CHAPTER 18
PAY DELIVERY ADMINISTRATION
It takes one set of knowledge and skills to design and develop a useful and workable
compensation system. It takes an entirely separate set of knowledge and skills, however, to maintain even
the best designed system and keep it viable. The problems and barriers for administering the
compensation system are as complex and difficult as those facing compensation system designers.
Design and development work involves change, innovation, and a new approach. The same old issues,
the same battles daily confront the administrators. The fun and challenge related to design and
development soon become repetitive, routine drudgery.
Processes and techniques available for implementing pay structure adjustments are discussed.
Merit guide charts, maturity curves, compa-ratios, control points, range indexes, and target salaries are
valuable tools available to wage and salary administrators.
KEY CONCEPTS:
2. Compensation administration issues.
4. Allocating budgeted funds to the various departments.
6. Vigilance and maintenance; the need for monitoring and auditing.
8. Merit budgets and merit guide charts.
10. Due process, a right and a concern.
SIGNIFICANT POINTS OF INTEREST
2. For the great majority of organizations, the personnel budget is not an ever-expanding pie.
3. Over the past two decades, compensation—base pay, premiums, differentials, bonuses, and
4. Compensation administration must successfully blend together (1) compensation policy set
by senior management; (2) compensation methods, techniques, and procedures used for
establishing compensation practices; (3) compliance with various pieces of legislation that
5. In one manner or another, practically every member of the organization, to some degree,
influences the size of the personnel budget and the manner in which it is allocated.
6. Some of the major groups that influence the personnel budgeting process are the
Compensation Committee, Salary Administration Committee, and the Job Evaluation
7. A major issue facing compensation system designers and administrators concerns how the
organization wishes to relate to the labor market. Does the organization wish to pay a
minimum feasible wage—one that suffices to provide enough job applicants and enough
acceptance of job offers to maintain desired employment levels—or to pay an amount
beyond the market to guarantee the best quality of applicants available? Above-market
8. Similar to market demands are the demands made in a dynamic economic environment—the
manner in which the organization adjusts its pay structure to meet changes in general
economic conditions. Now, lag, lag-lead, and lead issues must be considered. If an
organization relates its pay policy and structure adjustment to market conditions, it then
9. A valuable index for analyzing internal pay practices is the compa ratio, which, very simply,
10. Another useful tool/technique for compensation administrators is the merit guide chart. The
11. Individual pay related decisions also occur with the redesign of pay structures, changes in
job design, promotions, and transfers. Some employees may be earning above the maximum
12. A problem that faces many compensation system designers occurs when market rates are
much higher than what the internal worth of the job is determined to be. Adjustment for
13. Due process becomes a more important employee-employer issue each year. Because of the
financial costs and time consumed in litigation, compensation professionals and managers at
all levels must be certain that employee rights are recognized and respected.