18. Pay Delivery Admin

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PAY DELIVERY ADMINISTRATIONPresented by:

Geetika Mittal

Neha Agarwal


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Why? To ensure an effective compensation program that develops internal

as well as external equity

To keep track of personnel cost change significantly affects firmsprofitability

Maintaining employee confidence in stability & fairness ofcompensation system

Though administration increase systems complexity , it makes pay

delivery more understandable Affect organizational budgets & makes a significant part of firmsfinancial resources

To ensure proper decisions are made among allocations to variouscompensation components


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The Budget Process Defines how the organization will spend its money for coming planned

period or plan year.

Written plans expressed in terms of dollars or some kind of units.

Includes : Capital budget and Operating budget

Consists of all kinds of staffing related expenses such as wages &

salaries,merit increases,pay structure adjustments ,benefits ,bonuses,overtime,incentives,allowances for contract or outside labor.

Merit or Salary Increase Budget largest share of increase in personnelbudget over preceding year

OperatingOfficer

DivisionManager

Division

Recommendations

Financialfeasibility

Controller

FinalApprovals

COO/CEO


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Compensation Committee Small select group of 3-5 directors

Significant influence on compensation received by seniormanagement

Review compensation opportunities made available to all employees

Exercises almost total authority over the compensation practices ofentire organization

Functions include : Periodically review & appraise the performance of CEO & top

managementReview compensation of competitive companies

Set compensation for CEO

Monitor executive perquisites and expenses

Review and approve personnel-related budgets

Report findings to the full board


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Others involved in Budget Decisions

ultimate responsibility for all decisions , final decisionmaker, reviews , makes recommendations & approvespersonnel budgets

CEO

Responsible for development of initial amounts to bedescribed in personnel budget

Develops projections of revenue , identify major costs, etc

Finance department/officeof controller

3-7 members , reviews the total budget & make allocationdecisions & allocations

Reviews past records , reviews recommendations, etc

Job evaluation committees

Salary admin committee

Includes various management representativesEnsures internal fairness among jobs by determining job worthacc. to some evaluation plan


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Administration of Pay3 steps:

Providing merit or salary increase budget data & information Adjusting pay structure in line with compensation policy, the

market, approved merit or salary increase budget for planned year

Moving employees in the pay grade relative to level of performance,seniority & location in the pay grade


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Typical Pay Adjustment & PromotionRecommendation ResponsibilitiesParty Involved Function

Immediate Supervisor Appraise performance; makes pay adjustments or promotionrecommendations

Reviewing manager ofmanagers

Reviews recommendations of subordinate supervisors & changes ,endorses , approves , or initiates action for pay adjustment &promotion

HR & Compensationdepartments

Reviews dept head recommendations for compliance with policy& budget, merit increase , promotion guidelines. Advises dept

heads on propriety of actions. Processes all necessary recordkeeping data and information

Senior Management Grants final approval for all compensation adjustments and jobchanges . Approves or denies requests that extend beyond policiesand guidelines . Approves policy changes.


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Using Merit Increase and Pay StructureSurvey Data Various surveys provides data on pay structure adjustments &

general increases.

Assist in development of organizational budget recommendations Validity guaranteed huge participant base

Two issues to be considered while designing pay structureAdjustment : Established Compensation policy & Amount ofapproved merit budget

Allocating Merit Budget funds Making any necessary changes in pay structure

Allocating the merit pool too various departments of organization


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Lag , Lead-Lag , Lead Pay Structure Policy


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Department Allocation of Merit Funds

Each department gets a % of merit pool equal to departmentspayroll as a % of total payroll of organiz.

Many organizations review pay structure practices of eachdepartment

Determination of compa-ratio of employees within department

Can determine the underpaid employees & hence larger percentageof merit pay to be allotted to them


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Adjusting pay of each employee Major issues to be considered:

Current level of performance Recognizes individual contribution

Tenure on present job

Seniority or length of service plan

One time seniority bonus

Common review date- date hired or promoted to present job

Date of last adjustment

Reason for last adjustment

Location in pay grade


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Annual Performance Bonus One time, lump-sum performance bonus

Less costly award

Paid once or twice in a year

Timings of Pay Adjustments

Pay Adjustments are given on Anniversary date orcommon review date

Time of year have critical effect on employees reaction


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Tools for Planning and Administration


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Compa-Ratio

Index number to do analysis of pay grade or salary range

The average of the employee's actual pay divided by the pay

range midpoint within the job grade Use

Pay grade analysis

Department analysis

Relating performance appraisal rating to pay adjustments

Merit Budget decisions

Pay structure analysis


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Control Point Pay policy rate that reflects relationship with the market

Procedure:

Evaluate the job and obtain a point score

Assign rate of pay to point score which can be paid to

proficient employee in job

Call the dollar rate the control point of job


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Range Index

Range function =

actual rate of pay minimum rate of pay

Maximum rate of pay minimum rate of pay

A range index of 0.50 means employee is at midpoint ofpay grade

Managers are informed about movement of employeethrough pay grade

Target Salary Combine current rate of pay, location of rate of pay and

level of performance

Budget and monitor the pay of an individual or all

employees


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Other Compensation Administration Issues

Guidelines for promotion and demotion adjustments

Available options for keeping employees whole

Attracting workers with knowledge and skills that are in shortsupply

Paying all employees a salary

Overtime for exempt employees

Adjusting pay for nonunion employees

Compensating temporary part- and full-time employees and regular

part-time employees


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Guidelines for promotion and demotion

adjustments

Promotion guidelines are set relative to

Individual location in the pay structure

Pay grade movement

Increase in point scores from current job to promoted job


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Available options for keeping employees

whole

Equal dollar pay adjustment

Cost of Living Adjustment (COLA)

Pay of employees is adjusted to meet inflationary pressure

at marketplace

CPI measures the relative change in goods and services

Area Wage Differential


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Attracting workers with knowledge and

skills that are in short supply

Possibility of bringing new employee at an advanced step

or location Causes a conflict with current employees

Solution

Add some responsibility and duties to the job

Separate pay structure for high demand jobs


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Paying all employees a salary

For fair treatment to all

Solution:

Keep a record of number of hours worked by eachemployee whether or not they are on salary

Disadvantage for pay-for-performance system


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Overtime for exempt employees

Overtime payments to employees who work for more

than 40 hours per week

Overtime payment may be

Straight hourly rate

Payment of time and a half

Compensatory time off

Year end bonus


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Differences In Compensation For Regular,

Temporary, Part- Time, And Full Time Employees

Regular Full Time employee hired and scheduled to

work for number of hours per week and weeks per year(generally 52 weeks)

Part Time Employees Scheduled to work from 20 to 32

hours per week (less than a full workweek)

Temporary Employees hired to perform assignments (

generally up to 6 months)


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Regular part time and temporary full time and part timeemployees differ from regular full time

Regular part time and temporary entry level rates andpay adjustments

Regular part time vacation, holiday and sick paybenefits on proportion to hours of work

Medical, disability and life insurance vary acrossorganizations

Retirement programs applicable to all who work at least1,000 hours

Second party employer pay the personnel cost oftemporary worker


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DUE PROCESS

Carry out legal proceedings to ensure individual rights in

accordance with established rules and procedures

Process to protect ownership rights to jobs

Process include:

Identifying and describing job requirements

Training employees

Assisting employees to set performance standards Active participation in performance appraisals

Rewards

Document Management


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How to Ensure Due Process in

Organization Process followed:

Auditing

Monitoring

Appeals

Auditing Report Information

Management gets the following information from Auditors reports

Purpose of the Audit

Units audited

Critical Issues or Problems that require further review

Overall results or summary of the findings of the audit


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Areas to be Audited

Completeness and accuracy of job description Adequacy and use of performance standards for

reviewing and rating employee performance Proper classification and grading of jobs

Compliance with ADA requirements Pay policy lines Relationship between pay adjustments and performance

and performance and current level of pay

Provision of pay adjustments Analysis of base pay, ratings and pay adjustments for anykind of illegal discrimination

Consistency of use of actual merit pay adjustments andfunds budgeted for merit pay


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Monitoring Report Information

Covers all parts of the units

Information gathered from monitors report:

Which individuals/units are not implementing compensationprograms as designed? Are Employees treated fairly?

Are job activities and performance standards accurately statedin understandable form

Are raters ratings being reviewed by higher-level managers?

Are performance appraisal schedules and standard operatingprocedures being followed?

Are jobs properly evaluated, classified and graded?

Are most appropriate methods and tools being used to identify

market levels of pay and other compensation opportunities?


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Appeals Process

Need of Appeal Process

There is a body of rules that must be followed

Each person has the right to voice his or her side

Decisions will be made on the basis of facts

Every effort will be made to treat everyone the same

Appeal is granted when there is:

Disagreement with received performance rating and pay adjustments Failure to receive requested transfer and promotions

Disagreement with evaluation of job

Dissatisfaction with Job Description and performance standards


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Guidelines to Due Process To treat employees equal and equitable, compensation

system must :

Follow set procedures

Be visible and known

Be predictable

Be institutionalized

Be perceived as equitable

Be easy to use

Be applicable to employees


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THANK YOU

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18. Pay Delivery Admin

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