pay structure

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The wage or pay structure is the hierarchy of rates of pay which exists within an employing organization. Economists also sometimes use the term to refer to the structure of pay within an industrial sector or national economy. Within companies, pay structure has two main components. Pay groups are broad groupings of employees who have their pay managed in accordance with a common set of rules. A large manufacturing company, for instance, might have several pay groups including a senior management group, middle management, supervisory and technical, skilled workers, semi-skilled and un-skilled operatives, and clerical and secretarial. Pay grades, in contrast, are divisions in pay within a pay group, such that managers with higher levels of responsibility are graded above and paid more than managers with lower levels of responsibility. Pay structures can be configured along two dimensions. First, they can be integrated, so that effectively there is a single pay group and a single hierarchy of pay grades, or they can be fragmented, with a number of pay groups, each with its own set of grades. In recent years, there has been a trend to rationalize pay structures and move to greater integration, particularly by merging manual and non-manual pay groups through single-status agreements. A counter-trend seen in some organizations, however, has been to divide the pay structure between different job families, so that there is a distinct set of pay grades for the accountancy and finance function, for operations management, for information technology, and so on. Second, pay structures can be taller or flatter. Where the former obtains, there will be a large number of pay grades within a particular pay group, whilst a flat structure will consist of a small number of grades. The dominant trend at present appears to be towards the flattening of pay structures as companies de-layer and introduce more flexible forms of organization. The main technique that managers rely upon in generating a graded pay structure is job evaluation, which can be used to assess the relative demands of different jobs and thus sort them into grades. [See broad-banding and differential.]

Subjects: Human Resource Management.

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