Q3. What are the factors that have to be determined before preparing the salary structure? Ans.

The following three factors have to be determined while developing a pay structure: The proper data for establishing the relative value of a particular job to the organisation. The proper pay range for a job with the defined value to the organisation. The value of each job position within the specified pay range.Once the above factors are determined, pay structures can be developed through the followingsteps: 1. Group the jobs with those that have a similar value in the organisation. 2. Measure these groups to find out the number of pay ranges needed to group the jobs on the basisof their value to the organisation. 2. Create a salary range that has a minimum point, a mid-point and a maximum point for amountsallotted within the range and determine the pay for each job grouping.

3. An organisations compensation philosophy and pay strategy determines the approach that should be taken to allocate pay across job ranges. Factors to be considered are: Number of years of experience. Number of reporting staff members. Performance evaluation results. Hazardous working conditions. Undesirable shifts. Education and degrees. Professional certifications. Management opinions. A successfully developed pay structure identifies career development in addition to promotion. It demonstrates and pays for the business results on which an organisation places value. An effectivepay structure is worth the time and attention. It pays to get it right. philosophy, although marketplace practices are very essential to consider in highly competitivesituations. In structuring this base pay program, several options are available Organisations can use a single rate structure in which the employees performing similar jobs will receive the same pay rate. Organisations can use a tenure based approach which focuses on from how long an employee hasbeen employed in a particular job Organisations can also use a combination of a tenure-based plan and a merit-based plan. Forexample usually employees begin their job at a fixed rate, and then progress to higher rates duringtheir first year based on the number of years spent in the job, then any additional pay increase isawarded only on the basis of performance. Organisations can use a pay system based on productivity. An example for this would be anemployee who is paid only a sales commission. An increasingly popular option is some form of base pay with an incentive opportunity, eitherbased on individual, team, unit, or company performance.

Most of the organisations combine elements of these approaches to create their own formalprogram. The most common traditional pay structure involves grouping similar jobs into pay gradesand assigning a salary range with a minimum, a midpoint, and a maximum.