Continuing Case:Carter Cleaning

Company

Prepared byGroup DynamicKelvin Lye, Wong Shwu Fen & Masood

Establishing Strategic Pay

Plan

Attracting – Developing - KEEPING

Case Details

Problem

Not using rate ranges

Not using compensable factors

No formal wage structure

Case Details

Not using rate ranges

Wage rates• Based on prevailing rates in the

surrounding community• An attempt by Jack to maintain some

semblance of equity between workers with different duties

Pay survey• No formal pay survey• Use want ads almost everyday• Conduct informal survey among

his friends in the trade association

Pay Policy• Paying 10% above what he feels

the prevailing rates• Reasons:

1. Reduce turnover2. Foster employee loyalty

His colleagues pay minimum rates

Case Details

Not using compensate factors

• Using informal policy of paying men about 20% more than women for the same job.

Jack’s Explanation?“They’re stronger and can work harder for longer hours and besides they all have families to support”

Question 3Similarly, is Carter’s male-female differential wise? If not, why not?

Questions

Question 1Is the company at the point where it should be setting up a formal salary structure based on a complete job evaluation? Why?

Question 2Is Jack Carter’s policy of paying 10% more than the prevailing rates a sound one, and how could that be determined?

Question 4Specifically, what would you suggest Jennifer do now with respect to her company’s pay plan?

Question 1Setting up a formal salary structure based on job evaluation? Why?

Need to set up a formal salary structure based on job evaluation

Why?

YES!

High staff turnover

Inconsistent pay rates compared to the market

Different pay rates for male and female workers• Address issues regarding

four forms of compensation equity among employees

Why?

Needs for job evaluation

Question 1Setting up a formal salary structure based on job evaluation? Why?

No employee involvement in setting up salary structure

• Maintain four forms of compensation equity among employees

Why? • No mechanism of communication to address employees’ problems regarding wages or salary

No job evaluation committee

• Employees can give different perspective regarding the nature of the jobs

• Ensure employees view pay process as transparent and procedurally fair

Problem?

What can this committee do?

Question 1Setting up a formal salary structure based on job evaluation? Why?

No compensable factors

• Maintain internal equity among employees

Why?• Evaluate and determine the

relative worth of each job compared to key jobs

• Categorize / rank / classify jobs into rate ranges or pay grades

• Ensure no discrimination in terms of gender, religion and race

• Related to employees’ capability and performance

Question 1Setting up a formal salary structure based on job evaluation? Why?

Purpose?

Skills

Working conditionsResponsibility

Effort

BACK

Question 2Paying 10% more than the prevailing rates a sound move? How to determine?

Paying 10% more

Jack believes that it•reduces turnover •fosters employee loyalty

• Reduce turnover of employees who only concern about the salary rate

• Indirect financial payments and other factors also influence the employees’ turnover

• Provide facts that employees are paid 10% more than prevailing rate

• Only loyal to high pay rate

Attract more applicants for job

BACK

Question 3Is Carter’s male-female differential wise? If not, why not?

Carter’s male-female differential wise?

• Should be based on performance, not gender

Disobey the Equal Pay Act (1963)

Does not maintain individual

equity

Discrimination against female

worker

Inefficient pay plan

NO!

Why?

Question 3Negative effects of male-female differential

Negative effects of male-female differential

Effect for female

Not perform in optimum performance

Increase in turnover

More grievance

More arguments for pay rate

Effect for male

Job dissatisfaction

Encourage counter

productivity

Work stoppages (stop working as part of a protest)

BACK

Question 4Suggestions with respect to CCC’s pay plan

• We suggest her to set up a logical pay plan properly . • This process is time-consuming and may need further

modification.

Jennifer and Jack shall take these steps to establish an efficient pay plan:

Conduct salary survey

Evaluate each job

Group jobs

Price pay grades

Question 4Suggestions with respect to CCC’s pay plan

Conduct salary survey

The best source of salary information in this case is:1.Self-conducted Survey2.Professional and governmental resources (with lower consideration)

Question 4Suggestions with respect to CCC’s pay plan

Conduct salary survey(Self-conducted survey)

Since it is not their first time to be in the market, John and other managers are already familiar with the salary survey. So: 1.First step is to price benchmark jobs.

• For each job in their company such as cleaner-presser, they finding a benchmark to evaluate the value of the job to company is necessary

2.Second Step is to compare each job pay rate with other companies• This is to determine the pay level of market (External Equity)

3.Third Step is collecting data on benefits such as insurance, vacation payment, and etc.

• It is very crucial to determine the employee’s benefits. • According to the Labor Acts, employee’s have certain rights, financial or

spiritual rights, which shall be compensated.

Question 4Suggestions with respect to CCC’s pay plan

Conduct Job Evaluation

There are various evaluation methods but the best job evaluation method for the job description of cleaner-spotters, pressers is Point Method

  Definition Relative weight

Total point Minimum point value

1. Skill 

The complexity of skill required for performing this job

35% 84 42

2. Effort 

The level of physical or mental effort required

35% 84 42

3. Working Conditions 

The working conditions, environment and stress level

10% 24 12

4. Responsibility 

The level of responsibility of the employee for the job

5% 12 6

5. Education 

The Level of education required for the job

5% 12 6

6. Work experience 

The working experience of the worker in related fields

10% 24 12

Question 4Suggestions with respect to CCC’s pay plan

Grouping similar jobs into pay grades

There are four main jobs discussed in the case:Store managers, cleaner-spotters, pressers and counterpeople

Counterpeople, cleaner-spotters and pressers in

all branches in one Pay Grade.

Store managers in all branches

in one Pay Grade.

As we know pay grades are comprised of jobs with similar difficulty or importance, hence:

Question 4Suggestions with respect to CCC’s pay plan

The graph shows an example of wage curve for the store worker’s cluster (cleaner-spotters and pressers)

Price each pay grade by plotting wage curve

Acknowledgement

Thank You!