Salary matrix is essential in compensation management, Lecture notes of Compensation and Reward Management

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Compensation Management

Preparing Salary Matrix

• Salary Matrix is a chart that can be used to determine the annual salary award & rate of salary progression of an individual Employee.
• A Salary Matrix allows 2 variables to be taken into account in deciding the level of award – - The individual’s performance rating & - The position already attained within the salary range.
• Ex: An individual with a Fully acceptable performance rating could receive a 5% increase when at the Bottom of the range, a 3% increase at the mid-point & 1% above the mid point.

Steps in preparing a Salary

Matrix

 Develop a matrix that lists each grade, the positions included

in each grade & the no. of levels considered appropriate for each grade.

 Then determine salary ranges for each level.

 Each year, salary schedule should be reviewed to see whether

it needs adjustment.

Importance

• A salary matrix can provide a relevant structure by which to

assist a human resource department in establishing appropriate pay for both new hires & tenured employees.

• The employees will know how their pay fits into the schedule

as well as their opportunities for future pay hikes.

• The staff will also see that the manager’s approach to setting

salaries is unbiased.

• A salary schedule provides essential structure for practices that

plan to expand or merge

Davis- Bacon act.

• The act was passed in 1931.
• It requires contractors & sub- contractors with contracts in excess of $2000 with the federal government to pay their workers a minimum wage that at least equal to the local prevailing wages & to provide them with the local prevailing benefits

Walsh- Healey Public Contracts act

• The act was passed in 1936.
• It applies to contracts over $10000 who are involved in either manufacturing or providing goods & services to the U.S government.
• The firms must pay their workers the federal minimum wage for the first 40 hours they work in a particular week & 1.5 times the minimum wage for any additional hours they work during the week.

FLSA

The objectives of this act involves:

• Minimum Wage.
• Child Labor
• Exempt & Non- Exempt status.
• Overtime
• Compensatory Time – off
• Independent Contractor regulations.
• Equal pay & pay Equity,

• Industrial Wage Boards.
• Wage boards are of 2 types

a. Statutory Wage Board : It means a body set up by law or with legal authority to establish minimum wages & other standards of employment which are then legally enforceable in particular trade or industry to which board’s decision relate b. Tripartite wage Board : It means a voluntary negotiating body set up by discussion between organized employers, workers & government to regulate wages, working hours & related conditions of employment.

Wage board decisions are not final & are subjected to

either executive or judicious review.

• Pay commissions :
• 1st: 1946- Conditions of service of central govt

employees

• 2 nd:1957-norms for fixing a need based minimum

wage setup.

• 3 rd:1973- System in which pay adjustments will

occur automatically upon an upward movement

in CPI.

• 4 th: 1986-Examine structure of all central govt

employees, including those in union territories.

• 5 th: 1996-Recommendations regarding restricting

of pay scales.

• 6 th:

Significant Compensation Issues

• Issue of Equal pay for Comparable worth
• Problem of measuring comparability.
• Issue of low salary budgets.
• Issue of Wage- Rate Compression

Compensation as Retention

Strategy

• Salary & Monthly Wage.
• Bonus.
• Economic Benefits.
• Long – term Incentives
• Health Insurance.
• After Retirement.