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- Factors Used in Job Pricing
- Compensable Factors and How They Are Applied in Determining Pay Ranges
- The Point and Job Content Method Application in Determining Compensation
- Compensation Recommendation for Customer Service Representative
- Related Management essays
Every job position in a firm has a pay range, where persons with less experience or skills are placed on the lower end of the scale while those more proficient and capable are situated on the higher one. According to Jorgensen (2012), companies base these pay ranges both on how they value a given job position in relation to other jobs within the organization, and on what they have to pay someone based on the market value. Additionally, factors like responsibilities, the nature of the job, the experience required, and the scope and the breadth of decisions made are usually considered while determining the final pay range or compensation for a job position. According to Saiyadain (2010), leaving alone commission-paid jobs, a basis is needed for distinguishing how much a job position is worth. This foundation is often established by assigning a pay-range level to each job position based on the pay for comparable ones in the industry.
The following paper answers four job position pay range questions addressing the factors used in job pricing, compensable factors in determining pay ranges, the point and job content methods, and the ways of how organizations can define compensation for a customer service representative.
Factors Used in Job Pricing
The job evaluation exercise usually provides the relative value of each position by assigning a numerical value to it. Job pricing converts these numerical values into actual dollars and pounds (Saiyadain, 2010). In line with this, Jorgensen (2012) asserts that the purpose of the job assessment is to establish relative job-worth only. It is job pricing that determines what the job will actually be paid. The relative job worth is expressed through points rather than dollar values. According to Saiyadain (2010) and Armstrong and Murlis (2013), job pricing uses two factors in determining which compensation approach is more suitable: budgetary allocation for wages and salary, and the difference in compensation between the highest and lowest paid employees.
The total wages and salaries budgetary allocation factor will result in a basis of pricing influenced by the corresponding budget. Pay in this scenario will not be fixed, but will change from time to time depending on managerial decisions, negotiations, changes in government laws or in market (Armstrong & Murlis, 2013). The difference in compensation between the highest paid and lowest paid jobs will result in a pay structure dependent on compensable factors. In this case, the lowest paid position becomes the basis for the compensation value to be raised (Saiyadain, 2010).
Compensable Factors and How They Are Applied in Determining Pay Ranges
According to Armstrong and Murlis (2013), compensable factors are those that make one job more important than another. Usually, the job as a whole is broken down into a number of compensable factors. Each of them is analyzed, and the results of the evaluation are used to provide an exact numerical value that represents relative job worth. It will later be employed to set the pay ranges depending on the degrees in each job position. Compensable factors differ from job to job, but in a general sense, there are some factors that appear to override.
The dominating factors are: mental and physical requirements, skills, responsibilities, and working conditions (Armstrong, 2011). Mental requirements consider the basic training and intelligence through formal education necessary to carry out the job satisfactorily. Skills mean the abilities developed through practice and/or employment that are required to perform the duties. Physical demands deal with the degree and frequency of straining, lifting, standing, the work position and the amount of strength needed to fulfill the assignments. Responsibilities include the possibility of error and its probable effects, the frequency of inspections, the degree of supervisions received and the value of the outcome of the work. Working conditions consider those disagreeable and hazardous aspects of the job and potential for injury and death.
The Point and Job Content Method Application in Determining Compensation
The point and job content methods are avenues used by firms to establish pay ranges. The point method is the one commonly employed by firms having formal evaluation programs. It divides job requirements into compensable factors and compares the degree of each of them to a predetermined scale with specific point values, as opposed to ranking the jobs based on the factors and then subjectively assigning point values (Armstrong, 2011). An example of how this method is applied in determining remuneration can be illustrated with a job analysis of a position requiring an eighth-grade education or its equivalent that is assigned150 points. If a high school education or its equivalent were requested, the value will be 200 points. Thus, the higher the degree of each factor needed is, the higher the points assigned are. The total number of points for all the factors will determine the relative worth of the job (Armstrong, 2011).
The job content method, on the other hand, involves a review of the official duties, and their assessment in terms of the levels established for the compensable factors. It also entails assigning corresponding point values to the job. This point value is then multiplied by a weighting value assigned to the compensable factor. Once the score for each of the jobs on each of the factors has been established and weighted accordingly, a total point score for each job category is calculated (Armstrong, 2011). An example of content method in determining compensation can be seen in a job situation demanding the “physical effort” compensable factor. This factor can be considered in terms of degree levels from “normal”, “moderate”, “considerable”, to “extensive” with each of them having corresponding points ranging from 15, 25, 35, to 50 respectively.
Compensation Recommendation for Customer Service Representative
When a firm values work properly, it will ensure that it prices individual jobs in the most effective way. It will also make sure that it provides insight into how the positions relate to the firm’s overall goals and objectives, and how these roles ultimately contribute to the success of the organization (Armstrong & Murlis, 2013). Most companies compensate customer service representatives based on customer service objectives, sales targets, lead/action, call or time spent with customers. However, this approach has got a major setback. It does not fully compensate the employer as his/her entire responsibility is never captured.
Customer service representatives are vital to a firm’s profitability as they are the link between the business and its customers. This paper recommends the use of the point method or system to define their compensations. It is because this approach allows the evaluation of a job on the basis of compensable factors that constitute the official duties. In the case of customer service representatives, contrary to the beliefs held by many, these factors are not sales leads, sales, actions, hours spent with customer, or even the number of customers attended to. They are skills, efforts, responsibilities and working conditions that their job entails.
In conclusion, setting a final pay range for a job position can only be achieved through proper work evaluation and compensations determination methods. In most organizations, the pay range works in such a way that the people with less experience at a job are placed on the lower end of the corresponding scale. On the other hand, those with more experience appear on the higher end. These scales are based on the job evaluation, assessment exercise and compensation methods. Many companies use a compensation approach that is reasonably reliable for establishing the levels for jobs that reflect their worth. Each job description is rated on the factors that differentiate positions from each other. After this process, jobs are ranked on the specified rating and assigned pay levels according to the order established.
Most conventional pay structures comprise a series of overlapping ranges and grades with all salary decisions being made within the pay structure’s framework. In addition, most salary or pay structures have the minimum pay generally being treated as the appropriate one for new workers who satisfy the minimum requirements for the job position. It means that as an employee gains experience or improves his/her skills, their pay is increased and over time, they advance through the range.
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