Chapter 11. Base Pay Structures

Compensation deals with establishing a meaningful and acceptable relationship between work and rewards. Work performed by employees should help organizations achieve their objectives. These objectives are derived from the organization’s overall business strategy, which supports the company’s mission statement.

When designed and administered appropriately, a company’s compensation program is an effective management tool for supporting the organization’s overall business strategy. A series of steps is used in the process of designing sound compensation programs. (See Figure 11.1.) This process is not a one-time event. It involves constant review and refinement in light of changing business needs.

Determine strategy before structure.

Figure 11.1. Determine strategy before structure.

Pay Structures

A pay structure consists of a series of pay ranges, or “grades,” each with a minimum and maximum pay rate. Jobs are grouped together in ranges that represent similar internal and external worth. (See Figure 11.2.)

Pay structure example.

Source: WorldatWork Certification Seminar 4: “Base Pay Management,” 2007.

Figure 11.2. Pay structure example.

The midpoint or middle-pay value for the range usually represents the competitive market value for a job or group of jobs. The company’s base-pay policy line connects the midpoints of the ...

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