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29 Cards in this Set
- Front
- Back
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Key factors determining how much an employer will pay for a particular type of labour |
Ability to pay Company profitability Importance of the labour to the firm Proportion of labour costs to total costs |
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Labour scarcity |
Rareness of labour... may pay more than the market rate to gain scarce labour |
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Explain difference between public and private labour market |
Generally... Low in hierarchy: public sector employees get paid more than private sector High in hierarchy: private sector employees get paid more than public |
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Define compensating differential |
A higher compensation level offered by an employer because of undesirable aspects of the employment |
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Define reasons for offering higher level of pay |
Seasonal work Cost of Living Poor working conditions Poor industry reputation |
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Define market comparator firms |
Firms selected as comparators when constructing a sample of market data |
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Relevant characteristics of comparator firms |
Geographical Reach # of Employees Product/Service Offered Labour Market |
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Sources of Compensation Data |
Third-Party Surveys In-House Surveys |
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Types of Third-Party Surveys |
Government Agencies Industry Groups Compensation Consultants Compensation Data Websites |
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Advantages of Third-Party Surveys |
Ease Cost |
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Disadvantages of Third-Party Surveys |
May not cover desired jobs, compensation characteristics, or employers Aggregate data are often provided , rather than company-by-company data |
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Types of In-House Surveys |
Informal (review of help wanted ads or a question to group of colleagues) Formal (by internal staff or comp. firms) |
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Adv/Disadv. of Informal Surveys |
Simple and quick but may have poor reliability and validity |
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Adv./Disadv. of Formal Surveys |
Employer controlled process Employer avoids paying consulting fees Need to have required expertise Employers surveyed may be reluctant to reveal compensation practices to their competitors |
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Four main steps of conducting compensation surveys |
1. Identify the jobs to be surveyed 2. Determine what information to collect 3. Identify which employers to survey 4. Determine the method of data collection |
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Types of Data Collection |
Personal Interviews Questionnaires Telephone Interviews Internet Surveys |
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Define mean or simple average |
A measure of central tendency of a set of values derived by summing the values of dividing by the number of values |
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Define weighted mean or weighted average |
A measure of central tendency of a set of values that adjusts the average based on the number of cases to which each value pertains |
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Define median |
The middle value in an ordered list of values |
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Define quartiles or deciles |
Division of an ordered list of values into either four groups (quartiles) or ten groups (deciles) |
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Define interquartile range |
A measure of pay dispersion across employers, calculated by dividing the difference between the 25th and 75th percentile values by the value of the 25th percentile |
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Define compa-ratio |
A measure of distribution of employees within their pay range calculated by dividing the mean base pay by the midpoint of the pay range |
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Steps in analyzing, interpret and inspecting the data |
1. Assess central tendency of pay and variation using either simple average of weighted average of each company 2. Dispersion: example mean tot. comp. lowest 30,000, highest 45,000, so dispersion is 50% across firms 3. Data includes:# of employees, min/max/midpt. of base pay ranges. Mean amts of base, perf., and indirect pay and total compensation paid to specific type of employees by quartile |
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Discuss drawing inferences from the data. What does it mean if average base pay range midpoint is $28,050 and weighted average midpoint is $26,936? |
Many employees = lower pay range Less employees = higher pay range |
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What does high dispersion between lowest and highest paying firms mean? |
job duties may be different across firms |
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If a firm has many employees in the bottom quartile, what does this suggest? And vice-versa? |
High turnover Low turnover |
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Define aging the data |
The process of adjusting compensation data to bring it up to date with the time period in which the new compensation will take effect |
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How many jobs do you need to survey each year? |
One fifth |
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Limitations to Compensation Surveys |
They may vary dramatically in quality of job matches and methodology May omit important information Unless data is available for all employers in the market sample, we don't know what compensation strategies are used by other firms Data may not fit all of the jobs an organization has Data may be too simple Other firms may include benefits that are difficult to monetarily price May be bias in data Assumption that the market values jobs fairly |
