Building Internally Consistent Compensation System by Dr. G C Mohanta

Building Internally Consistent Compensation System

Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)

Professor Al-Qurmoshi Institute of Business

Management Hyderabad

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Components of Compensation System

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Types of EquityInternal Equity - Fairness of the

pay structure, relationship among jobs within a single organization

External Equity - Comparisons of similar jobs in different organizations

Individual Equity - Comparisons among individuals in the same job within the same organization

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Equity Theory

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Creating Internal Equity through Job Analysis and

Job Evaluation

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Internal Equity in PracticeJob analysis

Collecting data about jobsJob evaluation

Valuing jobs

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Job Analysis The systematic, formal study of the duties

and responsibilities that comprise the job The process seeks to obtain important and

relevant information about the nature and level of the work performed

It Can be used to identify/determine: • Skill levels • Compensable job factors • Work environment (e.g., hazards; attention;

physical effort) • Responsibilities (e.g., fiscal; supervisory) • Required level of education

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Types of Data Collected Through Job Analysis

Work Activities – work activities and processes; activity records; procedures used; personal responsibility

Worker-oriented activities – human behaviours, such as, physical actions and communications on the job; elemental motions for methods analysis; personal job demands, such as, energy expenditure


Types of Data Collected Through Job Analysis (Contd.)

Machines, tools, equipment, and work aids used

Job-related tangibles & intangibles – knowledge dealt with or applied; materials processed; products made or services performed


Types of Data Collected Through Job Analysis (Contd.)

Work performance – error analysis; work standards; work measurements, such as, time taken for a task

Job context – work schedule; financial and nonfinancial incentives; physical working conditions; organizational and social contexts

Personal requirements for the job – personal attributes, such as, personality and interests; education and training required; work experience


Job Analysis Result• Job Description

– Job based– Tasks– Work performed

• Job Specification– Employee based– Knowledge, skills & abilities– Experience

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Job DescriptionOutput from job analysis used to develop job

description and job specification It defines the responsibilities, requirements,

functions, duties, location, environment, conditions and other aspects of jobs

It may be developed for jobs individually or for the entire job families

It describes and focuses on job itself and not on any specific individual who might do the job


Job Specification

It defines worker characteristics (i.e., knowledge, skills and abilities) required to perform the job competently


Job Evaluation

Methods and practices for ordering jobs or positions with respect to their value or worth to the organization

A system for comparing jobs for purpose of determining appropriate compensation levels for individual jobs or job elements

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