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Applying this formula in calculations similar to those in Table 3 gives:

Table 4

Job Job Points Current Salary Compa-ratio(%) Proposed Salary:
(Job Points x $164.45c
plus $11,954)
x Compa-ratio
Salary
Increase/Decrease
(Proposed minus Current)
A 1,200 170,000 98 205,108 35,108
B 900 150,000 111 177,554 27,564
C 750 100,000 87 117,704 17,704
D 500 85,000 103 97,004 12,004
E 300 60,000 107 65,579 5,579
F 200 40,000 93 41,705 1,705
Totals   605,000   704,654 99,654

This objective will require an increase in total payroll of 16.5%. Budgetary constrains may prevent the organisation from achieving this high objective.

Another scenario to consider is where the organisation has a predetermined budget allocation. The budget may or may not be sufficient to achieve the desired market position. For example suppose that our sample organisation has a preset budget of 5% of the present payroll to allocate. Five percent of the payroll is $30,250 ($605,000 X 0.05). This not enough to reach the median of the market (that requires $39,287, per Table 3). In this case, various policy positions, somewhere between the company's current practice position and the market median will need to be tested until a position is reached that absorbs the allocated budget increase.

5.2 Aligning policy incorporating a performance-based salary review.

Utilisation of this methodology requires that some quantifiable measure of performance in the job be used to determine an individual's level of pay.

A brief review of a quantifiable performance appraisal system is as follows:

A quantifiable performance appraisal system links a person's performance to a position in the salary range for their job. This then determines their pay.

This requires that:

  • A salary range exists for the job.
  • Movement through the salary range is performance based.
  • A system for measuring the performance exists.
  • The performance measurement system is quantitative.
  • The outcome of the performance measurement determines the position in the salary range.

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