Bauer, Human Resource Management
SAGE Publishing, 2020
Instructor’s Manual
Chapter 11: Developing a Pay Structure
Chapter Summary
– Pay and compensation are one type of a formal reward system.
Chapter Learning Objectives:
After completing this chapter, students should be able to:
LO 11.1: Explain the conceptual foundation of compensation and reward systems.
– Reward system
LO11.2: Describe how to develop internally, externally, and individually equitable, and legally
compliant pay structures.
– Equity theory
Bauer, Human Resource Management
LO 11.3: Implement the development of a pay structure.
– Ensure internal equity
– Job structure or job hierarchy
– Job evaluation
– Ranking method
Bauer, Human Resource Management
SAGE Publishing, 2020
– Broadbanding
– Ensuring individual equity
LO 11.4: Identify basic principles underlying person-based pay structures.
– Person-based pay structures
LO 11.5: Describe the philosophy and challenges of executive pay structures.
LO 11.6: Evaluate issues of pay administration such as compression and pay transparency.
– Pay compression
– Pay inversion
Bauer, Human Resource Management
SAGE Publishing, 2020
Suggested Exercises or Projects
Exercise 11.1 Put the students into groups of four to seven. Have them locate a position that
requires a bachelor’s degree and then, through any number of methods, identify the pay band for
Exercise 11.2 Have the students look up the pay scale for military or civil service employees.
Does the scale make sense? Why is this scale public while most organizations keep their scales
private. Is there a danger in allowing individuals to see how much others are making?
Discussion Questions:
1. Organizations need to identify the needs of the strategic direction with respect to the positions
held within it. What steps can a company take to align its compensation system with its general
business strategy?