Continuing Case:

Carter Cleaning Company

Establishing Strategic
Pay Plan

Attracting – Developing - KEEPING

Prepared by
Group Dynamic
Kelvin Lye, Wong Shwu Fen & Masood
Case Details

Problem

No formal wage structure

 Not using rate  Not using

ranges compensable factors
Case Details

 Not using rate ranges

Wage rates Pay survey

• Based on prevailing rates in the
surrounding community
• An attempt by Jack to maintain some
semblance of equity between
workers with different duties
• 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 His colleagues
pay minimum
• Reasons: rates
1. Reduce turnover
2. Foster employee loyalty
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”
Questions

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

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

Question 3
Similarly, is Carter’s male-female differential wise? If not, why not?
Question 4
Specifically, what would you suggest Jennifer do now with respect
to her company’s pay plan?
Question 1
Setting up a formal salary structure based on job
evaluation? Why?

YES!

Need to set up a formal salary structure

based on job evaluation

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

Why?
High staff turnover

Inconsistent pay rates

 Needs for job evaluation compared to the market

Different pay rates for

• Address issues regarding male and female workers
four forms of
compensation equity
among employees
Question 1
Setting up a formal salary structure based on job
evaluation? Why?

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

Problem?
 No employee involvement in
setting up salary structure No job evaluation committee

What can this

committee do?

• Employees can give different

• Maintain four forms of perspective regarding the nature of the
compensation equity jobs
among employees • Ensure employees view pay process as
transparent and procedurally fair
 BACK

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

Why? • Evaluate and determine the

relative worth of each job
compared to key jobs
• Categorize / rank / classify jobs
 No compensable factors into rate ranges or pay grades
• Ensure no discrimination in terms
Purpose of gender, religion and race
? • Related to employees’ capability
and performance
Skills Effort

Responsibility Working conditions • Maintain internal equity

among employees
 BACK

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

Paying 10% more Attract more applicants for job

• Reduce turnover of employees

who only concern about the
Jack believes that it
salary rate
•reduces turnover
• Indirect financial payments and
•fosters employee loyalty
other factors also influence the
employees’ turnover

• Provide facts that employees

are paid 10% more than
prevailing rate
• Only loyal to high pay rate
Question 3
Is Carter’s male-female differential wise? If not, why
not?

Carter’s male-female
differential wise? NO!

• Should be based on
performance, not gender
Why?

Disobey the Does not Discrimination Inefficient

Equal Pay maintain against female pay plan
individual worker
Act (1963)
equity
 BACK

Question 3
Negative effects of male-female differential

Not perform in
optimum performance

Effect for male

Negative effects of
male-female differential
Effect for female

More More arguments Job

grievance for pay rate dissatisfaction

Work stoppages Encourage

Increase in
(stop working as counter
part of a protest) productivity turnover
Question 4
Suggestions 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  Evaluate  Group  Price pay

salary survey each job jobs grades
Question 4
Suggestions with respect to CCC’s pay plan

 Conduct salary survey

The best source of salary information in this case is:

1.Self-conducted Survey
2.Professional and governmental resources (with lower consideration)
Question 4
Suggestions 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 4
Suggestions 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 Total point Minimum point
weight value
1. Skill The complexity of skill required for 35% 84 42
  performing this job
2. Effort The level of physical or mental effort 35% 84 42
  required
3. Working The working conditions, environment 10% 24 12
Conditions and stress level
 
4. Responsibility The level of responsibility of the 5% 12 6
  employee for the job
5. Education The Level of education required for 5% 12 6
  the job
6. Work The working experience of the 10% 24 12
experience worker in related fields
 
Question 4
Suggestions 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

As we know pay grades are comprised of jobs with similar difficulty or

importance, hence:

Counterpeople, cleaner- Store managers in all

spotters and pressers in branches
all branches in one Pay Grade.
in one Pay Grade.
Question 4
Suggestions with respect to CCC’s pay plan

 Price each pay grade by plotting wage curve

The graph shows an example of

wage curve for the store
worker’s cluster (cleaner-spotters
and pressers)
Acknowledgement

Thank You!