King Abdulaziz University
Faculty of Economics and Administration
Department of Human Resource Management
Executive Master Program
Academic Session 2024-25
Compensation and Benefits – EHRM 604
Group Project
Title of Group Project: Designing A Pay Structure
Learning Objectives: In this case, EHRM students (working on Job) will learn to design a
pay structure. To do so, they will:
1. Write a job description, using the O*NET website/or any other professional websites.
2. Use the point method/classification/ranking (of your choice) to conduct a job
evaluation.
3. Analyze pay survey data for benchmark jobs.
4. Create a market pay line using Excel.
5. Establish a pay policy line based on a pay level strategy.
6. Create pay grades.
7. Establish pay ranges.
Instructions for Students: By following these steps, Students can systematically design a
pay structure that reflects the internal value of jobs, aligns with market trends, and supports
the organization's overall compensation strategy.
Step 1: Job Analysis
1. Initiate the Job Analysis: HR professionals start by identifying the need for job
analysis, focusing on understanding the roles and responsibilities within the
organization.
2. Select Jobs for Analysis: Determine which jobs are critical for analysis based on
their impact on organizational goals and performance.
3. Data Collection: Gather information through interviews, surveys, and observations to
develop a comprehensive job description. Capture essential tasks, responsibilities,
work context, and required knowledge, skills, and abilities.
4. Job Documentation: Create detailed job descriptions that include job titles, job
summary, essential tasks, responsibilities, and required qualifications.
Step 2: Job Evaluation
5. Select Job Evaluation Method: Choose a suitable job evaluation method, such as the
point method, ranking, or classification, based on organizational needs and
preferences.
6. Assign Job Values: Evaluate each job's relative worth within the organization using
the chosen method, assigning points or rankings accordingly.
7. Develop Hierarchical Ranking: Establish a hierarchical ranking of jobs based on
their evaluated worth, creating an internal structure that reflects the organization's job
hierarchy.
8. Ensure Internal Alignment: Verify that the job evaluation process aligns internal
job values with organizational goals and structure, ensuring fairness and transparency.
Step 3: Pay Policy Identification
9. Determine Pay Strategy: Decide whether the organization aims to lead, lag, or meet
the market in terms of compensation. Consider the impact on employee attraction and
retention.
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10. Tailor Strategies: Customize pay policies for different job families or levels,
acknowledging that varied strategies may be effective in different areas of the
organization.
Step 4: Pay Survey Analysis
11. Conduct Market Pay Surveys: Gather compensation data from relevant labor
market surveys, including base pay, bonuses, stock options, and benefits.
12. Data Analysis: Analyze external pay data to understand market trends, ensuring the
organization's compensation remains competitive within its industry.
13. Adjustment Considerations: Use survey data to evaluate and potentially adjust the
organization's pay structures based on external market conditions.
Step 5: Pay Structure Creation
14. Merging Internal and External Data: Integrate the internal job evaluation data
(Step 2) with external market pay rates (Step 4) through a regression analysis to
establish a market pay line.
15. Adjust the Market Pay Line: Depending on the organization's pay strategy, adjust
the market pay line to lead, lag, or meet the market.
16. Develop Pay Grades and Ranges: Create pay grades and ranges within the structure,
considering factors like job responsibilities, performance, and market
competitiveness.
17. Finalize Pay Structure: Review and finalize the pay structure, ensuring internal
equity, market competitiveness, and alignment with the organization's compensation
philosophy.
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CASE SCENARIO (Students currently not working)
You are the newly hired human resource (HR) director for an engineering consulting firm
that is expanding its operations to Chattanooga, Tenn. The organization is headquartered in
Indianapolis, Ind. Based on the organization’s mission statement; you know the firm strives
to create customized and technically proficient electrical engineering plans for regional
clients. The following personnel are required to start the Chattanooga operation (the numbers
in parentheses indicate the number of positions):
Levels/ Operation Human Engineers MIS Support
Departments Resource Staff
1 Director of regional HR director Lead Manager of Security
operations (this is you) engineer information guard
systems
2 Assistant to the Administrative Engineer Senior Front desk
director of assistant in HR information receptionist
operations systems
analyst
3 Operations analyst Benefits Engineering Informatio
manager associate for n systems
special analyst
projects
4 Operations trainee Benefits
counsellor
5 Payroll
assistant
You can see from the list that there are several job families, including operations, HR,
engineering, information systems and office support. You can now begin the process of
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designing a pay structure for the organization. Follow the steps as discussed above.
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Rubrics for Group Project
SEQUENCE DESCRIPTION
Job Analysis (4 marks) - Identification of the need for job analysis.
- Selection of critical jobs for analysis.
- Comprehensive data collection through interviews, surveys, and
observations.
- Development of detailed job descriptions.
- Selection of an appropriate job evaluation method (point, ranking, or
Job Evaluation (4 marks) classification).
- Accurate assignment of job values using the chosen method.
- Establishment of a hierarchical ranking reflecting organizational job
hierarchy.
- Verification of internal alignment with organizational goals.
Pay Policy Identification (3 - Clear determination of the organization's pay strategy (lead, lag,
marks) meet the market).
- Customization of pay policies for different job families or levels.
- Consideration of the impact on employee attraction and retention.
Pay Survey Analysis (4
marks) - Conducting market pay surveys for relevant labor market data.
- Thorough analysis of external pay data, including base pay, bonuses,
and benefits.
- Use of survey data to evaluate and potentially adjust the
organization's pay structures.
- Demonstrated awareness of market trends and competitiveness.
Pay Structure Creation (5 - Integration of internal job evaluation data with external market pay
marks) rates.
- Appropriate adjustment of the market pay line based on the
organization's pay strategy.
- Development of clear pay grades and ranges within the structure.
- Final review and approval of the pay structure, ensuring alignment
and equity.
Total Marks: 20
