1)The traditional and most widely used approach to developing a pay structure focuses on setting pay for jobs or groups of jobs. This precise definition of a job's responsibilities can contribute to an attitude that some activities "are not in my job description," at the expense of flexibility, innovation, quality, and customer service.

Organizations have responded to these problems with a number of alternatives to traditional job-based pay structures. Some organizations have found greater flexibility through delayering, or reducing the number of layers in the organization's job structure, sometimes using broader groupings called broad bands. Another way organizations have responded is toward pay structures that reward employees on their knowledge and skills. Skill-based pay systems are pay structures that set pay according to the employees' levels of skill or knowledge and what they are capable of doing. The human resource department often uses a compa-ratio to compare actual pay to the pay structure, to ensure that policies and practices match.

Read the case below and answer the questions that follow.

Ray Wilson is quality manager of the Tiffin, Ohio plant of North-West Electric, a manufacturer of electrical components. Some North-West locations have implemented various forms of delayering and use of broad bands, something he heard about from the experiences of Tiffin's sister plant in Kinston, North Carolina, at a recent quality conference. This made Ray consider his own situation. His staff is generally effective, but they do not always do well in the highly ambiguous environment of the plant because their defined responsibilities do not incorporate a great deal of flexibility. Additionally, many of them are reluctant to step outside their roles. Due to four levels of employees between his hourly staff and him, Ray sometimes feels overly insulated from the happenings on the shop floor. Now, Ray has to decide whether or not to try this approach with his own staff, and what specifically to do if he does make changes. Using your knowledge about what the advantages and disadvantages of this approach are likely to be, answer these questions about Ray's situation.

1. If Ray decided to delayer his organization, what would he be doing?
2. One advantage of the delayering approach at North-West would be:
3. Having broad bands will help Ray attract better talent because:
4. How will using broad bands help Ray with the fact that his employees are reluctant to step outside their role?
5. If Ray decides to use broad bands, what challenge will he have to manage carefully with regard to performance evaluation?

2.

Job Structure: Relative Value of Various Jobs

Along with market forces and principles of fairness, organizations consider the relative contribution each job should make to the organization's overall performance. In general, an organization's creation of a pay structure requires that the organization develop an internal structure showing the relative contribution of its various jobs.

The first step to design a pay structure is with a job evaluation to measure the relative worth of the organization's jobs, using compensable factors such as experience, education, and complexity. Pay structures usually include employees making an hourly wage, piecework rates, or a salary. To match what employees earn in comparable jobs in the marketplace, an organization can use survey data or a regression analysis to plot points for a pay policy line. Pay grades are established for sets of jobs having similar worth or content. Within these pay grades, a pay range is included that has minimum, maximum, and midpoint pays for employees holding a particular job. Finally, an organization may pay extra to employees to reflect differences in working conditions or labor markets, such as working the night shift or working in a high-cost area.

Read the case below and answer the questions that follow.

Sally Conroy, HR manager at Valley Ranch Cosmetics, has recently undertaken a comprehensive review of the pay structure at her organization. She and her staff performed job evaluations on all positions and graded each position on its compensable factors. The biggest issue that became clear during the resulting analysis was that the salespeople are currently paid twice as much as the logistics staff, despite similar job evaluation point scores. After investigating, Sally found that salesperson retention had been a large problem in the past, and thus salaries were increased. In addition, the executive team considers sales growth to be a primary objective of the organization; cost control, the responsibility of the logistics staff, while important, is secondary in the minds of the executives. The choices Sally faces are to emphasize the external comparisons, in which case the structure needs little adjustment, or to emphasize the internal comparisons, which would call for an increase in logistics pay or a decrease in sales pay.

1. What is the most likely consequence of emphasizing the internal evaluation?
2. What would be a disadvantage of emphasizing the external evaluation?
3. What is the most likely reason that people in logistics are paid less for similar work than salespeople?
4. What would be an advantage of emphasizing the internal evaluation?
5. All other things being equal, which of these positions should be paid more?

3.

Legal Requirements for Pay

Compensation in the United States is governed by a number of laws that set boundaries for what companies can do. Two of the most important are the Equal Employment Opportunity and the Fair Labor Standards Act. The first states that it is illegal to discriminate on the basis of race, sex, or other protected categories in employment practices, including pay practices. However, this law does not guarantee equal pay for men and women, whites and minorities, or any other groups because other factors influence a person's earnings. The 1938 Fair Labor Standards Act (FLSA) establishes the minimum wage and requirements for overtime regulations and employment of minors that govern employers.

The FLSA establishes periodic minimum wages, of which the latest federal minimum wage is $7.25 per hour as of January 2015, although some exceptions apply for training wages and adherence to state minimum-wage laws. The FLSA also establishes overtime pay for wage earners working over 40 hours per week with detailed computation that includes bonuses and piece-rate payments. These employees are considered nonexempt workers because they are covered under FLSA requirements for overtime pay. Those employees who are not covered are considered exempt employees, usually paid salaries, who are in the executive and other professional white-collar jobs. FLSA rules also govern employment of child labor, outlining details from ages under 14 through 18. Finally, two additional federal laws, the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936, govern pay policies of federal contractors.

1. Nonexempt
2. Exempt
3. Minimum wage

4.

Establishing a Pay Structure

One of the key decisions employers must make is the level of compensation provided to employees. Compensation is a significant cost, and employees are one of the most important assets of the organization. It is important that the organization makes and executes good strategic choices. To facilitate this process, many organizations think systematically about its job structures for compensation and pay levels for different jobs.

An organization's job structure consists of relative pay for different functions and different levels of responsibility. It defines, for example, the difference in pay between entry-level and management jobs, as well as different entry-level jobs in different departments, such as in production or accounting. Pay level is the average amount that an organization pays for a particular job and includes wages, salaries, and bonuses. Job structure and pay levels together form the pay structure, a policy that helps the organization achieve goals related to employee motivation, cost control, and the ability to attract and retain talented employees.

1. Legal requirements
2. Organizational goals
3. Market forces

5.

1. The overtime rate applies to the hours worked beyond ____ in one week.
2. Kate is a financial assistant and reports to Samuel, the head of the finance department. Samuel works longer hours than Kate. However, Kate is paid one and a half time her regularly pay for working more than 40 hours per week. Under the FLSA, what justifies the organization’s decision to pay Kate overtime pay?
3. Carl is the CEO of a software firm. He is of the opinion that it is fair to pay above the market rate if doing so can help his firm attract and retain top talent. He knows that these employees will make the company more innovative and that they will also contribute significantly to the product quality and productivity. Which of the following statements best supports his view?