Reference no: EM132872166

Development of a base pay salary structure (grades and salary ranges) using provided market data and job evaluation points.

The purpose of this assignment is to build a new base pay structure at HealthRx for the positions listed below

Step 1. Assume that the job evaluation points of relevant benchmark jobs at HealthRx are as indicated in the column labeled: Points (X). Note that these are not the only jobs at HealthRx, just the benchmark jobs. Market rates, from a current pay survey analysis conducted by HealthRx, are indicated in the next column.

Points (X)    Market Rate (Y) Title
 790 28,118 Mailroom Clerk
1050 39,351 Billing Clerk
1180 53,116 Center Secretary 
1350 55,481 Accounts Receivable Specialist 
1375 57,413 Purchasing Agent
1670 63,027 Telecommunication Analyst
2050 93,904 Programmer
2290 82,663 Benefits Specialist
2325 83,519 Tax Accountant
2400 83,734 Compensation Analyst
2455 85,028 Human Resource Generalist
2695 90,202 Regulatory Analyst
3010 100,099 Purchasing Manager
3255 81,153 Nurse Practitioner
3400 118,959 Reimbursement Manager
3590 118,096 Compensation and Benefits Manager
3645 129,181 Information Systems Manager
3990 133,543 Center Administrator
4750 149,003 VP Finance
4760 152,277 VP Marketing

Using the job evaluation points as your X data, survey rates as your Y data, conduct a regression analysis to determine a market pay line, or "pay policy line" (PPL). Your PPL is a mathematical way to translate your points into dollars, based on the external labor market. See regression instructions for Excel at the end of the assignment.

Step 2: Slot jobs in grades.

Step 2A: Decide on the number of pay grades for the non-executive jobs in HealthRx . Note: The VPs are not considered executive level at HealthRx. You may decide to broadband at HealthRx, but be aware that broadbanding requires many other changes besides just wide pay grades. Job sequences, and maybe the concept of job, must be reconsidered. If you do broadband, at minimum discuss the related changes that have to be made in general terms.

Step 2B: Assign job evaluation points to grades. Assume that the most points a non-executive job can have is 5,000.

Notes: As you determine the number of grades and do the slotting, be aware of the job sequences in HealthRx. Unless the current job ladders are restructured (which you are free to propose, with justification), jobs at different levels in the career sequence need to be in different grades (perhaps unless you broadband). For example, General Accountant should be in a lower grade than Accounting Manager. Also, not all grades need to have benchmark jobs in them. And finally, ideally, all grades should have an equal point range. For example, one grade shouldn't contain a range of 600 points, while another a range of 400 points.

Step 3. Determine grade midpoint, maximums, and minimums by calculating pay ranges around your midpoints.

Step 3A. Calculate grade midpoints, by plugging in the midpoint point value of each of your grades into your pay policy line, for x.

Step 3B. Calculate minimums and maximums. Use whatever range percentages you think appropriate, but defend whatever you choose. Office and clerical positions typically have a range of .10 - .25, and management positions have a typical range of .30 - .60. Note that these percents apply often to larger organizations; in smaller organizations it is sometimes difficult to get pay ranges above .50 or so without creating a great deal of overlap.

It is appropriate to use different percentages for different grades. For example, you might choose one percentage for lower grades, another for middle grades, and yet another for the higher grades

Be careful not to have too much grade overlap. Grade overlap is calculated as illustrated by the following example: if the maximum rate for grade 7 exceeds the minimum rate for grade 10, that is considered a 3 grade overlap. In considering how much overlap is appropriate, look at the job titles. Ask yourself if you would accept the possibility of an incumbent in the lower grade being paid more than an incumbent in the higher grade. For example, would it be acceptable for a General Accountant to potentially be paid more than the Accounting Manager? The Accounting Manager more than the VP of Finance?

Step 4. Check your pay structure. One thing to check is to see whether median market pay rates of jobs fall well within the proposed range of the grade to which those jobs will be assigned. That is, each job listed on the previous page can be classified into a pay grade since you know the job evaluation points assigned to it. As an example, consider the Programmer. What grade does it fall in? What is the range in pay for that grade? Does the Programmer's market rate fall within your proposed range for the grade it is in? Do same check for each job. Where proposed range does not include the market rate for a job, it suggests there is a significant difference between the value of the jobs to HealthRx vs. the value to other companies in the market.

Do these instances represent a problem that needs to be addressed? If so, indicate options you would consider to address the problem. If not, indicate why not. Please address each instance separately. In doing so, please do not present a single solution. Rather, indicate multiple options that could be considered.

Step 5. Prepare report outlining the issues you encountered with this assignment, how you addressed them along with your recommended salary structure in one unified document.