Pay Grades

Group similar jobs into pay grades

Pay grade

A pay grade is comprised of jobs of approximately equal difficulty.

Once the committee has used job evaluation to determine the relative worth of each job it can turn to the task of assigning pay rates to each job; however it will usually want to first group jobs into pay grades. It could, of course just assign pay rates to each individual job. But for a large employer, such a plan would be difficult to administer since there might be different pay rates for hundreds or even thousands of jobs. And even in smaller organizations there’s a tendency to try to simplify wage and salary structures as much as possible. Therefore the committee will probably group similar jobs (in terms of their ranking or number of points, for instance) into grades for pay purposes. So, instead of having to deal with hundreds of pay rates, it might only have to focus on say 10 or 12.

A pay grade is comprised of jobs of approximately equal difficulty or importance as established by job evaluation. If the committee used the point method, then the pay grade consists of jobs falling within a range of points. With the ranking method, the grade consists of all jobs that fall within two or three ranks. The classification method automatically categories jobs into classes or grades. With the factor comparison method, the grade consists of a specified range of pay rates Ten to 16 grades per job cluster (a cluster is a logical grouping such as factory jobs, clerical jobs , and so on) are now common. However, as we’ll explain shortly, there’s a trend toward including more jobs and a broader range of jobs within each cluster.

Price each pay grade – wages curves.

Wage curve – Shows the relationship between the value of the job and the average wage paid for this job.

The next step is to assign pay rates to your pay grades. Of course if you chose not to slot jobs into pay grades, you would have to assign individual pay rates to each individual job. You’ll typically use a wage curve to help assign pay rates to each pay grade (or to each job)

The wage curve shows the pay currently paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation Figure presents an example. Note that it shows pay rates on the vertical axis, and pay grades (in terms of points) along the horizontal axis. The purpose of the wage curve is to show the relationships between (1) the value of the job as determined by one of the job evaluation methods and (2) the current average pay rates for your grades.

The pay rates on the wage curve are traditionally those now paid by te employer. However, if there is reason to believe the current pay rates are out of step with the market rates for these jobs, choose benchmark jobs within each pay grade, and price them via a compensation survey. These new market based pay rates then replace to current rates on the wage curve the slot in your other jobs (and their pay rates) around the benchmark jobs.

Here s how to price jobs with a wage curve. First, find the average pay for each pay grade, since each of the pay grades consists of several jobs. Next, plot the average pay rates for each pay grade as was done in figure. Then, fit a line, called a wage line, through the points just plotted. You can do this freehand o by using a statistical method. Finally, price the jobs. For this, wages along the wage line are the target wages or salary rtes for the jobs in each pay grade. If the current rates being for any of your jobs or grades fall well above or below the wage line, raises or a pay freeze for that job may be in order. Your next step then is to fine tune your pay rates.

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