MPO EXAM 3 LATEST UPDATED
Discuss the difference between pay level and job structure
Pay level is the average pay in organizations, including wages, salaries, and
bonuses
Job structure is the relative pay of jobs in organizations (i.e., the range of pay often
expressed by salary grades).
Explain the concepts of internal and external equity about compensation
First, external equity pay comparisons focus on what employees in other
organizations are paid for doing the same general job. A market pay survey is the
primary administrative tool organizations use in choosing a pay level.
o fairness of your pay relative to others in the labour market
Second, internal equity pay comparisons focus on what employees within the same
organization, but in different jobs, are paid. These comparisons may influence the
general attitudes of employees; their willingness to transfer to other jobs within the
organization; their willingness to accept promotions; their inclination to cooperate
across jobs, functional areas, or product groups; and their commitment to the
organization.
o fairness of your pay relative to others in the organization in different jobs
Describe the factors that determine pay level, including product market
competition, labor market competition, and market pay surveys
Product-market competition - sell goods and services at a quantity and price that
will bring a return on investment.
Labor-market competition - amount an organization must pay to compete against
other organizations that hire similar employees.
Market pay survey- the primary administrative tool organizations use in choosing a
pay level.
Describe the following important components in the process of collecting market
,wage data; market pay surveys; benchmarking, key/non-key jobs
Benchmarking pay surveys provide information on the going rates of pay of the
competition. The following issues must be determined before pay surveys are used:
o Which employers should be included in the survey?
o Which jobs are included in the survey?
o If multiple surveys are used, how are all the rates of pay weighted and combined?
Key jobs - benchmark jobs that have relatively stable content and are common to
many organizations so that market-pay survey data can be obtained.
Non-key jobs- are unique to organizations and cannot be directly valued or
compared through the use of market surveys.
Define the concept of job evaluation
Job Evaluation: The systematic process of determining the relative worth of jobs in
order to establish which jobs should be paid more than others within an
organization.
Three Basic Job Evaluation Systems:
o Job Ranking
o Job Classification
o Point System
Describe the point system of job evaluation, and demonstrate how an organization
would conduct a job evaluation using the point method
whats a point manual
Point System:
o A quantitative job evaluation procedure that determines the relative value of a job
by the total points assigned to it.
o Permits jobs to be evaluated quantitatively on the basis of factors or
elements—compensable factors—that constitute the job.
, The Point Manual:
o A handbook that contains a description of the compensable factors and the
degrees to which these factors may exist within the jobs.
Explain how an organization combines job evaluation and market pay survey data
to product a pay structure. Include the concepts of pay policy-line and pay grades in
your discussion
define pay structure, and the 3 approaches to developing pay structure (market
survey approach, pay policy line, pay grades)
Pay Structure: relative pay of different jobs (job structure) & how much they are
paid (pay level).
Developing a Pay Structure; 3 Pay-setting Approaches:
1. Market Survey Approach - emphasizes external comparisons. It bases pay on
market surveys that cover as many key jobs as possible.
2. Pay Policy Line - mathematical expression that describes the relationship
between a job's pay and its
3. Pay Grades - Grouping jobs of similar worth or content together for pay
administration purposes.
- Range spread - distance between minimum & maximum amounts in a pay grade.
Define the concept of broadbanding as it relates to compensation
Broadbanding: Collapses many traditional salary grades into a few wide salary
bands.
Explain how stock options work as a component of executive compensation
advantages and disadvantages of stock options
Stock Options: Represent on form of equity compensation granted by companies to
their employees & executives. They give the holder the right to purchase the
company stock at a specified price for a limited duration of time in the quantities
spelled out in the options agreement.
Discuss the difference between pay level and job structure
Pay level is the average pay in organizations, including wages, salaries, and
bonuses
Job structure is the relative pay of jobs in organizations (i.e., the range of pay often
expressed by salary grades).
Explain the concepts of internal and external equity about compensation
First, external equity pay comparisons focus on what employees in other
organizations are paid for doing the same general job. A market pay survey is the
primary administrative tool organizations use in choosing a pay level.
o fairness of your pay relative to others in the labour market
Second, internal equity pay comparisons focus on what employees within the same
organization, but in different jobs, are paid. These comparisons may influence the
general attitudes of employees; their willingness to transfer to other jobs within the
organization; their willingness to accept promotions; their inclination to cooperate
across jobs, functional areas, or product groups; and their commitment to the
organization.
o fairness of your pay relative to others in the organization in different jobs
Describe the factors that determine pay level, including product market
competition, labor market competition, and market pay surveys
Product-market competition - sell goods and services at a quantity and price that
will bring a return on investment.
Labor-market competition - amount an organization must pay to compete against
other organizations that hire similar employees.
Market pay survey- the primary administrative tool organizations use in choosing a
pay level.
Describe the following important components in the process of collecting market
,wage data; market pay surveys; benchmarking, key/non-key jobs
Benchmarking pay surveys provide information on the going rates of pay of the
competition. The following issues must be determined before pay surveys are used:
o Which employers should be included in the survey?
o Which jobs are included in the survey?
o If multiple surveys are used, how are all the rates of pay weighted and combined?
Key jobs - benchmark jobs that have relatively stable content and are common to
many organizations so that market-pay survey data can be obtained.
Non-key jobs- are unique to organizations and cannot be directly valued or
compared through the use of market surveys.
Define the concept of job evaluation
Job Evaluation: The systematic process of determining the relative worth of jobs in
order to establish which jobs should be paid more than others within an
organization.
Three Basic Job Evaluation Systems:
o Job Ranking
o Job Classification
o Point System
Describe the point system of job evaluation, and demonstrate how an organization
would conduct a job evaluation using the point method
whats a point manual
Point System:
o A quantitative job evaluation procedure that determines the relative value of a job
by the total points assigned to it.
o Permits jobs to be evaluated quantitatively on the basis of factors or
elements—compensable factors—that constitute the job.
, The Point Manual:
o A handbook that contains a description of the compensable factors and the
degrees to which these factors may exist within the jobs.
Explain how an organization combines job evaluation and market pay survey data
to product a pay structure. Include the concepts of pay policy-line and pay grades in
your discussion
define pay structure, and the 3 approaches to developing pay structure (market
survey approach, pay policy line, pay grades)
Pay Structure: relative pay of different jobs (job structure) & how much they are
paid (pay level).
Developing a Pay Structure; 3 Pay-setting Approaches:
1. Market Survey Approach - emphasizes external comparisons. It bases pay on
market surveys that cover as many key jobs as possible.
2. Pay Policy Line - mathematical expression that describes the relationship
between a job's pay and its
3. Pay Grades - Grouping jobs of similar worth or content together for pay
administration purposes.
- Range spread - distance between minimum & maximum amounts in a pay grade.
Define the concept of broadbanding as it relates to compensation
Broadbanding: Collapses many traditional salary grades into a few wide salary
bands.
Explain how stock options work as a component of executive compensation
advantages and disadvantages of stock options
Stock Options: Represent on form of equity compensation granted by companies to
their employees & executives. They give the holder the right to purchase the
company stock at a specified price for a limited duration of time in the quantities
spelled out in the options agreement.
