Week 4 Discussion

Establishing a Strategic Pay Plan

Employee Pay Rates or Compensation

When we discuss a pay rate or a compensation plan, we include all the mechanisms associated with the employment and the value or worth of each individual employee. The key to compensation is to align the rewards with the strategy. In other words, the compensation package produces the behavior results of the speci�c goals achieved. Managers utilize various instruments in setting the pay scales that are speci�c to the job or the task in question. Firms need to have some keen considerations for compensation.

Determining the Pay Worth

Firms use several approaches to setting a pay rate. One such approach is the federal guidelines of establishing a minimum wage. Other methods are based on the market, i.e., “what are the competitors paying,” by utilizing survey methods. In a union environment, the pay rate is negotiated based on several factors of the union or management binding contract. Understanding and establishing a methodology involved in the approach to promote a competitive pay plan become very bene�cial to the �rm’s mission, vision, and values.

Establishing the Pay Plans

The only way an established pay plan could work is if managers could understand the basic factors in determining the pay rates—outlining all the direct and indirect �nancial payments such as the job evaluation’s equity or worth, the ranking within each job and function, the job classi�cation, and the competency required to perform the tasks and skills of the position. In some instances, geography plays a large role in pay basecation, cost of living, dif�culty attracting candidates, etc.

Basic System of Pay Plans

For many �rms, keeping the system simple helps avoid any type of discrimination. When I worked in human resources (HR), we established classi�cations and grades. Each section had its own vertical pay rate range. This is a good system to understand as well as research on.

Remember when you are dealing with such a sensitive issue as pay, you need to know the law.

Determinants of Wages Review each tab to know more.

Personal Perception of Wage

Cost of Living

Labor Union

Government Legislation

Ability to Pay

Supply and Demand

Productivity

It is de�ned as an organized association of workers, formed to protect and further their rights and interests in both private and public sectors. A union negotiates with the employer of the members (employees within the union) regarding compensation, working hours, and overall health and well-being of the union workers membership.

Additional Materials

From your course textbook, Human Resource Management, review the following chapter:

Establishing Strategic Pay Plans

From the South University Online Library, read the following article:

Best Laid Plans: Establishing Fairness Early Can Help Smooth Organizational Change (https://www.thecampuscommon.com/library/ezproxy/ticketdemocs.asp? sch=suo&turl=http://search.ebscohost.com.southuniversity.libproxy.edmc.edu/login.aspx? direct=true&db=bth&AN=9474817&site=eds-live)

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