HRM 500 WEEK 7 DISC

Slide #

Scene/Interaction

Narration

HRM500 Week 7 Scenario Script - Part 1: Establishing a Pay Structure

Slide 1

Scene 1

Angela’s Office

HRM500_7_1_Angela-1: Welcome back, team! Pay is an important issue for Human Resource Managers. It impacts both employees and organizational costs. If we do not plan pay strategies in advance, it may result in dissatisfaction and low pay rates, making it hard to recruit good employees. On the other hand, if pay rates are too high due to not planning in advance, it could create a great deal of unnecessary expenses for the organization.

We as an organization need to make pay decisions based on job structure and pay level.

Job structure refers to the relative pay of different jobs within the organization, while the pay level is the average amount an organization pays for a particular job.

Slide 2

Scene 2

Angela’s Office

HRM500_7_2_Angela-1: Ashley and Michael, we need to look at creating a pay structure for the upcoming year here at Montrose.

The pay structure needs to motivate employees to help the organization reach goals. What are your thoughts on this?

HRM500_7_2_Ashley-1: We should first look at the legal requirements that affect pay in the areas of equal employment opportunity, minimum wage, overtime pay, and wages for government contractors.

HRM500_7_2_Michael-1: We cannot differentiate in pay based on employees’ age, sex, race, or other protected status. However, it is important to note that these laws do not guarantee equal pay for men and women, whites or minorities, or any other groups.

HRM500_7_2_Angela-2: We have to pay at least the minimum wage for all employees. The Fair Standard Labor Act, or FSLA, establishes a minimum wage. The current federal minimum wage is seven dollars and twenty-five cents per hour.

Overtime pay was also established by the FSLA. We must take into consideration that if hourly employees work more than forty hours a week, they must be paid overtime compensation.

HRM500_7_2_Ashley-2: Exempt employees, on the other hand, are not covered by the FSLA for overtime pay. Nonexempt employees covered by the FSLA are paid overtime.

HRM500_7_2_Michael-2: Child labor, as we know, is not allowed based on the FSLA. Restrictions apply to children under the age of eighteen years. There are restrictions set against working in hazardous occupations. Also, fourteen and fifteen year old children may only work outside of school hours.

HRM500_7_2_Ashley-3: An organization must consider the economy when determining pay for employees. We must keep costs low so that we can make a profit on the products and services that we offer.

HRM500_7_2_Angela-3: You two have brought up some excellent points regarding pay structure. We discussed the role of job structure in determining pay, and also looked at pay levels and legal requirements to consider. Let’s do a quick activity on the topics we have discussed before moving on.

Slide 3

Interaction – Multiple Choice Activity –

Question: The piece of legislation that established the federal minimum wage, as well as overtime pay regulations and child labor restrictions was named:

a. Occupational Safety and Health Administration (OSHA)

b. *Fair Standard Labor Act (FSLA)

c. Lily Ledbetter Fair Pay Act

Slide 4

Scene 3

Angela’s office

*Graphic of stock market graph with markers at, above, and below the market rate line

*Either screen capture or just listing the websites for:

-U.S. Bureau of Labor Statistics

-National Compensation Survey

-WorldAtWork

-Society for Human Resource Management

HRM500_7_3_Angela-1: Good job – you answered the question correctly. Next, let’s discuss the impact of product and labor markets on pay structure. Ashley, what have you dug up during your research?

HRM500_7_3_Ashley-1: Well Angela, when considering pay, we should look at product markets. This would include organizations that offer competing goods and services. Besides competing to sell products and services, organizations must compete in labor markets for human resources.

HRM500_7_3_Michael-1: Although labor and product markets limit organizations’ choices about pay levels, there is a range within which organizations make pay decisions.

If many workers are competing for fewer jobs, that gives us more flexibility for pay as an organization.

When organizations have a broad range in which to make pay decisions, a company can choose to pay at, above, or below the rate set by the market.

HRM500_7_3_Ashley-2: We can gather information about market pay through benchmarking. This is where we compare our own practices of pay against those of successful competitors.

Pay surveys are available for many kinds of industries. The primary collector of this information is the United States Bureau of Labor Statistics, which continuously conducts a National Compensation Survey to measure wages, salaries, and benefits paid to the nation’s employees.

HRM500_7_3_Ashley-3: The most widely used sources for compensation are WorldatWork and the Society for Human Resource Management.

HRM500_7_3_Michael-2: We will need to determine whether to gather data by looking at a particular industry or at particular job categories. Industry-specific data are relevant for jobs with skills that are needed only for a certain type of product or service.

HRM500_7_3_Angela-2: I see… very interesting… Thanks team! You have given me some valuable information to work with regarding the role of product and labor markets. Let’s complete a short activity to review what we’ve learned before moving on.

Slide 5

Interaction – Multiple Choice activity –

Question: The practice of comparing a company’s pay practices with the pay practices of competing companies is known as:

a. Product market

b. Labor market

c. Benchmarking*

d. Job rotation

Slide 6

Scene 4

Angela’s office

*Graph shown with minimum point, maximum point, and midpoint highlighted

HRM500_7_4_Angela-1: Great job on that second question, team! Next we will discuss the relative value of jobs. We will also consider pay structure as it relates to hourly wages, piecework, salary, pay policy line, pay grades, pay ranges, pay differentials and alternatives to job-based pay. What did you two find out about all of these important elements of pay structure?

HRM500_7_4_Ashley-1: Well, to start out, we learned that we can use a method called a job evaluation to measure the relative internal worth of an organization’s jobs.

We can accomplish this by assembling and training a job evaluation committee which consists of people familiar with the jobs to be evaluated.

HRM500_7_4_Michael-1: Within a pay structure, we can look at pay rates, pay grades and pay ranges. In other words, pay may be presented in terms of a rate per hour, known as hourly wage; a rate of pay for each unit produced, known as piecework; or a rate of pay per month or year, called a salary.

HRM500_7_4_Ashley-2: We can then use a graphed line to show the mathematical relationship between job evaluation points and pay rate. We can also base our pay on market research from surveys.

Pay grades can be used to group sets of jobs having similar worth in order to establish rates of pay.

HRM500_7_4_Michael-2: Also, by using a pay range, we can create a set of pay rates defined by a minimum point, a maximum point, and a midpoint of pay for employees holding a particular job or a job within a particular pay grade.

In some situations, we may have to adjust pay to reflect differences in working conditions or labor markets. For example, we could pay extra to individuals who are required to work second shift.

HRM500_7_4_Ashley-3: Some alternatives to traditional pay are delayering and skill-based pay systems.

Delayering reduces the number of levels in the company, while skill-based pay systems are pay structures that set pay according to the employees’ levels of skill or knowledge and what they are capable of doing.

HRM500_7_4_Angela-2: This is excellent information, team! Thank you for explaining the relative value of jobs, as well as the many differential elements that can be used in a pay structure. Let’s do one more brief activity to review what we’ve learned before moving on to our final topic.

Slide 7

Interaction – Multiple Answer Activity

Question: Which of the following elements are involved in pay structure (check all that apply):

a. *Pay rates

b. *Pay grades

c. *Pay ranges

d. Pay raises

e. Pay discrepancies

Slide 8

Scene 5 – Angela’s office

HRM500_7_5_Angela-1: Nice work team! You have really increased your understanding of the elements of a typical pay structure. Before we wrap up today’s meeting, let’s examine actual pay and current issues involving pay structure.

We will be responsible for establishing Montrose’s pay structure. This structure will represent our organization’s pay policy. However, the organization may opt to do something different. As part of our responsibilities, the HR department therefore should compare actual pay to the pay structure, making sure that policies and practices match.

HRM500_7_5_Michael-1: A company’s policies related to pay structure influence employee and public opinion about the organization. Keep in mind that issues affecting pay structure can reflect positively or negatively on an organization.

HRM500_7_5_Ashley-1: Recent issues related to pay structure include pay during military duty and pay for executives.

The Uniformed Services Employment and Reemployment Rights Act or USERRA requires employers to make jobs available to their workers after returning from fulfilling military duties for up to five years.

The armed services pay service members during their time in duty; however, the pay often falls short of their earnings in civilian life. One option for us at Montrose is to pay the difference between military wages and what they would normally earn as civilians.

HRM500_7_5_Michael-2: Also, there has currently been a great deal of scrutiny regarding executive pay. In recent years, the pay for some of the highest level executives in the U.S. has topped six million a year, and two point five million was in the form of a salary plus a bonus. Although executives make up a small portion of the total workforce, the issue of executive pay is relevant to pay structure in terms of a comparison of pay against employees’ inputs and outcomes.

HRM500_7_5_Angela-2: You’ve hit the nail on the head, Michael – that is definitely a hot-button topic in today’s economic climate. Let’s do one final practice activity on comparing pay policies and practices, and then I’ll let you two go for the day.

Slide 9

Interaction – Case Study True/False question

Question: Through their research, Ashley and Michael discover that Montrose’s top three executives are each commissioning a salary above $1 million per year, taking long vacations and 2 hour lunch breaks, and working an average of 32 hours per week.

On the other hand, Montrose’s average call center employee is making current federal minimum wage ($7.50 per hour), has 1 week vacation per year, and has a 30 minute lunch break per day, with an average work week of 45 hours during regular season and 50 hours during peak season.

Montrose’s current pay policies indicate that all employees should complete a 40 hour work week, including a maximum of 60 minutes for lunch each day, and that top of the pay scale should not be greater than 75% more than the bottom of the pay scale for employees across the board.

True or False: Montrose’s current pay policies match their actual pay practices.

Slide 10

Scene 6 – Angela’s office

HRM500_7_6_Angela-1: Nice work on that last activity, team. Thankfully, that was just a practice case and not really how things are done here at Montrose! (laughs)

We’ve accomplished a lot at our meeting today.

We looked at the decisions involved in determining a pay structure and examined legal requirements for establishing pay policies. We discussed how economic forces influence pay decisions, as well as how employees evaluate the fairness of a pay structure. We then explained how organizations design pay structures, and also looked at alternatives to job-based pay.

Congratulations, team - we are off to a great start! We now have enough information to develop a new pay structure for Montrose and present it to the Board of Directors.

Please do some research on unions and labor relations before our meeting next week.

You will also need to complete your weekly discussions on Economic Influences on Pay and Employee Stock Ownership and Executive Pay. Also, if you haven’t already done so, make sure to visit the Salary dot com website for your eActivity. I hope you both have a productive week!