Reference no: EM132747100

Scenario: The New Pay Plan

Carter Cleaning Centres does not have a formal wage structure nor does it use rate ranges or compensable factors. Wage rates are based mostly on those prevailing in the surrounding community and are tempered with an attempt on the part of Jack Carter to maintain some semblance of equity between what workers with different responsibilities in the stores are paid. Carter does not make any formal surveys when determining what his company should pay. Jack scans the want ads in the local paper nearly every day and conducts informal surveys among his friends in the local chapter of the laundry and cleaners trade association. While Jack has taken a "seat-of-the-pants" approach to paying employees, his salary schedule has been guided by several basic pay policies. Although many of his colleagues adhere to a policy of paying minimum rates, Jack has always followed a policy of paying his employees about 10 percent above what he feels are the prevailing rates, a policy that he believes reduces turnover while fostering employee loyalty. Of greater concern to Jennifer is her father's informal policy of paying men about 20 percent more than women for the same job. When confronted about this practice, Jennifer's father explains, "Men are stronger and can work harder for longer hours, and besides they all have families to support."

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

Problem 2. Is Jack Carter's policy of paying 10 percent more than the prevailing rates a sound approach? How else might wage rates be determined?