Creating pay grades
Business Finance
Use attacked excel worksheet for assignment
This case, “Designing A Pay Structure (Links to an external site.),” can be accessed in the Student Development materials available from the SHRM website.
The student workbook can be found under the link above, or by searching the SHRM website. Make sure to select “Student Development” to filter results.
Case Study Instructions
Covers ONLY the following steps:
- Step 1 : Calculate Lead Pay Level Strategy
- Step 2 : Create Pay Grades
- Step 3 : Establish Pay Grade Minimums and Maximums
(NOTE: Only respond to steps 1, 2, & 3 above which are Tasks G, H, I in the workbook.)
Task G – Calculate the Lead pay level strategy by increasing each benchmark job by 1.03 (3% increase)
- Enter results into provided form.
Task H – Create pay grades by combining any benchmark jobs that are substantially comparable for pay purposes. Clearly label your pay grades and explain why you combined any benchmark jobs to form a grade. Note: Pay Grade A is the lowest pay grade and Pay Grade D is the highest.
- Enter results into provided form.
Task I – Using the groupings created in Task H establish the pay range minimums and maximums for each grade.
- For each grade calculate the benchmark job average (if there is more than one job in the grade) or just the job amount if there is only one job in the pay grade.
- Enter this amount in the Grade Average Pay line under the column “Predicted Pay +3%” and in the midpoint column.
- Follow the case instructions below for calculating the range spreads. However use range spreads of 20% for Pay Grades A & B and 60% for Pay Grades C and D should you have jobs in those grades.
- Use the following formula for calculating the range minimum and maximum:
Example: 30% Range Spread
Minimum = Midpoint
100% + (range spread % / 2)Minimum = $20,000 / 1.15 = $17,391 Maximum = Calculated minimum X 1.xx
(xx = range spread %)Maximum = $17,391 X 1.30 = $22,609
- Enter results in the minimum and maximum columns on the provided form.
