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Wages and Salaries IUIC

CHAPTER 1

1. Literature Review

1.1 Job Analysis and EvaluationJob analysis is the formal process of identifying the content of a job in terms activities involved and attributes needed to perform the work and identifies major job requirements. Job analysis was conceptualized by two of the founders of industrial/organizational psychology, Frederick Taylor and Lillian Moller Gilbreth in the early 20th century. Job analyses provide information to organizations which helps to determine which employees are best fit for specific jobs.

Industrial/organizational psychologists are often the professionals who perform job analyses. These professionals use either a task-oriented or worker-oriented approach. The task-oriented approach focuses on identifying each individual task involved in performing the job well. The worker-oriented approach focuses on the attributes need in a prospective employee to perform the job successfully

One of the main purposes of conducting job analysis is to prepare job descriptions and job specifications which in turn help hire the right quality of workforce into an organization. The general purpose of job analysis is to document the requirements of a job and the work performed. Job and task analysis is performed as a basis for later improvements, including: definition of a job domain; description of a job; development of performance appraisals, personnel selection, selection systems, promotion criteria, training needs assessment, legal defense of selection processes, and compensation plans.

In the fields of human resources (HR) and industrial psychology, job analysis is often used to gather information for use in personnel selection, training, classification, and/or compensation.

The field of vocational rehabilitation uses job analysis to determine the physical requirements of a job to determine whether an individual who has suffered some diminished capacity is capable of performing the job with, or without, some accommodation.

Job analysis aims to answer questions such as:

Why does the job exist?

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What physical and mental activities does the worker undertake? When is the job to be performed? Where is the job to be performed? How does the worker do the job? What qualifications are needed to perform the job? What are the working conditions (such as levels of temperature, noise, offensive fumes,

light) What machinery or equipment is used in the job? What constitutes successful performance?

1.2 Methods

1.2.1 Job ranking

Perhaps the simplest method of job evaluation is the ranking method. According to this method, jobs are arranged from highest to lowest, in order of their value or merit to the organization. Jobs also can be arranged according to the relative difficulty in performing them. The jobs are examined as a whole rather than on the basis of important factors in the job; and the job at the top of the list has the highest value and obviously the job at the bottom of the list will have the lowest value.

Jobs are usually ranked in each department and then the department rankings are combined to develop an organizational ranking. The following table is a hypothetical illustration of ranking of jobs.

Table: Array of Jobs according to the Ranking Method

Rank Monthly salaries

1. Accountant Rs 3,000

2. Accounts clerk Rs 1,800

3. Purchase assistant Rs 1,700

4. Machine-operator Rs 1,400

5. Typist Rs 900

6. Office boy Rs 600

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The variation in payment of salaries depends on the variation of the nature of the job performed by the employees. The ranking method is simple to understand and practice and it is best suited for a small organization. Its simplicity, however, works to its disadvantage in big organizations because rankings are difficult to develop in a large, complex organization. Moreover, this kind of ranking is highly subjective in nature and may offend many employees. Therefore, a more scientific and fruitful way of job evaluation is called for.

1.2.2 Job grading or classification

According to this method, a predetermined number of job groups or job classes are established and jobs are assigned to these classifications. This method places groups of jobs into job classes or job grades. Separate classes may include office, clerical, managerial, personnel, etc. Following is a brief description of such a classification in an office.

(a) Class I - Executives: Further classification under this category may be Office manager, Deputy office manager, Office superintendent, Departmental supervisor, etc.

(b) Class II - Skilled workers: Under this category may come the Purchasing assistant, Cashier, Receipts clerk, etc.

(c) Class III - Semiskilled workers: Under this category may come Steno typists, Machine-operators, Switchboard operators, etc.

(d) Class IV - Semiskilled workers: This category comprises Daftaris, File clerks, Office boys, etc.

The job classification method is less subjective when compared to the earlier ranking method. The system is very easy to understand and acceptable to almost all employees without hesitation. One strong point in favor of the method is that it takes into account all the factors that a job comprises. This system can be effectively used for a variety of jobs.

The weaknesses of the job classification method are:

Even when the requirements of different jobs differ, they may be combined into a single category, depending on the status a job carries.

It is difficult to write all-inclusive descriptions of a grade.

The method oversimplifies sharp differences between different jobs and different grades.

When individual job descriptions and grade descriptions do not match well, the evaluators have the tendency to classify the job using their subjective judgments.

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1.2.3 Factor comparison

A more systematic and scientific method of job evaluation is the factor comparison method. Though it is the most complex method of all, it is consistent and appreciable. Under this method, instead of ranking complete jobs, each job is ranked according to a series of factors. These factors include mental effort, physical effort, skill needed, supervisory responsibility, working conditions and other relevant factors (for instance, know-how, problem solving abilities, accountability, etc.). Pay will be assigned in this method by comparing the weights of the factors required for each job, i.e., the present wages paid for key jobs may be divided among the factors weighed by importance (the most important factor, for instance, mental effort, receives the highest weight). In other words, wages are assigned to the job in comparison to its ranking on each job factor.

The steps involved in factor comparison method may be briefly stated thus:

Select key jobs (say 15 to 20), representing wage/salary levels across the organization. The selected jobs must represent as many departments as possible.

Find the factors in terms of which the jobs are evaluated (such as skill, mental effort, responsibility, physical effort, working conditions, etc.).

Rank the selected jobs under each factor (by each and every member of the job evaluation committee) independently.

Assign money value to each factor and determine the wage rates for each key job. The wage rate for a job is apportioned along the identified factors. All other jobs are compared with the list of key jobs and wage rates are determined.

An example of how the factor comparison method works is given below:

Table: Merits and Demerits of Factor Comparison Method

Merits Demerits

Analytical and objective.

Reliable and valid as each job is compared with all other jobs in terms of key factors.

Money values are assigned in a fair way based on an agreed rank order fixed by the job evaluation committee.

Flexible as there is no upper limitation on

Difficult to understand, explain and operate.

Its use of the same criteria to assess all jobs is questionable as jobs differ across and within organizations.

Time consuming and costly.

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the rating of a factor.

1.2.4 Point system or method

This method is widely used currently. Here, jobs are expressed in terms of key factors. Points are assigned to each factor after prioritizing each factor in the order of importance. The points are summed up to determine the wage rate for the job. Jobs with similar point totals are placed in similar pay grades. The procedure involved may be explained thus:

(a) Select key jobs. Identify the factors common to all the identified jobs such as skill, effort, responsibility, etc.

(b) Divide each major factor into a number of sub factors. Each sub factor is defined and expressed clearly in the order of importance, preferably along a scale.

The most frequent factors employed in point systems are:

I. Skill (key factor): Education and training required, Breadth/depth of experience required, Social skills required, Problem-solving skills, Degree of discretion/use of judgment, Creative thinking;

II. Responsibility/Accountability: Breadth of responsibility, Specialized responsibility, Complexity of the work, Degree of freedom to act, Number and nature of subordinate staff, Extent of accountability for equipment/plant, Extent of accountability for product/materials;

III. Effort: Mental demands of a job, Physical demands of a job, Degree of potential stress.

The educational requirements (sub factor) under the skill (key factor) may be expressed thus in the order of importance.

Define Degree

1. Able to carry out simple calculations; High School educated

2. Does all the clerical operations; computer literate; graduate

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3 Handles mail, develops contacts, takes initiative and does work independently; post graduate

Assign point values to degrees after fixing a relative value for each key factor.

Table: Point Values to Factors along a Scale

Point values for Degrees Total

Factor 1 2 3 4 5

Skill 10 20 30 40 50 150

Physical effort 8 16 24 32 40 120

Mental effort 5 10 15 20 25 75

Responsibility 7 14 21 28 35 105

Working conditions 6 12 18 24 30 90

Maximum total points of all factors depending on their importance to job = 540

(Bank Officer)

4 Find the maximum number of points assigned to each job (after adding up the point values of all sub-factors of such a job). This would help in finding the relative worth of a job. For instance, the maximum points assigned to an officer's job in a bank come to 540. The manager's job, after adding up key factors + sub factors' points, may be getting a point value of, say 650 from the job evaluation committee. This job is now priced at a higher level.

5 Once the worth of a job in terms of total points is expressed, the points are converted into money values keeping in view the hourly/daily wage rates. A wage survey, usually, is undertaken to collect wage rates of certain key jobs in the organization. Let's explain this:

Table: Conversion of Job Grade Points into Money Value

Point range Daily wage rate (Rs) Job grades of key bank officials

500-600 300-400 1 Officer

600-700 400-500 2 Accountant

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700-800 500-600 3 Manager I Scale

800-900 600-700 4 Manager II Scale

900-1,000 700-800 5 Manager III Scale

1.2.5 Merits and DemeritsThe point method is a superior and widely used method of evaluating jobs. It forces raters to look into all keys factors and sub-factors of a job. Point values are assigned to all factors in a systematic way, eliminating bias at every stage. It is reliable because raters using similar criteria would get more or less similar answers. “The methodology underlying the approach contributes to a minimum of rating error” (Robbins, p.361). It accounts for differences in wage rates for various jobs on the strength of job factors. Jobs may change over time, but the rating scales established under the point method remain unaffected.

On the negative side, the point method is complex. Preparing a manual for various jobs, fixing values for key and sub-factors, establishing wage rates for different grades, etc., is a time consuming process. According to Decenzo and Robbins, “the key criteria must be carefully and clearly identified, degrees of factors have to be agreed upon in terms that mean the same to all rates, the weight of each criterion has to be established and point values must be assigned to degrees”. This may be too taxing, especially while evaluating managerial jobs where the nature of work (varied, complex, novel) is such that it cannot be expressed in quantifiable numbers.

1.2.6 Point System

The point system is the most common approach than any other method. This system also evaluates the compensable factors for each job, but this method uses points instead of wages. This system is a little complicated than the typical factor comparison method but it is more accurate. This system requires six steps that are usually implemented by a job evaluation committee or an individual analyst.

Step 1: Determine Critical Factors

The first step in the point system is to determine all the critical factors of the job. Generally, the basic critical factors of all kind of jobs remain the same. But organizations can add more details by breaking down those factors into subfactors.

Step 2: Determine the Levels of Factors

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Since every organization has its own unique functionality, therefore, the critical factors or subfactors may vary. For that, several levels are created, e.g. minimum, moderate, high, etc. associated with each other to help analysts reward different degrees accordingly.

Step 3: Allocate Points to Sub factors

The next step is to allocate the point to the subfactors. When all the factors and the levels are listed, the result is a point system matrix. The job evaluation committee then subjectively assigns the maximum possible points to each subfactor, according to that subfactor’s importance, under the highest level.

Step 4: Allocate Points to Levels

Once the subfactors are allocated with the maximum total points under the highest level, in the next step, analysts allocate points across each row to reflect the importance of the different levels. Usually equal point differences are assigned between levels, for simplicity.

Step 5: Develop the Point Manual

After allocating points to the critical factors, subfactors and the levels, the next step is to develop the point manual. In this step analysts develop a point manual that contains a written explanation of each job element as well as defining what is expected for the four levels if each subfactor.

Step 6: Apply the Point System

The last and the final step is application. When the point matrix and the manual are ready, the relative value of each job can be determined. This process requires specialists to compare job descriptions with the standard point manual description for each subfactor. The match between the job description and the point manual statement reveals the level and points for each subfactor of every job. The points for each subfactor are added to find the total number of the points for the job.

1.3 Wages and Salaries SurveysFirms are always keen on a fair equity internally as well as externally. All job evaluation techniques result in a ranking of jobs based on their relative worth within the firm to ensure internal equity. On the other hand, most firms rely on wage and salary surveys to determine a fair rate of compensation, externally. Companies conduct these surveys to discover what other employers in the same labor market are paying for the specific key job.

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1.3.1 Sources of Compensation DataWage and salary survey data are benchmarks against which analysts compare compensation levels. There are several sources to conduct surveys of the labor markets to collect data. Many state unemployment offices compile this information for employers. Employer association is another source that surveys member firms.

The central paradox of survey is that each firm watches what the others in its labor market pay. An increase by one is likely to be detected by others and may influence their pay plans.

1.3.2 Survey ProceduresSince surveys are expensive, organizations sometimes select a sample of firm from the labor market and contact them by phone or email to learn what they are paying for the key jobs. Most companies are willing to cooperate since they also need this information.

1.4 Pricing JobsIn the pricing jobs, the job evaluation worth is matched with the labor market worth. Two activities are involved; establishing the appropriate pay level for each job and grouping the different pay levels into a structure that can be managed effectively.

1.4.1 Pay LevelsThe internal rankings and the survey wage rates are combined through a graph called scattergram, to set the right pay level. The scattergram is created by plotting the total points and wage level for each key job.

The dots that represent key jobs can be used to draw a wage-trend line as close to as many points as possible, employing a statistical technique called the least squares method of regression. The wage-trend line helps determine the wage rates for non-key jobs.

1.4.2 The Compensation StructureIt is not uncommon for an employer of hundreds of workers to have scores of individual job titles. Compensating hundreds or even scores of jobs would present a wage and salary analyst with complex problems. The differences between jobs might be only a few cents that is why the existence of hundreds of separate wage rates would be meaningless.

A more convenient approach that attracted compensation analysts is to lump jobs into job classes. In the job grade approach, jobs are already grouped into predetermined categories. The grouping is done by creating job grades based on the previous ranking, grades or points.

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The problem with flat rates for each job class is that giving worker a merit increase, a raise in pay for performance, requires moving the employee into higher job class which upsets the entire balance of internal equity. Most firms then use rate ranges for each class to solve these problems. Rate ranges are the pay ranges for each job class.

The analysts perform a new job evaluation and assign each new job to an appropriate job class as the new jobs are created. If rate changes are used, new incumbents usually start from the bottom.

1.5 CHALLENGES AFFECTING COMPENSATION:

1.5.1 Strategic Objectives:Grant raises should be based more on skills and knowledge that a person possesses rather than the inherent worth of or demands of the job: the more the skills and knowledge, the higher the pay.

1.5.2 Prevailing Wage Rates:Market forces may cause some jobs to be paid more than their relative worth. Demographic shifts and relative supply and demand relationships affect compensation. These rates appear on a wage chart as “Red Circle” rate. The term arises from the practice of marking out-of-line rates with a red circle on the chart. Pay raises of red circle rates are often frozen when the supply of talent catches up with the demand.

1.5.3 Union Power:When unions represent a portion of the workforce, they may be able to obtain wage rates that are out of proportion to the relative worth of the jobs. Higher wages may lead to more automation, fewer benefits or loss of the firm’s competitive position. Unions may also limit management’s flexibility in administering merit increases, since union often argue for raises that are based on seniority and are applied across the board equally.

1.5.4 Government Constraints:The Fair Labor Standards Act (FLSA) of 1938 is the most comprehensive law affecting compensation management. It sets minimum wage rate, overtime pay, equal pay, child labor, and record-keeping requirements. The minimum-wage and overtime provisions require employers’ to

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pay at least a minimum hourly rate regardless of the worth of the job. When the minimum is increased by law, the wages of those who already earn above the minimum may be adjusted accordingly. If those above the minimum wage rate do not get raises, wage differentials are squeezed together, causing wage compression.

In 1963, the FLSA was amended by the Equal Pay Act. This amendment was passed to eliminate sex-based discrimination in pay. It requires employers to pay men and women equal wages when their jobs are equal in skill, effort and responsibility and are performed under similar conditions.

1.5.5 Comparable Worth and Equal Pay: The idea of ‘comparable pay for comparable work’ is called comparable worth. It requires employers to pay equal wages for jobs of equal comparable value. Under the Equal Pay Act for example, male and female nurses would have to be paid the same if their seniority and merit matched but a female nurse and a male electrician could be paid different rates. Under Comparable Worth, however, if a nurse and an electrician both receive approximately the same number of points under a job evaluation point system, they have to be paid the same, subject presumably to merit and seniority differences. Comparable worth is used to remove the historical gap between the incomes of men and women.

1.5.6 Compensation Strategies and Adjustments:Most organizations have compensation strategies and policies that cause wages and salaries to be adjusted. A common strategy is to give nonunion workers the same raises that are given to unionized employees; this often is done to prevent further unionization. Premiums or bonuses for international assignments are another adjustment. Some companies, particularly large ones, pay a premium above the prevailing wages to attract and retain the best employees.

1.5.7 International Compensation Challenges:The growing globalization of business also means greater movement of employees among countries. As employees are relocated, compensation specialists are challenged to make adjustments that are fair to the employee and the company while keeping competitiveness in mind.

When international assignments are temporary, usually under a year, the employee is paid his or her regular salary plus adjustments. These additional amounts typically cover transportation, temporary living quarters, and cost of living differentials. Educational supplements may be added if children join the employee. Bonuses may be used to compensate for hardships, particularly if an employee is sent to a less than desirable location. For extended stays, relocation expenses may also include the purchase of the employee’s residence at the appraised value,

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company paid trips back to the home country, legal expenses for adjusting wills, supplements to offset higher taxes n the new country and the other adjustments to income.

1.5.8 Productivity and Costs:Regardless of company or social policies, employers must make a profit to survive. Without profits, they cannot attract enough investors to remain competitive. Therefore, a company cannot pay its workers more than the workers give back to the firm through their productivity.

Two-tiered wages and bonuses are innovations that became widespread during the 1980s. As the name implies, employers created two wage structures, usually one for current employees and one for future recruits. Current employees often retain their current wages and rate ranges; future employees, however, are paid a lower rate to start. The lower starting rate assures the employers lower labor costs as current employees leaves and are replaced by lower cost recruits.

Compensation innovations help employer productivity and costs. Instead of wage increases that permanently raise workers’ pay levels, about one-fifth of employers give lump-sum bonuses. These bonuses are not part of the employees’ pay base. If sales, productivity or profits falter the following year, bonuses are not given.

Fringe benefits have been a major target of cost-reducing efforts. More employers are trying to increase productivity and relate pay increases to gains in productivity through incentives and gain sharing.

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CHAPTER 2

2. CORELATION WITH ORGANIZATION

For a better comparison between theory and industry, three firms were selected as subject from different sects of the industry such as finance, lifestyle and government. The results have thus a higher level of accuracy and dependency factor.

2.1 Companies Consulted:

2.1.1 EMAAR, PAKISTAN

About EMAAR:

Emaar Pakistan is pioneering the concept of master-planned communities that integrate residential amenities with schools, healthcare, shopping malls, hotels, dining and entertainment, to bring a world-class lifestyle to the country.

We are now building the spirit of Pakistan with outstanding lifestyle communities currently underway. In Karachi, Crescent Bay, the seafront wonder, is a vibrant community of high-rise towers set along three crescent shaped man-made bays. In Islamabad, Canyon Views offers superb villas, townhomes and apartments with the finest architecture, facilities, security, views and green open spaces available in the capital.

A subsidiary of Emaar Properties PJSC, the Dubai-based property developer, Emaar Pakistan is fast becoming the property developer of choice for the nation.

Emaar Pakistan is currently developing two major projects in the country:Canyon Views, Islamabad

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Crescent Bay, Karachi

HR at EMAAR:

Our HR function plays a critical role in the success of EMAAR Pakistan by serving the needs of the business. By applying the change process, we help create a performance-driven culture for the enterprise. We attract, develop and retain talent, ensuring employee inclusion & engagement. Throughout our work, we strive to deliver simple and effective services. Our goal is to enhance the productivity of all employees. Our responsibilities include HR strategies, employee benefit programs, talent management, performance management, employee development, organization development, employer branding & employee relations. In search of talent, the company actively provides opportunity to young University Graduates for Internships

Person Consulted:

Name: Leema Shamshad Designation: A.M. HR Email: [email protected]

2.1.2 SNL Financial

About SNL Financial:

SNL Financial collects, standardizes and disseminates all relevant corporate, financial, market and M&A data — plus news and analysis — for the industries we cover: banking, financial services, insurance, real estate, energy and media/communications

SNL Financial was originally founded as "S&L Securities" in New Jersey in 1987 with an initial focus on the savings and loan industry. But state law would not permit the incorporation of a non-bank with "S&L" in the official company name. So we replaced the "&" with an "N" to create "SNL." And our universe soon expanded well beyond savings & loans to the various business sectors we cover today.

Since our founding, SNL has continuously expanded our global operations, as well as the scope and depth of our coverage and products — all without compromising the standards of quality and

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customer service that drive our success. Throughout our organization, SNL has infused 4 core tenets — Accuracy, Relevance, Completeness and Timeliness — and we stand behind our published information with a unique Accuracy Guarantee.

As a result, leading investment banks, investment managers, corporate executives, ratings agencies, government agencies, consulting firms, law firms and media such as The New York Times, The Wall Street Journal, USA Today, Washington Post, Forbes and Fortune rely on SNL Financial for the best possible information on the companies in our sectors

HR at SNL

SNL's reputation as a leading financial information and research firm depends upon the teamwork, effort, commitment and intelligence of our more than 1,800 employees worldwide. To remain at the top of our industry, we need talented, motivated people in every area of the company: content, news, research, technology, sales, client service, employee development and administration.

SNL Financial is an Equal Opportunity/Affirmative Action Employer. SNL Financial seeks to develop and nurture its diversity and believes that diversity

among its workforce strengthens the organization, stimulates creativity, promotes the exchange of ideas and enriches the work lives of all employees.

SNL Financial is committed to working with and providing reasonable accommodation to applicants with physical and mental disabilities.

Person Consulted:

Name: Sheraz Karim Designation: Director HR Email: [email protected]

2.1.3 NESCOM

About NESCOM:

National Engineering and Scientific Commission (NESCOM) is a civilian controlled Pakistani scientific and research organization carrying out research in many engineering and scientific areas including information technology, fluid dynamics, aerodynamics, aerospace engineering, electrical engineering, mechanical engineering and chemical engineering, with specialties in the design and production of the defense systems for the Pakistan Armed Forces.

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NESCOM is one of the largest and well known research organization in Pakistan. Under the leadership of noted nuclear scientist, Irfan Barney SI, HI, NESCOM has emerged as a respected and well-known organization in other countries as well. Today, NESCOM has about 16,000 employees. Some of these scientists and engineers hold Ph.D. degrees earned from reputed foreign universities. NESCOM also has a hospital for its employees and their families and is regarded as among the best in the country.

Person Consulted:

Name: Confidential Designation: General Manager HR (SPS 10) Email: [email protected]

2.2 Comparison of Wages & Salaries Policies of the Consulted Firms

2.2.1 Question 1, Reasons of Compensation Offered:

For what reason do you offer “compensation to your employees in your company? Underline as many as applicable.

1. Recruit and retain qualified employees2. Increase or maintain morale/satisfaction3. Reward and encourage peak performance4. Achieve internal and external equity 5. Reduce turnover and encourage company loyalty6. Modify (through negotiations) practices of unions

EMAAR: All

SNL Financial: 1, 3 and 4

NESCOM: 1

2.2.2 Question 2, Types of Compensation Offered:

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What types of compensation do you give to your employees? Underline as many as applicable.

1 Direct: wages, salaries, commissions, bonuses2 Indirect: insurance plans life, health, and dental, disability social assistance benefits retirement

plans, social security, workers’ company paid absences vacations, holidays, and sick leave3 The Job: interesting, challenging, responsible, opportunity for recognition, advancement, feeling

of achievement4 Job Environment: policies, supervision, co-workers, status symbols, working conditions, flextime,

compressed work week, job sharing, telecommuting, flexible benefits programs

EMAAR: We offer all of the above compensations

SNL Financials:

Direct: Salaries, commissions, bonuses Indirect: Insurance plans life, health, and dental, benefits retirement plans, holidays, and sick

leave, The Job: Interesting, challenging, responsible, opportunity for recognition, advancement, feeling

of achievement, Job Environment: policies, supervision, co-workers, working conditions

NESCOM: All of the above except commissions and bonuses

2.2.3 Question 3, Contents of Job Analysis Document:

What does your Job analysis document include from the following?

1 Why does the job exist?2 What physical and mental activities does the worker undertake?3 When is the job to be performed?4 Where is the job to be performed?5 How does the worker do the job?6 What qualifications are needed to perform the job?7 What are the working conditions (such as levels of temperature, noise, offensive fumes, light)8 What machinery or equipment is used in the job?9 What constitutes successful performance?

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EMAAR: 1, 2, 3, 4, 6, & 7

SNL Financials: 1, 2, 6, & 9

NESCOM: All

2.2.4 Question 4, Job Ranking Method:

Please give us an array of Jobs according to the Job Ranking Method in your company? E.g.

Rank Monthly salaries

1. Accountant Rs 3,000

2. Accounts clerk Rs 1,800

3. Purchase assistant Rs 1,700

4. Machine-operator Rs 1,400

5. Typist Rs 900

6. Office boy Rs 600

EMAAR:

SNL Financials: Confidential information

NESCOM:

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No Rank Approx Monthly Salary1 Accountant 45,0002 Accounts Clark 30,0003 Purchase Assistant 30,0004 Executive 50,0005 Assistant Manager 100,00006 Manager 150,0000


2.2.5 Question 5, Jobs Grading:

What are the jobs grading in this organization? Please specify every level.

An example of job grading is:(a) Class I - Executives: Further classification under this category may be Office manager, Deputy office manager, Office superintendent, Departmental supervisor, etc.

(b) Class II - Skilled workers: Under this category may come the Purchasing assistant, Cashier, Receipts clerk, etc.

(c) Class III - Semiskilled workers: Under this category may come Steno typists, Machine-operators, Switchboard operators, etc.

(d) Class IV - Semiskilled workers: This category comprises Daftaris, File clerks, Office boys, etc.

EMAAR: Grade 1 to 10

SNL Financials: 19 different levels e.g Executives, Office manager, Deputy office manager, Office superintendent, Departmental supervisor, etc.

NESCOM:

Regular : Officers & Staff (All Govt Service Benefits) Contract : Officers & Staff ( with Lump sum salary for approved period of I or 2 yrs – extendible.

No Seniority) Contingent : Skilled, semiskilled & unskilled employees for max 05 months to meet any

contingent requirement, No Seniority. Retired Personnel : Officers & Staff (As & When required through DGWR) Serving Forces Personnel : Officers and staff of all ranks

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No Rank Approx Monthly Salary1 Data Entry Operator 250002 Computer Operator 300003 Junior Executive 360004 AM 480005 Manager 730006 GM 98000


2.2.6 Question 6, Point System:

Point system is a six step method to evaluate compensable factors of each job using points. How does your company does follow this system for example for a job at executive level?

Point values for Degrees Total

Factor 1 2 3 4 5

Skill 10 20 30 40 50 150

Physical effort 8 16 24 32 40 120

Mental effort 5 10 15 20 25 75

Responsibility 7 14 21 28 35 105

Working conditions 6 12 18 24 30 90

Maximum total points of all factors depending on their importance to job = 540

EMAAR: Skill 50, Physical effort 32, Mental effort 25, Responsibility 28, Working conditions 18

SNL Financials: Skill 50, Physical effort 24, Mental effort 20, Responsibility 35, Working conditions 18

NESCOM: Compensation packages are defined by Ministry of Defense (MOD) & no change is possible until decided by MOD

2.2.7 Question 7, Wage and Salary Survey:

Wage and salary surveys of the labor market are important to discover what other employers are paying for specific key jobs. What are your company’s sources to collect the compensation data and/or what is your survey procedure?

EMAAR: Only if there is a major change in economy only then we get the salary surveys

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SNL Financials: Third party surveys are conducted to obtain independent, unbiased data

NESCOM: It is done through Ministry of Defense/ Procedures are classified however past data and forecasted manpower requirements are used to forecast and allocate budget for upcoming financial requirements

2.2.8 Question 8, Pricing Jobs:

Pricing jobs involves two activities:

Establishing the appropriate pay level Grouping the different pay levels into a structure

How does your company establish pay levels (perhaps by using scattergram. The scattergram is created by plotting the total points and wage level for each key job) and how do you set up a framework of compensation structure using job classes, merit increases and rate ranges? (a merit increase is a raise in pay for performance, requires moving the employee into higher job class which upsets the entire balance of internal equity. Most firms then use rate ranges for each class to solve these problems. Rate ranges are the pay ranges for each job class.

The analysts perform a new job evaluation and assign each new job to an appropriate job class as the new jobs are created. If rate changes are used, new incumbents usually start from the bottom)

EMAAR: Experience/Qualification

SNL Financials: Compensation structure is designed based on independent market surveys and keeping the pay levels at the median of the target market/industry

NESCOM: N/A as it is done through MOD

2.2.9 Question 9, Red Circle Rate.

Market forces may cause some jobs to be paid more than their relative worth. Demographic shifts and relative supply and demand relationships affect compensation. These rates appear on a wage chart as “Red Circle” rate. The term arises from the practice of marking out-of-line rates with a red circle on the chart. Pay raises of red circle rates are often frozen when the supply of talent catches up with the demand. Are you giving out any salaries at “Red Circle Rate”? and for which position?

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EMAAR: At the moment we don’t have any Red Circle

SNL Financials: Not Applicable

NESCOM: Not Applicable

2.2.10 Question 10, Union Determined Wage Rates:

When unions represent a portion of the workforce, they may be able to obtain wage rates that are out of proportion to the relative worth of the jobs. Are there any worker unions present in your company? And do they affect the wage rate?

EMAAR: No

SNL Financials: Not Applicable


2.2.11 Question 11, Compensations Offered on International Assignments:

The growing globalization of business also means greater movement of employees among countries. As employees are relocated, compensation specialists are challenged to make adjustments that are fair to the employee and the company. What compensation do you offer an employee while sending him on an international assignment?

EMAAR: Boarding and lodging along with a pay raise

SNL Financials: If moved for a permanent role, compensation offered is as per the new geography’s pay scale & ranges to keep market & internal equity


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2.2.12 Question 12, Two-Tiered Wages:Two-tiered wages and bonuses are innovations that became widespread during the 1980s. As the name implies, employers created two wage structures, usually one for current employees and one for future recruits. Current employees often retain their current wages and rate ranges; future employees, however, are paid a lower rate to start. The lower starting rate assures the employers lower labor costs as current employees leaves and are replaced by lower cost recruits. Is this policy practiced in your company?

EMAAR: No

SNL Financials: No, the current market is taken into consideration when hiring new employees

NESCOM: Yes

CHAPTER 3

3. CRITICAL EVALUATION

3.1 Reasons of Compensation Offered:Upon asking about the reason compensations are offered to your employees, EMAAR replied that they offer compensations for all types of reasons mentioned in the book. This holds true because EMAAR is an international organization and they strive for keeping their employees happy, satisfied and motivated in any way they can manage. SNL, an equally competent firm gives a few reasons for offering compensations such as offering compensation for retaining qualified employees, offering compensation to increase their morale and to achieve internal and external equity. NESCOM, on the other hand, being run mostly of governmental decisions does not indulge itself too much into motivation employees and they just offer compensation for the reason of recruiting and retaining employees.

3.2 Types of Compensation Offered:When asked about the different types of compensations being offered to their employees, EMAAR, again being the competent and competitive firm it is replied that they offer a wide variety of compensations to their employees such as direct compensation that includes salaries, indirect compensation that includes life insurance and health plans, on the job compensations such as working conditions and policies etc. SNL also offers more or less all the types of compensations mentioned, NESCOM on the other hand offers all except bonuses and commissions because there is no such trend of offering commissions and bonuses in government run organizations.

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3.3 Contents of Job Analysis Document:The third question was related to the contents of job analysis document. HR in EMAAR, being a fully developed and efficient department has very well composed job analysis documents that includes almost all the requirements stated by the book such as Why does the job exist? What physical and mental activities does the worker undertake? When is the job to be performed? Where is the job to be performed? What qualifications are needed to perform the job? What are the working conditions (such as levels of temperature, noise, and offensive fumes, light)? It however does not state the criteria of performance by describing what constitutes successful performance? Which is a very important question that should be a part of the job analysis document to set a criteria of performance. SNL and NESCOM are also not far behind in this case and have pretty detailed and up to the requirement job analysis documents.

3.4 Job Ranking Method:The fourth question was related to job ranking method in which the firms were asked to state the ranks and salaries accordingly. EMAAR stated its organizational hierarchy to be manager with salary PKR 150,000, assistant manager 100,000, executive PKR 50,000, purchase assistant PKR 30,000, accountant PKR 45,000 and accounts clerk PKR 30,000. NESCOM follows more of less the same organizational hierarchy and has GM PKR 98,000, manager PKR 73,000, assistant manager PKR 48,000, junior executive PKR 36,000, computer operator PKR 30,000 and data entry operator PKR 25,000. A point to be noted here is that a manager in EMAAR is getting a salary of PKR 150,000 whereas a manager at NESCOM is getting paid PKR 73,000, almost half to EMAAR. This difference might be due to the reason that EMAAR is an international organization which is giving higher benefits to its employees that NESCOM, a government organization. SNL refused to give out this information, stating it to be strictly confidential. This might be because they might not have fixed rates of salaries offered to each rank.

3.5 Jobs Grading:Upon asking about the job grading in the firm, each firm had a different system of grading in their organization. EMAAR grads its employees from 1 to 10. SNL has 19 different levels of grades which includes Executives, Office manager, Deputy Office manager, Office superintendent, Departmental supervisor, etc. NESCOM has divided its jobs into regular officers, officers in contract, contingent officers, retired personnel and serving forces personnel.

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3.6 Point System:All of the firms were asked to give the points system they follow for a job at executive level. The following bar chart has been prepared by the data received from the firms and gives a clear comparison. NESCOM on the other hand does not have a hand in ranking or giving points to different organizational levels. This has all been preset for them by the Ministry of Defense.

Skill Physical Effort Mental Effort Resopnsibility Working Conditions

0

10

20

30

40

50

60

EMAARSNLNESCOM

3.7 Wage and Salary Survey:The firms were asked their sources to collect the compensation data and their survey procedure to which EMAAR said that they collect such data only if there is a major change in economy. SNL conduct ‘third party surveys’ to obtain independent, unbiased data. NESCOM, again bounded by the government said that it is done through Ministry of Defense and procedures are classified however past data and forecasted manpower requirements are used to forecast and allocate budget for upcoming financial requirements.

3.8 Pricing Jobs:

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Upon asking how do the firms establish pay levels, EMAAR said that they do it after considering the experience and qualification of the candidate. SNL’s compensation structure is designed based on independent market surveys and keeping the pay levels at the median of the target market/industry. NESCOM, again said that it is done through Ministry of Defense.

3.9 Red Circle Rate:Market forces may cause some jobs to be paid more than their relative worth. Demographic shifts and relative supply and demand relationships affect compensation. These rates appear on a wage chart as “Red Circle” rate. The term arises from the practice of marking out-of-line rates with a red circle on the chart. Pay raises of red circle rates are often frozen when the supply of talent catches up with the demand. Upon asking about the firms red circle rates, all three of them said that they don’t have any red circle rates at the moment although they do exist depending on circumstances, political and social conditions.

3.10 Union Determined Wage Rates:When unions represent a portion of the workforce, they may be able to obtain wage rates that are out of proportion to the relative worth of the jobs. All three firms said that they are not facing this problem because they currently don’t have any unions in their organizations which are common in those firms who deal with labor force mostly.

3.11 Compensations Offered on International Assignments:The growing globalization of business also means greater movement of employees among countries. As employees are relocated, compensation specialists are challenged to make adjustments that are fair to the employee and the company. EMAAR offers boarding and lodging along with a pay raise. SNL said that if the employee is moved for a permanent role, compensation offered is as per the new geography’s pay scale & ranges to keep market and internal equity. NESCOM said that we are purely a Pakistan based organization and do not need to send our employees abroad.

3.12 Two-Tiered Wages:Two-tiered wages and bonuses are innovations that became widespread during the 1980s. As the name implies, employers created two wage structures, usually one for current employees and one for future

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recruits. Current employees often retain their current wages and rate ranges; future employees, however, are paid a lower rate to start. The lower starting rate assures the employers lower labor costs as current employees leaves and are replaced by lower cost recruits. EMAAR said that they don’t follow this pay structure; NESCOM on the other hand follows this pay structure. SNL considers the current market before deciding the pay structures.

CHAPTER 4

4. CONCLUSION & RECOMMENDATIONS

4.1 CONCLUSION:

Looking at the overall results of the questionnaire, with few exceptions almost all of the policies, requirements and criteria set my theory are being followed in the industry. This can also be said with more affirmation because not one but three companies were consulted that too were from different sectors of the industry. Theory, after having made with immense research is still alive today and is practiced giving indication towards the correctness and accuracy of it. That being said, there is still room for additions as time passes because with the change of trends which include psychographic changes, demographic changes, social and political changes, new policies should be introduced in industry as well as in books to keep the students updated as well who are the ones who will run the industry one day.

4.2 Recommendations:

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4.2.1 Compensation:

NESCOM offers compensation to employees just for one reason; to recruit and retain them. True, it’s a government run organization but it should work more towards its employees motivation and wellbeing. This will make them more productive.

4.2.2 Salary Rate:

NESCOM should revise its salary amount at each level. Compared to the market, it is a bit behind. With very less employee benefits and lower salaries, the employees would be in a danger or being demotivated and less productive.

4.2.3 Wage and Salary Surveys:

Wage and salary surveys are extremely important to be conducted regularly. You don’t want to lose your competitive employees to other organizations, just because they were offering higher salaries and you didn’t know about it. All the three companies we consulted are weak in conducting these surveys.

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