MGT 340 Ch 12-13

What are the key decisions in establishing a pay structure?

A job structure establishes relative pay for different jobs. Organizations set pay levels for different job functions and responsibility levels. Together, job structure and pay levels create a pay structure policy.

What legal requirements affect pay policies?

Employers must follow EEO standards to ensure equal pay for equal work. The FLSA requires minimum wage, overtime pay, and child labor laws. Federal contractors must pay at least the prevailing wage in their area.

How do economic forces influence pay decisions?

Employers must balance product and labor market demands. Product markets set a limit on pay, while labor markets require competitive wages. Paying above-market attracts top talent but may hurt competitiveness, while below-market pay requires strong recruiting/training practices.

How do economic forces influence pay decisions?

Employers must balance product and labor market demands. Product markets set a limit on pay, while labor markets require competitive wages. Paying above-market attracts top talent but may hurt competitiveness, while below-market pay requires strong recruiting/training practices.

How do employees evaluate the fairness of pay?

According to equity theory, employees compare their pay-to-input ratio with others. If they perceive inequity, they may adjust effort, leave, or seek change. Pay transparency helps in assessing fairness.

How do organizations design pay structures?

Organizations use job evaluation to measure relative worth, research market pay levels, create pay grades, and establish pay ranges. Pay differentials adjust pay based on market or working conditions.

What are alternatives to job-based pay?

Delayering reduces job levels into broad pay bands. Skill-based pay rewards employees based on knowledge and skills, increasing flexibility and adaptability

How do organizations ensure pay matches the structure?

HR should compare actual pay with the pay structure using compa-ratios (average pay vs. midpoint of the pay range). If compa-ratios deviate from 1, HR should adjust pay practices or structure.

What issues arise in paying military employees and executives?

The Uniformed Services Employment and Reemployment Rights Act (USERRA) requires jobs to be available for employees returning from military service. Executive pay is scrutinized due to its high disparity from worker pay, which may affect employee morale and equity perceptions.

How does incentive pay relate to performance?

Incentive pay ties compensation to performance, directing behavior toward organizational goals. Employees must believe they can meet standards and value the rewards.

How do organizations recognize individual performance?

Through piecework rates, standard hour plans, merit pay, bonuses, and sales commissions. Each method provides different incentives for achieving individual goals.

What are ways to recognize group performance?

Gainsharing distributes productivity gains among employees. Group bonuses reward teams for specific goals, while team awards recognize a broader range of performance measures.

How do organizations link pay to overall performance?

Through profit sharing and stock ownership. Profit sharing gives employees a portion of company profits, while stock ownership (options or ESOPs) aligns employee interests with company success.

How do organizations use a balanced scorecard for incentives?

A balanced scorecard combines financial, customer satisfaction, operational efficiency, and skill development measures to guide incentive pay decisions.

What contributes to the success of incentive programs?

Employee participation and clear communication ensure fairness and understanding. Involving employees in pay decisions supports empowerment and alignment with company goals.

What are issues in performance-based executive pay?

Executive incentives should balance motivation and fairness. Performance measures should align with organizational success and ethical behavior to ensure long-term benefits.