Comp Exam 2

pay (aka skills-focusedpay) is based on an employee’sdemonstrated mastery of a series ofcompetencies that make them more valuableto the business. Employees can move “up” or“around” to other positions. (This is what thischapter is about.)
Rewards employees for acquiringjob related knowledge, skills, andcompetencies rather thandemonstrating successful jobperformance, assuming thatincreased performance will comefrom these acquired learning

person focused pay- rewardmanagerial, service, or professionalworkers for successfully learningspecific curricula (e.g. receive amasters degree, etc.)

person focused pay- used mostly foremployees who do physical work,increases these workers’ pay as theymaster new skills

types of person focused pay

pay compensates employees for the job they perform while also consideringseniority, merit, and incentive pay.

skills at thesame level of responsibility or difficulty(similar skills/knowledge)

skills thatare traditionally considered supervisory Scheduling, coordinating, training,leading

level of expertise orspecialization an employee possesses

individual’s capability toorchestrate and apply combinationsof knowledge and skills consistentlyover time

Employers have identified alink between foundational competencies and jobperformance and have also discovered that foundationalcompetencies assist employees to learn industry-specificskills.

competencies: specific to an industry andcut across industry sub-sectors making it possible tocreate career lattices where a worker can move easilyacross industry subsectors.

Competencies: developed to defineperformance in a workplace, to design a competency-basedcurriculum, or to articulate the requirements for anoccupational credential such as a license or certification

Stairstep and skill block model
----jobs from a particular job family that differ interms of complexity and build on top of one another
----skills donot necessarily build on one another.Employees do not need to go in order

pay: Mostly found in continuousprocess settings, likemanufacturing in which: Assembly lines are used One employee’s job dependson the work of at least oneother worker

steps of developing a pay structure

represent the horizontaldimension of pay structures (i.e., jobevaluation points)

midpoint, minimum, andmaximum pay rates. The minimumand maximum values denote theacceptable lower and upper boundsof pay for the jobs within paygrades

compensation philosophies

difference between themaximum and minimum pay rates of a given paygrade

range spread for
 Higher skilled jobs
 Lower skilled jobs

range minimum formula=

range max formula=

relative competitiveness ofinternal pay rates based on pay range midpoints

vesting: employers must grant employees100% vesting after no more than three years ofservice

employers grantvesting rights gradually, 20% after two years, then20% each year until 100% vested

compa-ratio = 1 means that the employee’s pay rate -----.
o •compa-ratio < 1 means that the employee’s pay rate falls-----. Companies with market lag policies strive for compa-ratios of lessthan 1.
o •compa-ratio > 1 means that an employee’s pay rate ==== rate for the job. Companies with market lead policies strive for >1.