HRM textbook

372 PART 4 COMPENSATION
FIGURE 11-10
Wage Structure
$10.00
$9.50
Wage curve (or line)
$9.00
$8.50
$8.00
Maximum rate
Wage rates, dollars
$7.50
$7.00
$6.50
Rate
range
$6.00
Minimum rate
$5.50
$5.00
$4.50
I II III IV V VI
$4.00
0 50 100 150 200 250 300
Jobs grades and evaluated points
pay rates for each step within each grade in tabular form. Thus Table 11-5 shows the
pay rates and steps for some federal government grades. As of the time of this pay
schedule, for instance, employees in positions classified in grade GS-10 could be paid
annual salaries between $45,771 and $59,505, depending on the level or step at
which they were hired into the grade, the amount of time they were in the grade, and
any merit increases they ve received.
DEVELOPING RATE RANGES The wage curve usually anchors the average pay
rate for each vertical pay range. The firm might then arbitrarily decide on a maximum
and minimum rate for each grade, such as 15% above and below the wage curve.
As an alternative, some employers allow the pay range for each grade to become
wider (they include more pay rates) for the higher pay ranges, reflecting the
greater demands and performance variability inherent in more complex jobs. As in
Figure 11-10, most employers structure their rate ranges to overlap a bit, so an
employee in one grade who has more experience or seniority may earn more than
would someone in an entry-level position in the next higher pay grade. 63
There are several reasons to use pay ranges for each pay grade. First, it lets the
employer take a more flexible stance in the labor market. For example, it makes
it easier to attract experienced, higher-paid employees into a pay grade at the top of
the range, since the starting salary for the pay grade s lowest step may be too
low to attract them. Pay ranges also let companies provide for performance differences
between employees within the same grade or between those with different
seniorities.
Compensation experts sometimes use compa ratios. The compa ratio equals an
employee s pay rate divided by the pay range midpoint for his or her pay grade.
A compa ratio of 1 means the employee is being paid exactly at the pay range
midpoint. If the compa ratio is above 1 then the person s pay rate exceeds
the midpoint pay for the job. If it is below then the pay rate is less than the midpoint.