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Recently, someone asked how he can calculate his compensation & benefits.
First of all, it depends on Employment Relationship of the applied company:
high pay - low commitments (stockbrokers)
high pay - high commitments (Microsoft)
low pay- low commitments (labors, temporary workers)
low pay - high commitments (Starbucks)

The pay model (a guide):
Alignment (work analysis, description, evaluation & certification)
Competitiveness (market definitions, surveys, policy lines)
Contributions (sonority based, performance based, merit guidelines)
Management (costs, communication, change)

Strategic decision on how to pay will depend on company (business) objectives and company business strategy

For example:
Strategy: Innovator, increase product complexity and shorten product life
Cycle.
HR Program Alignment: Committed to agile, risk-taking, innovative people.
Compensation System: Reward Innovation in products and processes, market-based pay, flexible-generic job descriptions

Strategy: cost cutter, focus on efficiency
HR Program Alignment: do more with less
Compensation systems: focus on competitors labor costs, increase variable pay, emphasize productivity, focus on system control and work specifications

Strategy: customer focused, increase customer expectation
HR Program Alignment: delight customer, exceed expectations
Compensation Systems: customer satisfaction incentives, value of job and skills based on customer contacts

Compensation strategy will always support organization strategy and work flow.

I will not tell you here what shapes Internal structures to not make it too complicated, let me explain a little bit about how compensation analyzed:
1. There is task-based data, with variety of tasks listed. Before calculating someone compensation, we have to see percentage of involvement in each task.
2. Then, there is a behavioral based data, where, again different working behaviors listed and evaluated from "does not apply" to "extreme"
3. Then there are different benchmark jobs:
Managerial group
Technical group
Manufacturing group
Administrative group
Etc

Each one has own ranking and classification

Then, we use Point methods:
1. Compensable factors
2. Factor degree numerically scaled
3. Weights reflecting the relative importance of each factor

Each job's relative value, and hence its location in the pay structure, is determined by the total points assigned to it.

There are six steps in the design of point plan:
1. Conduct job analysis
2. Determine compensable factors
3. Scale the factors
4. Weight the factors according to importance
5. Communicate the plan and train users; prepare manual
6. Apply to nonbenchmark jobs

For total summing of skills, required for job performance, the HAY GUIDE CHART usually used. Then we have to scale the factors (weight the factors according to importance), using different job evaluation forms.

After job analysis-job description-job evaluation process the final result is a structure.

This is the first step in evaluating your compensation & benefits.
Next time I will tell you more

The most common approach to designing pay differences for different work: job evaluation.
Job evaluation has evolved into many different forms and methods.
Job evaluation is the process of systematically determining the relative worth of jobs to create a job structure for the organization. The evaluation is based on a combination of:
-job content
-skills required
-value to the organization
-organizational culture
-external market

This potential to blend organizational forces and external market faces is both a strength and a challenge of job evaluation

Defining job evaluation:
content;
value
external market links

Major decisions:
establish the purpose
-supports organization strategy
-supports work flow
-is fair to employees
-motivates behavior toward organization objectives

Ranking - orders the job description from highest to lowest based on a global definition of relative value or contribution to the organization's success

Two common ways of ranking: alternation ranking (orders job descriptions alternately at each extreme), the paired comparison method uses a matrix to compare all possible pairs of jobs

Classification - a job description is compared too the class description to decide which classis the best fit for that job. Writing class descriptions can be troublesome when jobs from several job families are covered by a single plan. The US federal government has 18-class evaluation system. These 18 classes correspond to 18 levels in the government's internal structure.

Point Method:
1. compensable factors
2. factor degrees numerically scaled
3. weights reflecting the relative importance of each factor

Point plan:
1. conduct job analysis
2. determine compensable factors
3. scale the factors
4. weight the factors according to importance
5. communicate the plan and train users; prepare manual
6. apply to nonbenchmark jobs

The final result of the job analysis - job description-job evaluation process is a structure, a hierarchy of work.

I. Total Compensation
1. Cash compensation
-base
-merit/cost of living
-short-terms incentives
-long-terms incentives
2. Benefits
-income protection
-work/live focus
-allowances
II. Relational Returns
-recognition & status
-employment security
-challenging work
-learning opportunities

With reference to:

"The Age Discrimination in Employment Act of 1967”, PROHIBITION OF AGE DISCRIMINATION, SEC. 623.
(a) It shall be unlawful for an employer:
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age;
(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age; or
(3) to reduce the wage rate of any employee in order to comply with this chapter.

(b) It shall be unlawful for an employment agency to fail or refuse to refer for employment, or otherwise to discriminate against, any individual because of such individual's age, or to classify or refer for employment any individual on the basis of such individual's age."

and to:

"Title VII of the Civil Rights Act of 1964”SEC. 2000e-2. [Section 703]"

"It shall be an unlawful employment practice for an employer:
(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin;
2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's race, color, religion, sex, or national origin."


Do you believe that it is ethical for US companies in the Middle East ask the following questions:

S e x:
Date of Birth:
Place of Birth:
Are you single? Married? Separated? Divorced?
Number of dependents:
Religion:
Do you have any disability?
Have you been convicted of a crime?

What do you think about the question: "What is your current salary?"