As the compensation analyst for the relatively new Omega Corporation, you are to price a pay structure.
Question:
As the compensation analyst for the relatively new Omega Corporation, you are to price a pay structure. Information is provided to you below and includes the points for each job (which was obtained through a job evaluation) and salary rate midpoint data (obtained through a salary survey) for each benchmark job.
You are to have equal percentage progressions between midpoint rates and set the rate RANGE at 10% on each side of the midpoint. Make sure you incorporate this information into your answer.
Do the following: (If there is more than one pay structure, you are required to only develop the pay structure with the most jobs). Hint: Please do not confuse structures with grades (NOTE: Providing me with a calculated answer and then a 1-2 sentence answer is not a discussion). If all you essentially provide me is a calculated answer, then you’ve simply demonstrated you know how to do calculations and you haven’t demonstrated you understand what and why you did it.
1. How many pay structures are required? DEMONSTRATE (with a plot) AND EXPLAIN WHY. If you determine there is more than one structure, only use the one structure with the most populous jobs.
2. Determine the number of grades and indicate which jobs are in which grade. Discuss how you determined the number of grades.
3. Determine the evaluation point ranges for EACH of the grades. Discuss what the evaluation points represent.
4. Determine the midpoint pay rate for EACH grade. Discuss what the midpoint pay rate for each grade represents.
5. Determine the high/low ratio and the midpoint to midpoint percentage progression. Discuss the meaning for each
6. Determine the pay rate range for EACH grade. What purpose does the pay rate range serve (i.e., why not just pay everyone the midpoint in that grade?)?
7. Draw and calculate the grade overlap BETWEEN EACH ADJACENT GRADES. Discuss what the overlaps represent.
8. DISCUSS THOROUGHLY how you would set up steps within the grades – you may have to do research for this.
Compensation Data for Omega Corp. | ||
Job | Evaluation Points | Salary Data |
A | 115 | $10.15 |
B | 125 | $10.30 |
C | 155 | $11.00 |
D | 155 | $11.15 |
E | 160 | $11.40 |
F | 170 | $11.35 |
G | 210 | $12.00 |
H | 225 | $12.15 |
I | 230 | $12.25 |
J | 285 | $13.25 |
K | 295 | $13.40 |
L | 325 | $14.10 |
M | 330 | $17.05 |
N | 375 | $19.85 |
O | 350 | $14.95 |
P | 400 | $16.00 |
Q | 425 | $16.25 |
R | 465 | $16.50 |
S | 540 | $18.40 |
T | 545 | $25.00 |
U | 555 | $18.55 |
V | 575 | $14.50 |
W | 580 | $19.25 |
X | 620 | $20.80 |
Y | 625 | $21.00 |
Z | 640 | $22.00 |
Can someone assist me with the pay rate range? Please view my answers so far below:
Part I: Omega Corporation
A. How many pay structures are required? DEMONSTRATE (with a plot) AND EXPLAIN WHY. If you determine there is more than one structure, only use the one structure with the most populous jobs.
In my assessment, there is only one pay structure. The pay structure includes jobs A- Z, excluding the four outliers of M (330, $17.10), N (375, $19.85), T (545, $25.00), and V (575, $14.50). I decided that there is only one structure because of the constant increase in salary excluding the few that seem to be mismatched to the data. One would assume that for jobs M, N, T and V, the job analysis, evaluation and compensation for these jobs were done incorrectly and or they do not match the other job levels.
B. Determine the number of grades and indicate which jobs are in which grade. Discuss how you determined the number of grades.
I determined the number of pay grades by using a pay scale beginning at $8 and increasing in each pay grade by $3.99 to accommodate the different job levels in the table provided to us. Pay Grade I is from $8-11.99. Pay Grade II is $12.00-15.99, Pay Grade III is $16.00-19.99 and Pay Grade IV is $20 and above. By using this scale I will have four pay grades.
Pay Grade | Pay Range |
Pay Grade I | $8.00-$11.99 |
Pay Grade II | $12.00-$15.99 |
Pay Grade III | $16.00-$19.99 |
Pay Grade IV | $20.00-$23.99 |
C. Determine the evaluation point ranges for EACH of the grades. Discuss what the evaluation points represent.
Pay Grade | Job Evaluation Points |
Pay Grade I | 1-200 |
Pay Grade II | 201-400 |
Pay Grade III | 401-600 |
Pay Grade IV | 601-800 |
I determined the number of pay grades by using a simple 200 point evaluation scale. Pay Grade I is from 1-200. Pay Grade II is 201-400, Pay Grade III is 401-600 and Pay Grade IV is 601-800. By using this scale I will have four pay grades. These are the set ranges even though pay grade I begins at 115 evaluation points to 170 evaluation points and pay grade IV begins at 620 evaluation points to 640 evaluation points, these pay grades will have the least amount of job levels within them.
D. Determine the midpoint pay rate for EACH grade. Discuss what the midpoint pay rate for each grade represents.
Pay Grade | Midpoint Pay Rate |
Pay Grade I | $9.995 |
Pay Grade II | $13.995 |
Pay Grade III | $17.995 |
Pay Grade IV | $21.995 |
Width Calculation: (Maximum - Minimum) / Minimum
(11.99-8)/8=0.49875
(15.99-12)/12=0.3325
(19.99-16)/16=0.249375
(23.99-20)/20=0.1995
Midpoint Calculation:
Minimum= Midpoint/ (1+ (Width/2))
8= Midpoint/ (1+ (0.49875/2)) = 8*1.249375=$9.995
12= Midpoint/ (1+ (0.3325/2)) = 12*1.16625=$13.995
16= Midpoint/ (1+ (0.249375/2)) = 16*1.246875=$17.995
20= Midpoint/ (1+ (0.1995/2)) = 20*1.09975= $21.995
I calculated the midpoint rate by finding the average between the difference of the minimum rate and the maximum rate and added this total to the minimum. This formula provided me with the midpoint rate for each pay grade.
E. Determine the high/low ratio and the midpoint to midpoint percentage progression. Discuss the meaning for each
High/low ratio:
(Midpoint rate for the highest grade/midpoint rate for the lowest rate)
($21.995/9.995) = $2.2006
Midpoint to Midpoint Progression: 30.071 % Compounded Annually
Pay Grade | Midpoint Progression |
Pay Grade I | $9.995 |
Pay Grade II | ($9.995*1.30071)= $13.00 |
Pay Grade III | ($13.995*1.30071)=$18.20 |
Pay Grade IV | ($17.995*1.30071)= $23.41 |
F. Determine the pay rate range for EACH grade. What purpose does the pay rate range serve (i.e., why not just pay everyone the midpoint in that grade?)?
Pay Grade | Minimum | Midpoint | Maximum |
Pay Grade I | |||
Pay Grade II | |||
Pay Grade III | |||
Pay Grade IV |
G. Draw and calculate the grade overlap BETWEEN EACH ADJACENT GRADES. Discuss what the overlaps represent.
H. DISCUSS THOROUGHLY how you would set up steps within the grades – you may have to do research for this.
Strategic Compensation A Human Resource Management Approach
ISBN: 978-0133802023
8th edition
Authors: Joseph J. Martocchio