EXERCISE: WAGESIM—A COMPENSATION ADMINISTRATION EXERCISE
- Objectives:
- To familiarize students with some of the problems involved in building and maintaining a compensation system.
- To provide students with alternative approaches for solving some typical compensation-related problems.
- To give students practice in writing memos to employees regarding compensation issues.
- To familiarize students with job evaluation procedures.
Procedures
This exercise will be done individually. You are to begin by reading all the material presented in this exercise. Assume that you are responsible for developing and maintaining the Mack Organization’s wage and salary system. Assume further that the person who previously had these responsibilities has just quit and left you all the E-mail Items that follow.
First, you are to respond in writing to each employee who sent an e-mail (5 E-mails). Second, explain on a separate sheet of paper what additional actions you would take with reference to each item. For example, if you believe that you should gather additional information before making a final decision on an item, explain what information you would need. Or, if you believe that additional memos or discussions with someone in the company are needed, explain this. You should submit both the memos additional action sheets.
Situation
The Mack Organization is a large organization headquartered in the midwestern United States. It has offices located throughout the country and employs over 700 individuals. You may assume the organization is a chemical company, a manufacturing company, a bank, an insurance firm, or any large organization with which you are familiar.
The Mack Organization’s human resource department includes a compensation administration section that consists of two individuals, one of whom is you (or your team). The company has several different wage structures, including one for executives and one for clerical personnel. For compensation purposes, all clerical employees are divided into five job classifications. The organization’s current wage structure for clerical personnel is shown in
Exhibit 4.4.
How Salaries Are Determined
Employee salaries directly relate to the work they do and how well they do it. Two major factors work together to establish the salaries payable for various jobs—job evaluation and salary ranges.
| Job Title | Salary | Number of Employees |
| Office Service Aide | $25,259 minimum
$33,262 maximum |
40 |
| Office Services Assistant | $26,588 minimum
$35,337 maximum |
30 |
| Administrative Assistant | $30,041 minimum
$39,604 maximum |
20 |
| Senior Assistant | $34,628 minimum
$45,083 maximum |
40 |
| Executive Assistant | $43,364 minimum
$54,794 maximum |
20 |
Job Evaluation
Job evaluation is a method of measuring the relative worth of each job in the organization compared to all the other jobs, based on an objective analysis of the duties and responsibilities of the position. The Mack Organization job evaluation is as follows: A description that defines the function of the job and lists the major duties performed is written for each job. Each description is then evaluated by a standing committee of employees from various areas of the organization who have a broad knowledge of the jobs that exist throughout the organization. Their evaluation is based on “yardsticks,” including knowledge required, freedom of action, accountability, contacts with employees and customers, physical effort required, unusual working conditions, research responsibilities, and supervision or management responsibilities. Based on these yardsticks, the job is assigned a point value. By listing all positions according to their point value, the relative worth of each position is established.
Grade Levels and Salary Ranges
Based on the total points received in a job evaluation jobs are assigned to a grade level. Each grade has an entry or minimum salary and a maximum salary payable for the jobs in that grade; the amounts between the entry and maximum salary comprise the salary range for the grade.
Usually employees begin at the bottom of each salary grade. Employees are considered for a merit increase after six months of satisfactory service. After this, they may receive an annual merit increase upon completion of satisfactory service. There is a total of six possible merit increases. Cost-of-living increases are
Reviews
There are no reviews yet.