A pay structure sets pay rates or ranges for jobs based on their internal value determined through job evaluation and external market rates. It aims to maintain competitive and equitable pay levels. A pay structure has elements like pay schedules, grades, and ranges. Designing a pay structure involves job analysis, evaluation, setting a pay policy, budgeting payroll, researching average salaries, and establishing a pay grade system to group positions by compensation level based on qualifications.
2. What is Pay
Structure? Their relative internal value, as stablished
by job evaluation.
External relativities, via market rate
surveys.
Where appropriate, negotiated rates for
the job.
A pay structure is a collection of pay rates
or pay ranges. Pay structures, also known
as salary structures, set out the different
levels of pay for jobs, or groups of jobs, by
reference to:
5. Why Pay
Structure?
Maintain pay levels that are
competitive with the external labor
market.
Maintain internal pay relationships
among jobs.
Recognize and reward differences
in level of responsibility, skill, and
performance.
Manage pay expenditures.
6. ELEMENTS OF A PAY STRUCTURE
Pay
Schedules
Pay
Grades
Pay
Range
7. Pay Schedule
is the timetable employers
follow to pay their employee.
Pay Schedule can be
classified as:
Weekly
Bi-weekly
Semi-monthly
Monthly
8. Pay Grade
is the level of responsibilities
performed within JDs of
position and length of time
the employees have to work.
9. Pay Range
is a set boundary for
compensation which
identifies the minimum to
maximum amount of a
specific pay group.
10. How to design
a salary
structure?
There are several steps to designing a pay structure:
Step 1: Job Analysis
Job analysis is the process of studying jobs in an
organization. The outcome of this process is a job
description that includes the job title, a summary of the
job tasks, a list of the essential tasks and
responsibilities, and a description of the work context.
Also included are the knowledge, skills and abilities
needed to perform the job.
Step 2: Job Evaluation
Job evaluation for Management & Professional Staff is
based on Occupational Guidelines established to
identify the nature and scope of the position’s tasks and
responsibilities. All jobs are evaluated against these
guidelines.
11. Step 3: Pay Policy Identification
Pay policy identification is the process of determining whether the organization
wants to lead, lag or meet the market in compensation. The pay policy or strategy
will likely influence employee attraction and retention. Pay policies can vary across
job families (i.e., groups of similar jobs) and job levels if the top management feels
that different strategies can be effective in different areas of the organization.
Step 4: Budget of payroll
Create a budget for payroll. Evaluate company profits, sustainable cash flow and
expenses to determine how much you are able to spend on payroll. Decide how
youwill allocate payroll.
12. Step 5: Average salaries
Research average salaries. Keep your salary structure competitive to
entice applicants. Read local job ads to see what other corporations are
paying for similar positions and duties.
Step 6: Pay Grade System
Devise a pay grade system. Pay grade is a structure that establishes
compensation for each position. After determining how much you will pay
for a position, establish a pay grade for these positions based on an
applicant's experience, education and progression in their career.
