththeorganization;Todevelopandmaintainalogicalsalarystructurewhichachievesequityinthepayforjobsofsimilarresponsibilityandconsistencyinthedifferentialsbetweenjobsinaccordancewiththeirrelativevalues;Toensurethatsalarylevelsmatchmarketrates;Tokeepthesalarylevelsadjustedinlinewithincreasesinthecostofliving;AimsOfSalaryAdministrationTomaintainconsistencyinmethodsusedtofixandreviewsalarylevelsanddifferentials;Toprovideforprogressionwithinthesalarystructureinaccordancewithperformanceandlevelofresponsibility;Tooperatethesalarysystemfairlyandconvincethestaffthatthesystemisfair;Tomaintainaflexiblesalarysystemwhichwillaccommodatechangesinthemarketratesfordifferentskillsandinthecompany’sorganizationstructure;Toachievesimplicityinoperationsasanaidtostaffunderstandingandtominimizeadministrativeeffort;Tooperateeffectivesystemsofcontrollingsalarycostsandtheadministrativeproceduresrequiredtoachievetheaboveaimsattheleastcosttotheorganization.ComponentsOfSalaryAdministration
Thestartingpointofsalaryadministrationisthedeterminationofsalarylevelsbyjobevaluation.Thereafter,salaryadministrationisconcernedwith:Thedesignandmaintenanceofsalarystructures;Theoperationofsalaryprogressionsystems;Theadministrationandcontrolofsalaryreviews;Thedesignandoperationofbonusschemes;Theprovisionofemployeebenefitsandotherallowances;Thedevelopmentofatotalremunerationpolicy.CompensationToolsandTechniquesPayStructureSalaryStructurePerformanceRelatedPayMeritPaymentSchemeIncentiveSchemeBenefitPoliciesSalaryReviewGuidelinesCompa-ratioSalaryProblemsCriteriaforPayStructuresBeappropriatetotheneedsoftheorganization,intermsofits:
-culture,sizeandthedegreeinwhichchangestakeplace -needforflexibility -typeandlevelofemployeestobecoveredBeflexibleinresponsetointernalandexternalpressures,especiallythoserelatedtomarketratesandskillshortages.Providescopeforrewardinghigh-flyerswhilestillprovidingappropriaterewardsforthemajorityofemployees.Ensurethatrewardsaregiveninlinewithperformancesandachievements.Provideabasisforcareerplanningwhichwillmotivateambitiousemployeeswithhighpotential.Facilitateconsistencyinthetreatmentofvaryinglevelsofresponsibilityandperformance.GradedSalaryStructuresAlljobsareallocatedintosalarygradewithinthestructureonthebasisofanassessmentoftheirinternalandexternalvaluetotheorganization.Eachsalarygradeconsistsofasalaryrangeorband.Thejobsallocatedtoasalarygradeareassumedtobebroadlyofthesamelevel–normallythesameminimumandmaximumrates,whichcorrespondwithgradeboundaries.GradedSalaryStructuresAtypicalgradedstructureconsistsofasequenceofsalarygradesorranges,eachofwhichhasadefinedminimumandmaximum.Itisassumedthatallthejobsallocatedintoagradearebroadlyofthesamevalue,althoughactualsalariesearnedbyindividualswilldependontheirperformanceorlengthofservice.Acrosstheboardcostoflivingormarketrateincreaseswillusuallyresultinanincreasetotheminimaandmaximaofeachgrade.Allthejobsinanorganizationmaybecoveredbythesamestructureofsalaryrangesortheremaybedifferentstructuresfordifferentlevelsorcategoriesofjobs.Make-upofaSalaryGradeAbasicprincipleofasalarystructureisthatindividualsadvancethroughthestructureeitherbyprogressingwithinthesalarygradeforthejobastheyimprovetheirperformance,orbypromotion.Inthesimpleststructure,peoplemovemoreorlesssteadilyfromtheentrypointofthegrade(withmightbeabovetheminimumiftheyhavealreadygainedrelevantexperienceelsewhereorwithinthefirm)totheupperlimit,unlesstheymovetoahighergrade.Itispossible,however,todistinguishthreestagesintowhichthisprogressionisdivided,andforsalaryadministrationpurposesitishelpfultodividethegradeintothreezoneswhichcorrespondtothesestages.SalaryStructure:RatioMethodSalaryStructure:RatioMethodSalaryStructure:DispersionMethodSalaryStructure:DispersionMethodThelearningzonecoverstheperiodwhenapersonisonhis‘‘learningcurve’,familiarizinghimselfwiththeknowledgeandskillsrequiredifheistobecomefullycompetent.Thelengthoftimetogothroughthiszonewillvaryaccordingtotheindividual’sexperience,competenceandabilitytolearn.Itwouldbeacceptedthatsomeonemightentertherangeatanypointinthiszone,frombottomtotop,dependingonexperience.TheLearningZoneThequalifiedzonecoverstheperiodwhenthejobholdercontinuestoincreasehiscapacitytodotheworkandtoimprovehisperformance.Theminimumsalaryinthiszoneshouldbethemarketrateforthejob,sofarasthiscanbeascertained,theassumptionbeingthatthemarketrateisthesalarylevelrequiredtoattractacompetentindividualfromanotherjobtojointhecompany.Themid-pointinthiszone,whichisalsothemid-pointofthegrade,isthesalarylevelwhichallcompetentemployeeswouldbeexpectedtoachieve.Thisisabovethemarketrateinordertoretaintheseindividuals.Anemployeewhoisnomorethancompetentcouldstopatthispoint,butmostwouldcontinuetoadvanceuntiltheyreachthetopofthequalifiedzone,whichwouldberegardedasthenormalmaximumforthejob.Manysuchemployeeswouldinanycasebepromotedtoahighergradebeforetheyreachtheupperlimitofthiszone.TheQualifiedZoneThepremiumzoneisreservedforthoseemployees,especiallyinthehighergradejobs,whoachieveexceptionalresultsbutforwhomsuitablepromotionopportunitiesdonotexist.Thiszoneenablesoutstandingstafftobegivenadditionalrewardsandencouragement.Insomesalarystructures,thepublishedsalarygradesforeachjobonlycoverthelearningandqualifiedzones,thepremiumzonebeingreservedforuseinspecialcases.Progressionthroughthatzonewouldnotberegardedasnormalbymanagementorstaff.ThePremiumZoneMake-upofaSalaryRangeRelationshipsBetweenGrades20%20%GradedSalaryStructuresTherangemaybedefinedintermsofthedifferencebetweenthelowestandhighestpointsintherange,usingtheminimumastheanchor(Maxminratiomethod):MinMidpointMaxMaxmin$20,000$24,000$30,0001:50$20,000$25,000$32,0001:60$20,000$26,000$34,0001:70Alternatively,therangemaybedefinedasapercentageofthemidpointusingthemidpointastheanchor(Salarydispersionmethod):MinMidpointMaxDispersionMaxPoint(100%)PointRatio$20,000(80%)$25,000(100%)$30,000(120%)+20%1.50$18,750(75%)$25,000(100%)$31,250(125%)+25%1.67$17,500(70%)$25,000(100%) $32,5000(130%)+30%1.85Themidpointoftherangeisregardedasthe““targetsalary”forthegrade,whichwouldbetheaveragesalaryofthestaffinthegrade.ThetargetsalaryisthesalarythatyouwillpaytoafullycompetentprofessionaldoingthejobonthatgradeThemidpointisusuallyalignedtothemarketratesforjobsinthegrade.Thesalarypolicyoftheorganizationdetermineswhetherthemidpointisequatedtothemedianmarketrateorwhetheritisrelatedtoanotherpoint.egupperquartileGradedSalaryStructuresTherateofsalaryprogressionthrougharangeisdetermineby:-timeorlengthofservice(serviceincrements)-individualperformance(variableormeritincrements)Thenumberofsalaryrangesrequireddependon:-theupperandlowersalarylevelsofthejobstobecoveredbythestructure,whichgivetheoverallrangeofsalarieswithinwhichtheindividualsalaryrangeshavetobefitted-thenumberofdistinctlevelsofresponsibilityinthehierarchywhichneedstobecateredforbyseparategrades-thesizeofthedifferentialsbetweeneachsalaryrange.GradedSalaryStructuresGradedSalaryStructuresThereisadifferentialbetweenthemidpointsofeachsalaryrangewhichprovidesadequatescopeforrewardingincreasedresponsibilityonpromotion.Itdoesnotcreatetoowideagapbetweenadjacentgradesorreducetheamountofflexibilityavailableforgradingjobs.Thesalaryrangesaresufficientlywidetoallowrecognitionofthefactthatpeopleinsamejobgradecanperformdifferently,fromsatisfactoryperformancetooutstandingperformance.Thereisanoverlapbetweentwoconsecutivesalarygradeswhichacknowledgesthatanexperiencedpersonshouldbeofmorevalueonthecurrentgradethananewcomerinthenexthighergrade.DesigningtheSalaryStructureStep1Conductmarketratesurveysforexistingjobs.Reviewexistingsalarystructuresanddifferentialsbetweenthesalarylevelsofthemostseniorandjuniorjobstobecoveredbythenewstructure.Identifykeyproblemareas(ifany)inexistingstructures.Step2Conductanupdateofthejobevaluationexercise,takingintoconsiderationallchangestojobssincethelastjobevaluationreviewStep3Obtainmarketratedatafortheevaluatedjobs,bearinginmindthatthereislikelybearangeofmarketratesratherthanaprecisefigure.Preferablythemarketratedatashouldbebasedonasimilarjobevaluationsystemforcomparability.DesigningtheSalaryStructureStep4Drawupasalarygradestructurebetweentheupperandlowerlimits,accordingtopoliciesfordifferentials,thewidthofsalarygradesandthesizeofoverlapbetweentwoconsecutivegrades.Step5Slotalljobsintogradestructureinaccordancewiththeresultsofboththejobevaluationsandthemarketratesurveys.Step6Identifyallcasesthatarebelowthesalaryrangeandcasesthathaveexceededthesalaryrange(max-outcases)andreviewtheirjobevaluationscoresandgradesAdvantagesofGradedStructuresTherelativelevelsofjobsindifferentfunctionscanb
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