Developing a pay structure

Developing a pay structure

Paper instructions:
Application: Course Project Part 1óDeveloping a Pay Structure
Developing a formal pay structure is one of the most complex responsibilities HR professionals face. It includes tasks such as analyzing market data, benchmarking jobs, measuring market position, determining internal equity, and taking into account strategic goals and objectives. Because of the complexity of these and other tasks, small businesses often outsource the process of developing a pay structure to private HR consulting firms. This ensures that the process is carried out by experts who understand the intricacies and requirements for pay structures.

This weekís Assignment, you have the opportunity to act as a member of a private HR consulting firm by developing a formal pay structure for a small business. You complete Part 1 of your Course Project by developing a business proposal focused on relevant wage data and other issues related to compensation and benefits.

You will complete Part 2 on equity-based compensation in Week 5, and you will conclude the project in Week 7 by completing Part 3 on retirement options. For each component of the Course Project, you will focus on a single companyís total rewards package and consider how to revise compensation and benefits options to be more externally competitive.

For Part 1 of the Course Project, consider the following scenario and develop a business proposal that describes the process of building a pay system at the organization depicted. Be sure to incorporate applicable information from current and relevant references.


You and two of your former classmates are co-owners of a full service HR consulting firm specializing in assisting emerging and fast-growing organizations with their HR needs. You are located outside of San Francisco, while many of your clients are located in Silicon Valley. Your role on the team is to address your clientsí compensation and benefit needs.

This morning, you received a call from a potential client who has been working as the general manager (GM) in a fast-growing company. This company hires a variety of software engineers who focus on building mobile applications and mobile phone security systems. Until recently, the company was able to use free data from the Internet to determine appropriate salary levels and adjustments to pay rates. The current benefits package at the company includes legally required benefits, as well as a strong medical insurance package (the company covers 70% of the cost of premiums), a 60% LTD plan, unlimited sick leave (typical for technology companies in Silicon Valley), and three weeks paid vacation annually. The current retirement plan is a simple 401(k) offered through a major brokerage house. It allows for a limited set of investment options with no employer match on employee pre-tax contributions.

With the companyís recent growth, the GM realizes itís time for a more formal approach to compensation and benefits and would like to develop a formal pay structure. The GM believes that a formal pay structure and total rewards package could increase the companyís external competitiveness and attract prospective talent.

He has asked you to generate a business proposal outlining how your HR firm might assist in helping to formalize the companyís compensation and benefits approach. In your proposal, outline the issues involved in determining the companyís needs and the aspects of compensation and benefits that you would address if hired.

To complete Part 1 of your Course Project: Create a 4- to 5-page business proposal that portrays your process for building a pay system at an organization:

ïIntroduction    ?Summarize the compensation and benefits practices currently in place at the company.
?Describe your overall approach to building a formal pay system for the company.
¶What steps will your team need to take?
¶What considerations will be necessary?

ïSection 1: Benchmarking
?Identify sources of compensation and benefits data, as well as wage data that is relevant to the organization.
¶Include a description of how to use this data to either lead or match a competitorís total rewards package.
?Describe how the companyís compensation and benefits should compare to exemplary total rewards packages in the technology industry.

ïSection 2: Employee Needs
?Identify elements of total rewards that may be important to software engineers and other employees of the company. Explain your reasons for choosing each of these elements.
?Describe how employee needs can be measured and prioritized to create an externally competitive total rewards package.

ïSection 3: Pay Structure and Policies
?Describe the relevant markets for each of the major occupational groups within the company.
?Describe at least one strategy for each of the following: pay levels, forms of pay, and pay mix.
¶Provide real-world rationale that supports each of these strategies. For example, how would this strategy help this specific organization?
¶Address the use of lag/lead pay policies.
?Explain how your team would address special or unique skills within the pay structure.


?Describe how you would address the companyís needs for a developing formal pay structure.
¶Address broad considerations related to pay structure, including strategic alignment, internal consistency, and external competitiveness.

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