Rewards:

What is in it me? Nearly every individuals consciously or unconsciously asks this question
before engaging in any behavior. Our knowledge of motivation and peoples behavior at work
tells us that people do what they do to satisfy needs. Before they do anything, therefore they look
for a pay off or rewards. The most obvious reward employees receive from work is pay. However
rewards also include promotions, desirable work assignments and a host of other less obvious
payoff- a smile, peer acceptance, work freedom, or a kind of recognition.
Intrinsic Rewards: are the personal satisfaction one derives from doing the job. These are selfinitiated rewards: pride in ones work, a sense of accomplishment, or enjoying being part of a
work team. Job enrichment, for instance can employees intrinsic rewards by making work seem
more meaningful.
Extrinsic Rewards: includes money, promotions, and benefits. They are external to the job and
come from outside sources, mainly management. Consequently, if an employee experiences a
sense of achievement or personal growth from a job, we would label such rewards as intrinsic. If
the employees receives a salary increase or a write-up in company magazine, we would label this
rewards as extrinsic rewards.

Figure: Structure of Rewards

Job evaluation and pay structure:

The essence of pay compensation administration is job evaluation and the establishment of a pay
structure. Lets now turn our attention to job evaluation to job evaluation topics and practices.

Job Evaluation:
We introduced job analysis as the process of describing job duties, authority relationships, skill required,
conditions of work, and additional relevant information. We stated that job analysis data could help
develop job descriptions and specifications, as well as job evaluations. By job evaluations, we mean using
job analysis information to systematically determine the value of each job in relation to each jobs in
relation to all jobs within the organization. In short, job evaluation seeks to rank all jobs in the
organization in a hierarchy that reflects the relative worth of each job. It is important to note that this is a
ranking of jobs, not people. Job evaluation assume normal performance by a typical worker. So, in effect,
the process ignores individual abilities or performance.
The ranking that results from job evaluation is not an end in itself.it should be used to determine the
organizations pay structure. Note that we say should; in practice, this is not always the case. External
labour market conditions, collective bargaining, and individuals skill differences may require a
compensation between the job evaluation ranking and the actual pay structure. Yet even when such
compromises are necessary, job evaluation can provide an objective standard form which modification
can be made.

Isolating Job Evaluation Criteria:

The heart of job evaluation is determining appropriate criteria to arrive at the ranking. It is easy to say that
jobs are valued and ranked by their relative job worth, but ambiguity increases when we attempt to state
what place one job higher than another in the job structure hierarchy. Most job evaluation plans use
responsibility, skill, effort, and working conditions as a major criteria, but each of these, in turn, can be
broken down into more specifics terms. Skill, for example, is an observable competence to perform a
learned psychomotor act (like keyboarding). But other criteria can have been used: supervisory controls,
complexity, personal contracts, and the physical demands needed.
You should not expect the criteria to be constant across jobs. Because jobs differ, it is traditional to
separate them into common groups. For example, production, clerical, sales, professional, and managerial
jobs may be evaluated separately. Treating like groups similarly allows for more valid ranking within
categories but still leave unsettled the importance of criteria between categories.
Separation by groups may permit us to say the position of software developer require more mental effort
than that of shipping supervisor, and subsequently receives a higher ranking, but it does not readily
resolve whether greater mental effort is necessary for software designers or customers service managers.

Job Evaluation Methods:

Three basic methods of job evaluation are currently in use: ordering, classification and point methods.
Lets review each of these.

Ordering method: the ordering method (ranking method) requires a committee typically composed of
both management and representatives - to arrange the jobs in a simple rank order, from highest to lowest.
No attempt is made to break down the jobs by specifics weighted criteria. The committee members
merely compare tow jobs and judge which one is more important or more difficult to perform. Then they
compare another job with the first two, and so on until all the job have been evaluated and ranked.
The most obvious limitation to the ordering method is its sheer unmanageability with numerous jobs.
Imagine the difficulty of correctly ranking hundreds or thousands of jobs in an organization. Other
drawbacks to consider are the method subjectivity no definite and consistent standards by which to
justify the rankings- and the fact that jibs are ranked in order, we cant know the distance between
rankings.

Classification Method: The classification method was made popular by the U.S. Civil Service
Commission, now the Office of Personal Management (OPM). The OPM requires the classification
grades be established and published in what they call their general schedules. These classifications are
created by identifying some common denominators- skill, knowledge, responsibilities- to create distinct
classes or grades of the jobs. Examples might include shop jobs, clerical jobs, and sales jobs, depending
on course, on the type of jobs the organization requires.
Once the classifications are established, they are ranked in an overall order of importance according to the
criteria chosen, and the each job is placed in its appropriate classification. This latter action generally
requires compering each positions job description against the classification, descriptions and
benchmarked jobs. At the OPM, for example, evaluator have classified both a statistician at the
Department of Energy and a chemical engineer at the Environment Protection Agency as positions at the
GS-7 grade, and electrician at the Department of Army and the industrial equipment mechanic at the
Military District of Washington as positions at the GS-10 grade.
The classification method shares most of the disadvantages of the ordering approach, plus the difficulty of
writing classification descriptions, judging which jobs go where, and dealing with the jobs that appear to
fall into more than one classification. On the plus side, the classification method has proven itself
successful and viable in classifying millions of kinds and level of civil service jobs.

Point Method: the last method we will present breaks down jobs based on various identifiable criteria
(such as skill, effort, and responsibility) and allocate points to each of these criteria. Appropriate weights
are given, depending on the importance of each criterion to performing the job, points are summed, and
jobs with similar points totals are placed in similar pay grade.
The point method offers the greatest stability of the four approaches presented. Jobs may changes over
time, but the rating scale established under the point method stay intact. Additionally, he methodology
underlying the approach contributes to a minimum of rating errors. On the other hand, the point method is
complex and therefore costly and time-consuming to develop. The key criteria must be carefully and
clearly identified, degrees of factors must be agreed upon in terms of all raters recognize, the weight of
each criterion must be established and point values assigned to degrees. Although it is costly and time
consuming to both implement and maintain, the point method appears to be the most widely used method.
Furthermore this method can effectively address the comparable worth issue.

Establishing the Pay Structure:

Once the job evaluation is complete, the data generated become the nucleus of the organizations pay
structure. This main establishing pay rates and ranges compatible with the ranks, classifications, or points
arrived at through the job evaluation.
Any of three job evaluation methods can be provides the necessary input for developing the
organizations overall pay structure. Each has its strength and weakness, but because of its wide use, we
will use the point method to show how points totals are combined with compensation survey data from
wage curves.

Compensation Surveys: many organizations use surveys to gather factual information on pay practice
within specific communities and among firms in their industry. They use the information for comparison
purpose. It can tell compensation committee if the organizations wages are in line with those of other
employees and, in shortage of individuals to fill certain positions, may help set wage level.
Where does an organization find wage salary data?
The U.S. department of Labour Statistics, regularly publishes a vast amount of wage data broken down by
geographic area, industry and occupation. Many industry and employee associations also conduct their
own survey and make their results available. Organizations also can conduct their own survey, and many
large ones do.
It would not be unusual, for instance, for the HRM director at Microsoft in Seattle to regularly share wage
data on key positions. The person might identify jobs such as maintenance engineer, electrical engineer,
computer programmer, or administrative officer and share comprehensive description of these jobs with
firms in the industry. In addition of the average wage level for a specific job, other information frequently
reviewed includes entry-level and maximum wage rates, shift differentials, overtime pay practice,
vacation and holiday allowances, the number of pay periods, and the length of the normal day and work
week.

Wage Curve: After the compensation committee arrives at point totals from job evaluation and obtain
survey data on that comparable organizations paying for similar jobs, a wage curve can be fitted to the
data.
A complete wage curve tells the compensation committee the average relationship between points of
established pay grades and wage base rates. Furthermore, it can identify jobs whose pay is out of trend
line. When a jobs pay rate is too high, it may be identified as a red circle rate. This means that the pay
level is frozen or below-average increases are generated until the structure adjusts upward to put the circle
rate within the normal range. Off-course a wage rate may be out of line but not red circled. The need to
keep or attract individuals with specific skill may require a wage rate outside the normal range, although
continuing to attract these individuals, may ultimately upset the internal consistencies supposedly inherent
in the wage structure. A wage rate may also be too low. Such undervalued jobs carry a green-cycle rate
and the company may attend to grant these jobs above-average pay increases or salary adjustments.

The Wage Structure: It is only a way short-step from plotting a wage curve to developing the
organizations wage structure. Jobs similar in terms of classes, grades, or points are grouped together. For
instance, pay grade 1may cover the range from 0 to 150 points, pay grade 2 from 151 to 300 points, and
so on. The result is a logical hierarchy of wages. The more important jobs are paid more, and as
individuals assume the jobs of garter importance, they rise within the wages hierarchy. Jobs may also be
paid in accordance with knowledge or competency-based pay.
Irrespective of the determinants, notice that each pay grade has a range and that the ranges overlap.
Typically, organizations design their wage structures with ranges in each grade to select different tenure in
positions, as well as levels of performance. Additionally, although most organizations create a degree of
overlap between grades, employees who reach the top of their grades can increase their pay only by
moving to a higher grade. However, wage structure are adjusted every several years (if not every year), so
that employees who top out in their pay grade arent mixed-out forever.