Managing Compensation
Chapter
9
Understanding how compensation can be used strategically to motivate employees is an
important starting point for this first of three compensation and benefits chapters. In this
chapter, the internal and external factors that affect the wage mix are presented as well as
methods used to determine the relative worth of jobs. Other factors that determine the wage
rate, such as wage and salary surveys and governmental regulation of wages, are also
discussed. The chapter concludes by looking at three important compensation issues: equal
pay for equal worth, wage-rate compression, and low salary budgets.
Chapter Outline
WHAT IS COMPENSATION?
STRATEGIC COMPENSATION
Linking Compensation to Organizational Objectives
The Pay–for-Performance Standard
COMPENSATION DESIGN—THE PAY MIX
Internal Factors
Compensation Strategy
Chapter 9 Managing Compensation
29
JOB EVALUATION SYSTEMS
Job Ranking System
Job Evaluation for Management Positions
COMPENSATION IMPLEMENTATION-PAY TOOLS
Wage and Salary Surveys
Collecting Survey Data
COMPENSATION ASSESSMENT
GOVERNMENT REGULATION OF COMPENSATION
Davis-Bacon Act of 1931
Walsh-Healy Act of 1936
Generating Interest
Ask the following questions:
1. What was the very first hourly federal minimum wage rate established by the Fair
Labor Standards Act in 1938?
2. What was the minimum wage the year you were born?
Part 4 Implementing Compensation and Security
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1939
$0.30
1978
$2.65
3. Does your home state have a different minimum wage law than the federal standard?
Dealing with Trouble Spots
Assign Case Study 1, “Pay Decisions at Performance Sports” to help students relate to the
challenges associated with making pay decisions.
In addition to the suggested Instructor’s Resource Guide answers listed below, you may also
want students to find an online salary report. Go to www.salary.com and key in “purchasing
agent” and a zip code of interest. The data provided includes (1) a base salary percentile
graph, (2) benefits information, and (3) a bi-weekly paycheck estimate.
1. What factors should Perkins and Balkin consider when setting the wage for the
purchasing agent position? What resources are available for them to consult when
establishing this wage?
2. Suggest advantages and disadvantages of a pay-for-performance policy for Performance
Sports.
1945
$0.40
1979
$2.90
1950
$0.75
1980
$3.10
1956
$1.00
1981
$3.35
1961
$1.15
1990
$3.80
1963
$1.25
1991
$4.25
1967
$1.40
1996
$4.75
1968
$1.60
1997
$5.15
1974
$2.00
2007
$5.85
1975
$2.10
2008
$6.55
1976
$2.30
2009
$7.25
Chapter 9 Managing Compensation
The primary advantage of a pay-for-performance program is that it ties employee effort
3. Suggest a new payment plan for the customer service representatives.
Several options are available to pay the customer service representatives. New
Involving Students
Ask students to bring to class salary information for three occupations where at least one of
the occupations is related to what their major is preparing them to do.
1. Write down three occupations you have an interest in or in which friends or family
3. Locate your three occupations from the list of occupations.
4. Review the OOH information for each of your selected occupations:
• Nature of the Work
• Training, Other Qualifications, and Advancement
Part 4 Implementing Compensation and Security
5. Be prepared to discuss the earnings and OES data sections of your selected