chapter 14 compensation control & administration harcourt, inc. items and derived items...

Chapter 14Chapter 14Compensation Control & Compensation Control &

AdministrationAdministrationHarcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

All rights reserved. Requests for permission to make copies of any part of thework should be mailed to the following address: Permissions Department,Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.

Compensation Compensation Decision Making Decision Making

Bergmann & ScarpelloBergmann & Scarpello4th edition4th edition

Harcourt, Inc. items and deriveditems copyright © 2001 by Harcourt, Inc.

Budget Controls: Budget Controls: Forecasting NeedForecasting Need

Top-DownForecasting

Bottom-upForecasting

Top-DownForecasting

Normally done by comptroller’s officeProjections of revenues & costs are

generated & financial revenues allocated based on careful analysis

of the past & review of expected activities for the coming year

Does not consider external changesDoes not consider external changessuch as job redesign or introductionsuch as job redesign or introduction

of technologies of technologies Does not factor in needs of specificDoes not factor in needs of specific

organizational units or diversity of skillsorganizational units or diversity of skillsHarcourt, Inc. items and deriveditems copyright © 2001 by Harcourt, Inc.

Bottom-upForecasting

Supervisory pay adjustment recommendations are used to

obtain expected changes in wages and salaries for the next year

The summation of all supervisor recommendations is the

proposed pay adjustment budget

Pay adjustment budgets can be Pay adjustment budgets can be determined from the pool of money determined from the pool of money

allocated for the % level rise allocated for the % level rise Normally based on further analysis ofNormally based on further analysis of

•Current year’s spendingCurrent year’s spending•Best estimates for next year’s spendingBest estimates for next year’s spending



Budget Controls: Analysis of Budget Controls: Analysis of Current Pay Plan’s ResultsCurrent Pay Plan’s Results

Focuses on examining the way money was used in the past year to project the amount that will be needed for the next year


Pay Plan Design Processes & Pay Plan Design Processes & ProceduresProcedures

Analysis of Pay Level Policy-Practice Analysis of Pay Level Policy-Practice CongruenceCongruence

Analysis of People Movement within Analysis of People Movement within and across Pay Structuresand across Pay Structures


Compa-ratioCompa-ratio is an index used – to examine whether managers

comply with the organization’s pay level policy

– to determine how the present pay ranges are being used



Standard compa-ratio formula: Standard compa-ratio formula:


Compa-ratio =Average Rates Actually Paid

Midpoint of the Range


Benefits of compa-ratio analyses


• Help control labor costs

• Assess range utilization

• Assess managers’ compliance with Equal Pay Act & other employment legislation


Controls imbedded into pay techniques• Performance of task-oriented job analysis

(determine who does what, when, why, how, & under what conditions)

• Managerial approvals for implementing new jobs & their job descriptions

• Use of same compensable factors & weights when evaluating jobs that will be paid under the same pay structure



Controls imbedded into pay techniques, cont.• Use of multiple pay surveys to identify the

going rate of pay, hours of work, & other pay treatments for employees on benchmark jobs

• Use of appropriately overlapping pay ranges• Use of same rules, criteria, or standards for

allocating pay raises & pay awards to individuals on given jobs



Employee Positions Employee Positions across pay structuresacross pay structures


When jobs are linkedin a career progressionladder but are paid under different pay structures,between-job wage compression between-job wage compression can occur

Quality Control Technician

Sales RepresentativeLow salary $25,000

High salary $30,000


Monitoring the Pay System-Monitoring the Pay System-Employee Behavior RelationshipEmployee Behavior Relationship

• Pay-turnover relationship– Exit interviews

– Turnover indices

• Pay-performance relationship

• Pay-organizational citizenship relationship

• Pay system-employee opinion relationship

chapter 14 compensation control & administration harcourt, inc. items and derived items...

Documents