Case study, edternal pay
Compensation Team 6
Haipeng Lin, Miranda Lockwood, Zack Luers, Olaia Martinez
11/19/2019
Overview:
Internal Pay Equity is the comparison between positions within your business to ensure fair pay. When judging internal equity you could use the most common method, the point method, which uses explicit criteria for compensable factors. This method can be considered to use less bias, but it is time consuming and expensive. Ranking is the quickest and least expensive, however it may not be the most detailed. Classification is good for benchmarks, however when job and grade descriptions do not match well the evaluators tend to use their subjective judgement.
External equity the situation that exists when an organization's pay rates are at least equal to market rates. It is also known as matching strategy. When addressing external equity you can lead, lag, or match the market. When you lead with compensation in the market, you are acquiring top talent best used if your business is using a differentiation strategy (Milkovich, 2020). However, this can be too expensive for most businesses. Some businesses may choose to lag the market, and lower wages. You may save money this way, but it could attract fewer people. Matching the market makes you competitive with others, but may not anticipate future needs, resulting in playing catch up. It is important to have a clear consistent method for pay equity so employees feel they are being compensated fairly.
Internal Pay Equity:
Employees must not feel that they are being underpaid compared to their colleagues. Bloomington Transit System prides themselves on their employees and assures that employees are treated fairly in the pay structure. We comply with all federal and state laws, rules and regulations.For Bloomington Transit we chose to use the point method evaluate jobs and ensure internal pay equity.This quantitative method ensures each job is evaluated fairly without bias (Milkovich, 2020). This way employees know exactly what skills they are being paid for. Each job has a set of clearly defined standards by which we evaluate the value of each job and the performance of each employee. We focus on adopting a straightforward and honest paying structure, and also offer compensation that fits the employees. These compensable factors include skills (level of education, years of experience, and ability), responsibilities (number of direct reports), mental and physical effort, and working conditions. Each of these factors will be assigned points that can be used in the point method to determine pay.
Once evaluations have been completed we will create pay grades. Similar jobs will be in the same grade, which will then have a pay range. By defining pay grades and seeing similar positions and qualifications, employees will have a good understanding of what they are being compensated for. For example bus drivers could be in one pay grade. Those with no experience would be at the lower pay range and those with more experience would be at the upper pay range. The next grade could be managers who oversee other employees, hire and fire, and make more decisions.
External Pay Equity:
According to job market data, organizational size, geographic location, cost of living, benchmark position and internal structure to decide our pay ranges, we will make sure that our pay is high enough to be competitive to attract talents who are able to provide skills and capacities required by organization’s strategies, for example, bus drivers, mechanics, full-time transit service attendants, and part-time BT-access operators. We will use a match strategy when it comes to pay. This ensures we are competitive within the market (Milkovich, 2020). We can attract more employees with our benefits, like 401K plans, PTO, and health insurance. We also can offer targeted individual incentives like bonuses for good driving.We differentiate ourselves from the market by also offering intrinsic of satisfaction for employees knowing they are making our whole community better. The employees will be making a meaningful contribution to safe transportation in the community. In addition, our competitive pay and benefits will contribute to our retention rate, which can help us retain talented employees.
Conclusion:
Bloomington Transit wants all employees to feel they are valued for their skills, and compensated fairly. By clearing defining compensable factors and using the point method, employees can easily see what they are being paid to do. This helps ensure there is no bias when it comes to pay. This helps foster a positive work environment. When it comes to external equity, Bloomington Transit matches the market when it comes to base pay. However, we offer a multitude of intrinsic and extrinsic rewards and benefits that also attract employees. By using these methods, we hope to attract quality candidates who feel valued and remain at the company for a long time.
Works Cited
Bloomington Transportation Plan. (2018, June 29). Retrieved from
https://bloomington.in.gov/sites/default/files/2018-07/Bloomington%20Trans%20Plan_F
Milkovich, G. (2020). Compensation. McGraw-Hill/Irwin.
Job Opportunities. (2019, August 15). Retrieved November 20, 2019, from
https://bloomingtontransit.com/jobs/.