Page 240 - Fundamentals of Management Myths Debunked (2017)_Flat

Determining Pay Levels A compensation system should reflect the changing nature of
work and the workplace.
Who gets
$15.85 • Determining pay levels isn’t easy, but employees expect
appropriate compensation.
an hour?
Different jobs require:
Who gets • Different kinds and levels of knowledge, skills, and
$325,000 abilities (kSAs) that have varying value to the

a year? organization
• Different levels of responsibility and authority

The higher the KSAs and the greater the authority

and responsibility, the higher the pay.

Alternative approaches to determining compensation:

• Skill-based pay systems—reward employees for job skills and competencies they
37
have. Job title doesn’t define pay, skills do. Usually more successful in manufacturing
organizations than in service organizations or in
organizations pursuing technical innovations. 38 90%

• variable pay systems—individual’s compensation is of U.S. organizations
contingent on performance. use variable pay plans 39

Other factors influencing compensation and benefit
packages include:
Exhibit 7–9 What Determines Pay and Benefits?

Primary how has he or she performed?
How long has employee
been with company and
determinant of How large is the Does job require
pay: the kind of company? Employee’s Tenure high levels of skills?
and Performance
job an employee How profitable is the Company Job Performed What industry is job in?
Size of
Kind of
company?
performs
Level of
Company
Kind of
Profitability Compensation Business
and
Bene ts
Geographical Unionization
Location
skill-based pay
A pay system that rewards employees for the job Where is organization Management Labor or
skills they demonstrate located? Philosophy Capital Intensive Is business unionized?
variable pay
A pay system in which an individual’s compensation
What is management’s
is contingent on performance philosophy toward pay? Is business labor or
capital intensive?
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