INSTRUCTOR’S MANUAL
Designing A Pay Structure
3
©2008 SHRM Lisa Burke, Ph.D., SPHR
Learning Objectives
In this case, students will learn to
design a pay structure. To do so,
they will:
Write a job description, using the •
O*NET website.
Use the point method to conduct •
a job evaluation.
Analyze pay survey data for •
benchmark jobs.
Create a market pay line using •
Excel.
Establish a pay policy line based •
on a pay level strategy.
Create pay grades.•
Establish pay ranges.•
Recommended Reading
Milkovich, G., and Newman, J.
(2008). Compensation. McGraw-
Hill Irwin. Chapters 1-8.
CAse
You are the newly hired human resource (HR) director for an engineering consulting
firm that is expanding its operations to Chattanooga, Tenn. The organization is
headquartered in Indianapolis, Ind. Based on the organization’s mission statement,
you know the firm strives to create customized and technically proficient electrical
engineering plans for regional clients. The following personnel are required to
start the Chattanooga operation (the numbers in parentheses indicate the number
of positions):
Director of regional operations•
Assistant to the director of •
operations
Operations analyst (2)•
Operations trainee•
HR director (this is you)•
Administrative assistant in HR•
Benefits manager•
Benefits counselor •
Payroll assistant•
Lead engineer (3)•
Engineer (6)•
Engineering associate for special •
projects
Manager of information systems•
Senior information systems analyst •
Information systems analyst •
Security guard•
Front desk receptionist•
You can see from the list that there are several job families, including operations, HR,
engineering, information systems and office support. You can now begin the process
of designing a pay structure for the organization.
Job analysis is central to many HR functions, including compensation, recruiting and
training. You need to understand what tasks, duties and responsibilities various jobs
will entail before you can assign fair and competitive pay rates.
Begin the process by gathering the needed job description information. To do so, you will combine information from O*NET
(http://online.onetcenter.org), an online job analysis resource developed by the Department of Labor, and existing internal
corporate HR documents (such as previous job descriptions). Each job description includes the job title; a job summary; essential
job tasks; the job’s work context; and job-relevant knowledge and skills that an incumbent must possess.
Benchmark jobs (jobs that are common and consistent across a wide range of employers) will be the focus of this exercise because
they will be used to design the pay structure. Appendix A contains the job descriptions of the benchmark jobs. You have one
description left to complete; your first task is to create a job description for the benefits manager position.