Compensation Case

1. Constructing a pay structure

• Deciding on the number of pay structures

• Market pay line

• Defining pay grades

• Pay ranges

• Evaluating results

2. Designing Merit pay systems

• Merit increase amounts

• Timing

• Recurring vs. nonrecurring increases

• Level of base pay

• Merit budgets

3. Designing Sales Incentive Compensation

• Sales Comp plans

• Determining salary and incentive pay

4. Conclusion

Designing compensation system is important for any company. Working in human resources is specifically focused on “building pay structures that recognize employee contributions”. There were five main points that were explained in this chapter: Constructing a pay structure, designing merit pay systems, designing sales incentive compensation plans, designing person-focused programs, and pay structure Variations. Each of these topics explains the many steps and what you have to take into account before you present a payment structure to a company.

Constructing a Pay Structure

This was the overview portion of the chapter. It explained what different thing you needed to account for and decide about your business before you laid out a plan for compensation. Within the steps presented there were sub-layers to the process only making it clear that making a compensation plan is very difficult if you do not understand the business. I also learned that with this process is a fluid one which means it is subject to change as the business changes and if you’re not careful this area of the business could be its downfall. The five steps for constructing a pay system are: deciding on the number of pay structures, determining a market pay line, defining pay grades, calculating pay ranges for each pay grade, evaluating the results.

Pay structures help define the different hierarchies that a company possess. This allows the pay amounts to be paid out differently based on job duties, area, and type of work that is being done in the company. This is the foundation of the whole company compensation plan. “Common pay structures include exempt and nonexempt structures, pay structure based on job families, and pay structures based on geography.” Exempt and nonexempt pay structures have to do more with how the salary is paid out over the course of the year. Exempt pay structure is when the