TABLE OF CONTENTS PAGE
1.INTRODUCTION…………………….…….……………………….………3
2.THE STEPS INVOLVED IN ESTABLISHING PAY RATES…..………3
2.1 Determining the worth of jobs: Job evaluation………………………...3-5
2.2 Methods of job evaluation……………………………………………….4-7
2.3 Conducting a wage and salary survey…………………………………7-8
2.4 Determining the pay structure…………………………………………..8-9
2.5 Determining pay grades…………………………………………………9-10
2.6 Determining pay ranges…………………………………………………10
2.7 Determining progression through pay range scales………………….11
2.8 Wage and salary curves…………………………………………………11-13
2.9 Maintaining the pay structure……………………………………………13-14
2.10 Participation policies…………………………………………………….14
2.11 Pay secrecy………………………………………………………………14-15
2.12 Strategic job value……………………………………………………….15
3. CONCLUSION ……………………………………………………..………15
4. REFERENCES ………………………………………………………….….15
1.INTRODUCTION
Managing people in the organization is one of the most important aspects in order for companies
to be successful and for organisations to be sustainable and maintain their competitive advantage
in the complex macro and micro-environments. In this essay the discussion is around the steps
involved in establishing pay rates within the broader view of reward, remuneration and
compensation practices.
QUESTION
To be a well-rounded member of the profession and a wise compensation practitioner you
need to demonstrate knowledge and understanding of reward, remuneration and
compensation practices to satisfy organisational as well as employee needs in a dynamic
environment. Discuss the steps involved in establishing pay rates.
Establishing pay rates while ensuring external and internal equity, entails various steps:
1. Determining the worth of jobs: Job evaluation
2. Methods of job evaluation
IOP3706 Assignment 2- Sem1 /2020 1
, 3. Conducting a wage and salary survey
4. Determining the pay structure
5. Determining pay grades
6. Determining pay ranges
7. Determining progression through pay range scales
8. Wage and salary curves
9. Maintaining the pay structure
10. Participation policies
11. Pay secrecy
12. Strategic job value
2. The steps involved in establishing pay rates
2.1
Step 1: Job Evaluation
According to Riggio (2012), a job evaluation is one of the products of a job analysis and is the
process of assessing the relative value of jobs to determine appropriate compensation. That is, the
wages or pay rates paid for a particular job should be related to the knowledge, skills, abilities and
other characteristics (KSAO’s) the job requires. There are, however, other variable that influence
the rate of compensation, such as supply of potential workers, the perceived value of the job to the
company, and the jobs history. It is important that the worth of each job is calculated and worked
out through doing a thorough job evaluation for the purpose of ensuring internal equity in the
organization.
An important principle in job evaluation is to evaluate the job, not the person as it could be easy to
confuse personal characteristics of the person currently in the job with the actual job requirements.
A job-based job evaluation system is when a grade is assigned to a specific job, not a person.
A person-based job evaluation system is when specific personal qualities or achievements are
regarded as important to the job and value is assigned to them.
The two ways of assessing the relative value or size of a job are holistically and analytically.
When the job is evaluated holistically, the relative size of the whole job is taken into consideration
based on what is consciously or unconsciously believed to be the most important criterion to be
used for comparisons. When the job is evaluated analytically, a range of factors are identified and
the degree to which they form part of different jobs are assessed.
Some purposes and uses of job evaluation according to Byars and Rue (2010) are:
• When pay is integrated with the job contribution to the company, equity is supported.
• Employees adapt easier to change in the organization as they understand what is required of
them in their jobs and their value within the organization.
• It creates an incentive for employees to progress in their careers and aim for higher positions in
the organization.
• It helps establish a workable, agreed-upon and functional pay structure.
• It simplifies and justifies the pay correlation between jobs, and reduces the role played by
chance, favouritism, and bias.
• It helps with setting pay levels for new, unique, or changing jobs.
• It provides an agreed-upon device as well as all the information needed to reduce and resolve
disputes and grievances.
IOP3706 Assignment 2- Sem1 /2020 2
1.INTRODUCTION…………………….…….……………………….………3
2.THE STEPS INVOLVED IN ESTABLISHING PAY RATES…..………3
2.1 Determining the worth of jobs: Job evaluation………………………...3-5
2.2 Methods of job evaluation……………………………………………….4-7
2.3 Conducting a wage and salary survey…………………………………7-8
2.4 Determining the pay structure…………………………………………..8-9
2.5 Determining pay grades…………………………………………………9-10
2.6 Determining pay ranges…………………………………………………10
2.7 Determining progression through pay range scales………………….11
2.8 Wage and salary curves…………………………………………………11-13
2.9 Maintaining the pay structure……………………………………………13-14
2.10 Participation policies…………………………………………………….14
2.11 Pay secrecy………………………………………………………………14-15
2.12 Strategic job value……………………………………………………….15
3. CONCLUSION ……………………………………………………..………15
4. REFERENCES ………………………………………………………….….15
1.INTRODUCTION
Managing people in the organization is one of the most important aspects in order for companies
to be successful and for organisations to be sustainable and maintain their competitive advantage
in the complex macro and micro-environments. In this essay the discussion is around the steps
involved in establishing pay rates within the broader view of reward, remuneration and
compensation practices.
QUESTION
To be a well-rounded member of the profession and a wise compensation practitioner you
need to demonstrate knowledge and understanding of reward, remuneration and
compensation practices to satisfy organisational as well as employee needs in a dynamic
environment. Discuss the steps involved in establishing pay rates.
Establishing pay rates while ensuring external and internal equity, entails various steps:
1. Determining the worth of jobs: Job evaluation
2. Methods of job evaluation
IOP3706 Assignment 2- Sem1 /2020 1
, 3. Conducting a wage and salary survey
4. Determining the pay structure
5. Determining pay grades
6. Determining pay ranges
7. Determining progression through pay range scales
8. Wage and salary curves
9. Maintaining the pay structure
10. Participation policies
11. Pay secrecy
12. Strategic job value
2. The steps involved in establishing pay rates
2.1
Step 1: Job Evaluation
According to Riggio (2012), a job evaluation is one of the products of a job analysis and is the
process of assessing the relative value of jobs to determine appropriate compensation. That is, the
wages or pay rates paid for a particular job should be related to the knowledge, skills, abilities and
other characteristics (KSAO’s) the job requires. There are, however, other variable that influence
the rate of compensation, such as supply of potential workers, the perceived value of the job to the
company, and the jobs history. It is important that the worth of each job is calculated and worked
out through doing a thorough job evaluation for the purpose of ensuring internal equity in the
organization.
An important principle in job evaluation is to evaluate the job, not the person as it could be easy to
confuse personal characteristics of the person currently in the job with the actual job requirements.
A job-based job evaluation system is when a grade is assigned to a specific job, not a person.
A person-based job evaluation system is when specific personal qualities or achievements are
regarded as important to the job and value is assigned to them.
The two ways of assessing the relative value or size of a job are holistically and analytically.
When the job is evaluated holistically, the relative size of the whole job is taken into consideration
based on what is consciously or unconsciously believed to be the most important criterion to be
used for comparisons. When the job is evaluated analytically, a range of factors are identified and
the degree to which they form part of different jobs are assessed.
Some purposes and uses of job evaluation according to Byars and Rue (2010) are:
• When pay is integrated with the job contribution to the company, equity is supported.
• Employees adapt easier to change in the organization as they understand what is required of
them in their jobs and their value within the organization.
• It creates an incentive for employees to progress in their careers and aim for higher positions in
the organization.
• It helps establish a workable, agreed-upon and functional pay structure.
• It simplifies and justifies the pay correlation between jobs, and reduces the role played by
chance, favouritism, and bias.
• It helps with setting pay levels for new, unique, or changing jobs.
• It provides an agreed-upon device as well as all the information needed to reduce and resolve
disputes and grievances.
IOP3706 Assignment 2- Sem1 /2020 2
