Compensation – Chapter 7 Review for Exam

M/C Practice Questions 

Know compensable factors (275)
Compensable factors are characteristics of jobs that are valued by the organization and differentiate jobs from one another. They can also be described as the characteristics in an organization that help pursue its strategy and achieve objectives.
The four main categories are:
1. Skill
2. Effort
3. Responsibility
4. Working conditions.
Under pay equity legislation, organizations are required to use these 4 categories in evaluating work.
They also typically include – job inputs, outputs, requirements and conditions.

What are benchmarking jobs? What are they used for? (283)
It is a job in the firm’s job evaluation system for which there is a good match in the labour market data. These jobs are picked because of the available data of the market comparator job. From these jobs and information, an organization can tell if they are lagging or leading when it comes to pay (for that particular job).

Know the process in developing the pt method – know the steps
1. Identify Compensable Factors – (275) – see above
2. Scaling the factors (277) – the process of establishing degrees for each compensable factor – ex. Education – degree 1 is graduating high school, degree 6 is a doctorate degree
3. Weighting the Factors (279) – see below
4. Applying and testing the system (280)

Know the pitfalls of the point method (289 and slide 15)
There are several disadvantages of the point method. It is complex when developing. The most significant drawback is its subjectivity. It seems scientific but a lot of the time it is based on subjective judgment.
There are also 4 main categories of problems:
1) inconsistent construct formation (289) – ambiguous factor definitions (can mean more then one thing), Inconsistent factor degree definitions (mean something else completely), Inconsistent degree statements (one or more of the degrees may not be relevant to the others).
2) Factor overlap – (291) – some factors are accounted for twice and some not enough. This happens because although some sound different, they are really measuring the same thing.
3) Hierarchical grounding (292) – can follow the hierarchy in the organization and assuming the higher the job the more responsibility. Therefore it is not finding anything independent of what we already know.
4) Gender bias – see below

Know the definition of pay grade (296)
Pay grade is a grouping of jobs of similar value to the organization. why have them? Simplifies administration, gets rid of perceived inequity, makes easier for employees to move across jobs and stability.

Know job evaluation problems in exploring solutions (main steps)
1. Check that your benchmark jobs are actually equivalent to the market comparator that you matched it with
2. Examine the outlier jobs (those that are the furthest away from the vertical line).
3. Examine whether jobs have been badly evaluated
4. Determine if the wrong factors have been included in the job evaluation system.

Know establishing pay grade sizes (297)
1. Equal Interval Approach – method to establish pay grade sizes in which points are spread equal for all pay grades. Ex. Pay grade 1 = 100-200 points, Pay grade 2 = 200-300 etc.
2. Equal Increase Approach – pay grades increase in size by a constant # of points
3. Equal % - point spreads increase by equal %
Telescopic – point spreads increase, but not by equal %
4. Broadbanding – reducing the # of pay grades by creating large or fat grades, sometimes known as bands. There are less pay grades thus creating fat grades.

When pay is frozen, what is this called? (306)
These are “red-circle” employees. These are employees that are being paid higher then the newly established pay grades and need to be taken down to the correct level. Red circle means that they will freeze the employees salary until salary scales catch up (due to things like inflation).

What is the Market line? (285)
The market line is a regression line that related job evaluation points to market pay (in dollars) for the benchmark jobs. Based on the amount of points allotted to the jobs, the amount of money a job should make is calculated. This is plotted on a graph as the market line. If the top job has 6 times more points then it should have 6 times the salary. The benchmark jobs are then plotted and the organization can then see if they are leading or lagging based on where everything is plotted.

Know the sources of gender bias (292)
It occurs when a job receives a higher or lower evaluation because the job incumbents are predominantly from on gender. Weiner suggests that they are 6 ways in which gender bias can operate in a JE 

1. Separate job families –
2. Valuing a factor when it is found in “male jobs” but not “female jobs”.
3. Confusing job content with stereotypes of inherent female attributes.
4. Ignoring factors found in female jobs
5. Having insufficient range of degree statements
6. Biased job descriptions

T/F Practice questions 
Know the point method steps – see above

Know the advantages to the point method (289 and Slide 14)
There are several advantages: precise, high degree of consistency, relative value of each job and gives readily available knowledge.

What is the key issues for establishing pay grades (296-297)
The key issues are  Why use them? How many should we have? How do we establish them?

Know pay ranges (296)
Pay range – the minimum and maximum pay rates (in dollars) for jobs in a particular pay range. Ex. The most you can make it your pay range is 50,000, the least is 40,000 etc.

Know methods used to derive factor weighing (279)
Each compensable factors needs to be weighed according to its importance relative to the others. It can be different in each firm. There are 2 methods used to weigh  statistical analysis and expert judgment.
Statistical analysis  uses sample of existing jobs that have already been rated and are thought to be paid correctly.
Expert judgment  forming a panel or committee within the organization to give weights to each factor.

Know validity and Reliability (282)
Validity  the extent to which a measuring instrument actually measures what we intend it to
Reliability  the extent to which a measuring instrument consistently produces the same measurement result when measuring the same thing. Ex. Will one rater come up with the same point allocated as another rater?

What is green circle? (305)
Employees who are currently paid below the new pay ranges for their jobs are known as “green circle” employees. These employees should be moved up to at least the minimum of the pay range for their jobs as soon as possible. If they are good performers they should be moved up even more then the minimum.

In establishing movement in a pay range, the 3 most common criteria are: experience, seniority and performance. (t/f question # 3)

Compensation – Chapter 8 Review for Exam

M/C Review Questions 

Know 3rd Party data sources (316-317)
1. Government agencies – Stats Can, HRDC
2. Industry Groups – most industries have associations which collect data on pay rates within their industries.
3. Compensation Consultants – firms that make collecting this information a business
4. Free websites – offer information online but don’t give source of data so not sure how valid it is.

What is the least desirable collection method? (322)
The least reliable is the questionnaire mail out method. The internet method is similar but since it is new, there is little evidence on how reliable it is.

Know the steps to analyzing survey data
1. Inspect the data
2. Draw inferences from the data
3. Examine pay range distribution
4. Apply survey data
5. Limitations of Compensation surveys