Compensation Management

  1. Calculate the pay policy line

By definition, pay policy line refers to the level which a company sets its own pay which is compared to the pay level provided on the market.  Basically, the pay structure midpoint is established to help judge the existing market rate (Schofield & Caballero, 2015). The following calculations exhibits a formula for pay policy line for the company which expects to lead the market by 5%.

Market formula => y = 900 + 0.5 x

The market formula illustrates relationships between the internal value of a job and the external value of a job (Schofield & Caballero, 2015). Since the company desires to have its salary 5% above that of the market, it is expected that its pay line is five times that of the market, implying that its formula becomes:

Table 1: Pay line policy analysis

 

Market Policy Pay line policy

 

y x y1 x1
900 0 945 0
900.5 1 945.5 1
901.5 2 946.5 2
903 3 948 3
905 4 950 4
907.5 5 952.5 5

Formula pay line policy => y = 945 + 0.5 x

2.Complete the table below

The table below is a summary calculations for the company pay line policy, revealing the minimum range, midpoint and maximum.

Table 2: Pay line policy ranges

 

Pay Grade Job Evaluation Points Range Minimum Range Midpoint Range Maximum Range Spread (Above and Below Midpoint)
1 1-249 112.5 125 137.5 10%
2 250-499 318.325 374.5 430.675 15%
3 500-749 499.6 624.5 749.4 20%
4 750-1000 612.5 875 1137.5 30%

Based on information above, the following pay line policy can be established:

References

Schofield, N. & Caballero, G. (2015). The political economy of governance: institutions, political performance and elections. Cham: Springer.