Call/WhatsApp: +1 914 416 5343

Relationship between compensable factors

Relationship between compensable factors
Use the article for essay,.

Dessler, G. (2015). Human resource management. (14th ed.) Upper Saddle River, NJ: Pearson.
Contemporary Topics in Compensation
How employers pay employees is evolving. In this final section, we’ll look at six important
contemporary compensation topics: competency-based pay, broadbanding, talent management,
comparable worth, board oversight of executive pay, and total rewards.
Competency-Based Pay
Some managers question whether job evaluations that slot jobs into narrow cubbyholes
(“Machinist I,” “Machinist II,” and so on) might not actually be counterproductive. For example,
high-performance work systems depend on flexible multiskilled job assignments and on teamwork,
and there’s no place here for employees to say “That’s not my job.”
Competency-based pay (and broadbanding, explained later) aims to avoid that problem.90
With competency- generally skill or knowledge-based pay, you pay the employee for the skills
and knowledge he or she is capable of using rather than for the responsibilities or title of the
currently held.91 Experts variously call this competence-, knowledge-, or skill-based pay. With
competency-based pay, an employee in a class I job who could (but may not have to at the moment)
do class II work gets paid as a class II worker, not a class I. Competencies are demonstrable
personal characteristics such as knowledge, skills, and personal behaviors such as leadership.
Why pay employees based on the skill levels they achieve, rather than based on the jobs they’re
to get and to use the skills required to rotate among jobs.
In practice, competency-based pay usually comes down to pay for knowledge or skill based
pay.92 Most such pay programs generally contain five elements. The employer defines specific
required skills and chooses a method for basing the person’s pay on his or her skills. A training
system lets employees acquire skills. There is a formal competency testing system. And, the work
is designed so that employees can easily move among jobs of varying skill levels. As an example,
review Chapter 4’s Figure 4-12 on page 114. For this job, BP lists the minimum level for each
skill (such as Technical Expertise and Problem Solving) someone holding this job must attain.
As an employee achieves each level of each skill, he or she would receive a bump in pay. The
accompanying JLG program feature shows another example.
A recent survey found that only about 12% use what they call skill-based pay and 13% use
competency-based pay.93 In challenging economic times, perhaps the efficiencies of job evaluation.

2. Employers use two basic approaches to setting pay
rates: market-based approaches and job evaluation
methods. Many firms, particularly smaller ones, simply
use a market-based approach. Job evaluation methods
involve assigning values to each of the company’s jobs.
This helps to produce a pay plan in which each job’s
pay is equitable based on its value to the employer.
• Job evaluation is a systematic comparison done in
order to determine the worth of one job relative to
another based on compensable factors.
• Compensable factors refer to compensable elements
of a job such as skills and efforts.
• Popular job evaluation methods include ranking,
job classification, the point method, and factor
• With ranking, for instance, you conduct a job
analysis, group jobs by department, and have
raters rank jobs.
3. We said the process of creating a marketcompetitive
pay plan while ensuring external,
internal, and procedural equity consists of 16 steps as
follows: 1. Choose Benchmark Jobs; 2. Select Compensable
Factors; 3. Assign Weights to Compensable
Factors; 4. Convert Percentages to Points for Each
Factor; 5. Define Each Factor’s Degrees; 6. Determine
for Each Factor Its Factor Degrees’ Points; 7. Review
Job Descriptions and Job Specifications; 8. Evaluate
the Jobs; 9. Draw the Current (Internal) Wage Curve;
10. Conduct a Market Analysis: Salary Surveys;
11. Draw the Market (External) Wage Curve;
12. Compare and Adjust Current and Market Wage
Rates for Jobs; 13. Develop Pay Grades; 14. Establish
Rate Ranges; 15. Address Remaining Jobs;
16. Correct Out-of-Line Rates
• Salary surveys may be informal phone or Internet
surveys, or formal surveys conducted by the employer
or utilizing commercial, professional, and/or
government salary surveys.
• Once the committee uses job evaluation to determine
the relative worth of each job, it can turn to the task
of assigning pay rates to each job; it would usually
first want to group jobs into pay grades to streamline
the process.
• The team can then use wage curves to price each
grade and then fine-tune pay rates.
4. Pricing managerial and professional jobs involves
some special issues. Managerial pay typically consists
of base pay, short-term incentives, long-term incentives,
and executive benefits and, particularly at the top levels,
doesn’t lend itself to job evaluation but rather to understanding
the job’s complexity, the employer’s ability
to pay, and the need to be competitive in attracting top
5. We addressed several important special topics in
compensation. More employers are moving from
paying jobs based on their intrinsic duties toward paying
jobs based on the competencies the job requires.
The main reason for doing so is to encourage employees
to develop the competencies they need to move
seamlessly from job to job. Broadbanding means
consolidating several rates and ranges into a few wide
levels or “bands,” each of which contains a relatively
wide range of jobs in salary levels. Broadbanding
encourages employees to move freely from job to
job and facilitates implementing team-based highperformance
management systems. Comparable worth
refers to the requirement to pay men and women
equal pay for jobs that are of comparable rather than
strictly equal value to the employee. With many
stockholders concerned with excessive executive
remuneration, board oversight of executive pay has
become an important issue, and boards of directors
should use qualified advisors and exercise diligence
and independence in formulating executive pay plans.
Total rewards encompass the traditional compensation
components, but also things such as recognition and
redesigned more challenging jobs.
Discussion Questions
11-5. What is the difference between exempt and nonexempt
11-6. Should the job evaluation depend on an appraisal of the
11-7. What is the relationship between compensable factors
11-8. Define and give an example of how to conduct a job
11-9. The average pay for most university presidents is

Leave a Reply