Before an organization begins the process of collecting labor market data, it must first define its relevant labor market. This may include similar organizations in the same labor market, all employers in the local market, similar organizations in the regional or national market, and/or all employers in the regional or national market. The goal of labor market data collection is to find data from employers with whom the organization competes for employees. For clerical employees, this may be all employers in the local labor market. For high-level management positions or certain specialized positions, this may be all employers in the national market. Once the data has been collected, it must be analyzed. The simplest analysis involves comparing the going market rate and approximating this rate within the organization’s own pay structure. Other methods involve using advanced statistics to study relationships among certain items in a specific job or market group. An organization may find pay range information, as well as weighted average of actual pay, very helpful (Kleiman, 2000).
Kudler’s compensation and pay grade are based on the responsibilities and requirements for each job position. Key position and hard-to-recruit positions may receive higher compensations than other employees. Overall, the compensation system is based on a merit-pay system where employees who receive exceptional performance review ratings are eligible for higher increases in pay than those who are rated as satisfactory. Employees who received an unsatisfactory performance review will not be eligible for compensation (University of Phoenix, 2004).
Jaggi (1979) explained in his article that, there is evidence that team performance is a function of not only environmental conditions, but also internal conditions, such as communication, structure, and processing procedures. Kudler recognized this condition and created a compensation program that recognizes team and overall store performance efforts. In this program, all store employees equally share incentives earned by the store for up to 20% of the after tax store profits. This according to Jaggi (1979), increases the frequency of desired behavior, a proper coordination and degree of reinforcement that is highly desirable by the organization. In additional, other positive reinforcements like health and dental insurance, life insurance, 401K plan, vacations and paid holidays are also available and are likely to be more appropriate for increasing positive growth and motivation.
Job Classifications and Market Rates
The Store Manager manages daily operations of a retail store engaged in selling specific lines of merchandise, such as groceries, meat, liquor, apparel, jewelry, or furniture; related lines of merchandise, such as radios, televisions, and household appliances; or general lines of merchandise. Store Managers formulate pricing policies to ensure profitability of store operations, coordinates sales promotion activities and prepares or supervises preparation of merchandise displays and advertising copy, performs and/or supervises employees engaged in taking of and controlling inventories, reconciling cash with sales receipts, keeping operating records, or preparing daily records of transactions, plans and prepares work schedules and assigns employees to specific duties. A combination of over two years of directly related training and/or experience is typically required for carrying out the responsibilities for this job. Store Managers may also order merchandise or prepare requisitions to replenish inventory on hand, ensure compliance of employees with established security, sales, and record keeping procedures and practices, and is typically accountable for controllable expenses, cash management, merchandising, and loss prevention and may hire and train store personnel and maintain employee relations.
The Store Manager working in Los Angeles-Long Beach-Glendale, CA, California now earns an average annual salary of 63,719. Half of those in this position would earn between 38,741 and 73,920 (the 17th and 67th percentiles). These numbers are derived from area-specific government survey data. When benefits and bonuses are added to this salary, the average total compensation for this position would be 77,111. The cost of living in this location affects the actual value of this salary. (SalarySurvey.com)
The cashier compiles collection, disbursement, and bank-reconciliation reports. Receives funds from customers and employees, disburses funds, and records monetary transactions. Receives cash or checks or completes credit-card charge transactions. Counts money to verify amounts and issues receipts for funds received. Job know-how usually involves six to twelve months of directly related study, training, and/or experience. Work is distinguished from lower level cashiers as it involves not only cashiering responsibilities of non-routine receipt, disbursement, recording of funds, but also aspects of accounting. Balances cash drawer and receipts at end of shift. Issues change and cashes checks. Compares totals on cash register with amount of currency in register to verify balances. Endorses checks and lists and totals cash and checks for bank deposit. Prepares bank deposit slips. Withdraws cash from bank accounts and keeps custody of cash fund. Disburses money in payment of wages, materials, taxes, plant maintenance, and other company expenses. Posts data and balances accounts. Operates various office machines. May authorize various plant expenditures and purchases. May prepare payroll and paychecks. May issue itemized statement to customer. May handle returns.
The Cashier working in Los Angeles-Long Beach-Glendale, CA, California now earns an average annual salary of 26,358. Half of those in this position would earn between 21,162 and 34,225 (the 17th and 67th percentiles). These numbers are derived from area-specific government survey data. When benefits and bonuses are added to this salary, the average total compensation for this position would be 30,769. See the graph and table below to learn how the cost of living in this location affects the actual value of this salary. (SalarySurvey.com)
The stock person helps to unload delivery vehicles and keeps stock rotated, keeping products available on the shelves and prices displayed for easy viewing.The Stock Person working in Los Angeles-Long Beach-Glendale, CA, California now earns an average annual salary of 18,252. Half of those in this position would earn between 12,890 and 23,496 (the 17th and 67th percentiles). When benefits and bonuses are added to this salary, the average total compensation for this position would be 22,206. See the graph and table below to learn how the cost of living in this location affects the actual value of this salary. (SalarySurvey.com)
Specialty Department Worker / Retail Clerk
The Retail Clerk operates cash register, scanners, and computers to itemize and total customer’s purchases in grocery, gasoline service stations, department, or other retail establishments. Enters charges for all items, subtracts value of discounts, coupons, or returns, totals bill, accepts payment of cash, personal check, charge and debit card. Job know-how typically involves one to three months of directly-related study, training, and/or experience. Additional duties can include reviewing price sheets to note price changes and sale items. checking identification when required by transaction, recording prices and departments, subtotals taxable items, and totals purchases on cash register, collecting cash, check, or charge payment from customer and makes change for cash transactions, counting money in cash drawer at beginning and end of work shift, recording daily transaction amounts from cash register to balance cash drawer, weighing items, wrap and bag merchandise, issue trading stamps, and redeem food stamps and promotional coupons, cashing checks and may use electronic scanner to record price.
The Retail Clerk working in Los Angeles-Long Beach-Glendale, CA, California now earns an average annual salary of 14,976. Half of those in this position would earn between 12,518 and 19,938 (the 17th and 67th percentiles). These numbers are derived from area-specific government survey data. When benefits and bonuses are added to this salary, the average total compensation for this position would be 17,312. The cost of living in this location affects the actual value of this salary. (SalarySurvey.com)
The Department Manager supervises and coordinates activities of workers in department of retail store and interviews job applicants and evaluates worker performance to recommend personnel actions such as hiring, retention, promotion, transfer or dismissal of workers, assigns duties to workers and schedules break periods, work hours, and vacations, trains workers in store policies, department procedures, and job duties, orders merchandise, supplies, and equipment, records delivery of merchandise, compares record with merchandise ordered, and reports discrepancies to control costs and maintain correct inventory levels, inspects merchandise to ensure it is correctly priced and displayed, recommends additions to or deletions of merchandise to be sold in department, prepares sales and inventory reports, listens to customer complaints, examines returned merchandise, and resolves problems to restore and promote good public relations, may assist sales workers in completing difficult sales, may sell merchandise, may approve checks written for payment of merchandise purchased in department, may install and remove department cash-register-receipt tape and audit cash receipts, may perform customer service activities and be designated customer service manager, may plan department layout or merchandise or advertising display displayer, merchandise, may be designated according to department managed or type of merchandise sold as candy-department manager; toy-department manager; produce-department manager.
The Department Manager working in Los Angeles-Long Beach-Glendale, CA, California now earns an average annual salary of 53,910. Half of those in this position would earn between 38,147 and 77,555 (the 17th and 67th percentiles). When benefits and bonuses are added to this salary, the average total compensation for this position would be 67,204. The cost of living in this location affects the actual value of this salary. (SalarySurvey.com)
The Retail Bagger bags groceries at grocery store, packs grocery items in sacks or cartons, arranging heavy and bulky items at bottom of sack or carton, verifies price of grocery item in question against price of items on stock shelf, upon request, carries packed sacks, or places sacks in grocery cart, and pushes cart to customer’s vehicle, upon request, places groceries into customer’s vehicle, collects shopping carts from parking lot and surrounding areas and returns carts to store, replaces cleaning and packing supplies used at grocery checkout counter. Returns grocery items left at checkout counter to specified stock shelves, cleans work area and carries empty bottles and trash to storeroom. May price and place grocery articles on shelves. May assist in unloading delivery trucks.
The Retail Bagger working in Los Angeles-Long Beach-Glendale, CA, California now earns an average annual salary of 16,796. Half of those in this position would earn between 13,197 and 22,096 (the 17th and 67th percentiles). These numbers are derived from area-specific government survey data. When benefits and bonuses are added to this salary, the average total compensation for this position would be 20,750. the cost of living in this location affects the actual value of this salary. (SalarySurvey.com)
The Market Approach of Competitors in Compensation Planning
Establishment of Pay Ranges and/or Rates – In order to actually establish a pay structure, an organization needs to set rates of pay for the jobs in the job hierarchy. Before doing this, an organization needs to ask, and answer, the following questions:
– How should the organization’s pay level relate to the external market? Should the organization be a pay leader, match the market or pay less than market?
– What is the organization willing to pay for: job content, seniority, performance, skills, cost of labor, or some combination of all of these?
– How does the organization pay its employees: based on a single rate structure (all employees in the same job receive the same pay), based on seniority, based on merit, based on productivity (piece work), based on new skills (skill-based pay), or based on some combination of these factors? Are short term or long term incentives provided?
– What steps does the organization need to take to ensure that pay is administered in a manner free of bias and discrimination?
If an organization decides to use pay ranges (or grades), it will have to determine how many ranges to have. This will depend on the number of different levels of relative job value that are recognized by the organization and the difference in pay between the highest and lowest paid jobs in the pay structure. The focal point of a pay range is the mid-point as this is generally the “going” rate for jobs assigned to that range. From the mid-point, an organization can determine the range minimum and maximum. The range minimum is the usually the lowest pay rate for any job in that range and is usually the pay rate given to people hired in that range who meet minimal qualifications only. Occasionally an organization will pay a “training” rate that is below that minimum. The maximum of a range is the highest rate an employer is willing to pay for jobs in that pay range. Other important range issues include the range width and the degree of overlap between ranges.
The end result of all of the above is a pay structure that should accomplish the organization’s objectives with regards to a pay program, and should reflect the organization’s philosophy on how it wishes to relate its pay program to the market. Also, this pay structure should demonstrate the internal job values of positions, and how the organization wishes to mix base pay, benefits and incentives.
Evaluation of Internal Competitiveness
Internal equity deals with the perceived worth of a job relative to other jobs in the organization. All employees compare their jobs to other jobs within the organization. Generally, they consider skill, effort, responsibility and working conditions in this comparison in order to determine the value of their jobs relative to other jobs. Likewise, management must often determine the “worth” or “value” of one job in relation other jobs for the purpose of pay programs. Maintaining appropriate pay relative to value or worth is achieving internal equity.
To achieve internal consistency, a firm’s employees must believe that all jobs are paid what they are “worth.” In other words, they must be confident that company pay rates reflect the overall importance of each person’s job to the success of the organization. Because some jobs afford a greater opportunity than others to contribute, those holding such jobs should receive greater pay. For pay rates to be internally consistent, an organization first must determine the overall importance or worth of each job. A job’s worth typically is assessed through a systematic process known as job evaluation. In general, the evaluation is based on “informed judgments” regarding such things as the amount of skill and effort required to perform the job, the difficulty of the job, and the amount of responsibility assumed by the jobholder.
Evaluation of External Competitiveness
External equity deals with the issue of market rates for jobs. An employer’s goal should be to pay what is necessary to attract, retain and motivate a sufficient number of qualified employees. This requires a base pay program that pays competitively. Among others, internal data such as turnover rates and exit interviews can be helpful in determining the competitiveness of pay rates.
Employees also compare their jobs and pay to the jobs and pay in other organizations. Generally, employees consider much more than base pay in determining external equity. Depending on the individual employee, serious consideration may be given to employee benefits, job security, physical work environment, commuting distance, opportunity for advancement and the employee relations practices of the employer in determining external equity issues. In the Pacific Northwest, a frequent consideration is also lifestyle and quality of life.
An important issue to employees in determining external equity is the transferability of their skills. If an employee’s skills are valued more highly in a different type of job or industry in the area, the employee may believe that he or she is not being treated fairly.
A firm achieves external competitiveness when employees perceive that their pay is fair in relation to what their counterparts in other organizations earn. To become externally competitive, organizations must first learn what other employers are paying and then make a decision regarding just how competitive they want to be. They then establish pay rates consistent with this decision. Following is an examination of how these steps are carried out.
The firm begins by conducting or acquiring a salary survey. This survey provides information on pay rates offered by a firm’s competitors for certain benchmark jobs (i.e., jobs that are performed in a similar manner in all companies and can thus serve as a basis for making meaningful comparisons). Some firms gather this information from existing surveys already conducted by others, such as those produced by the Bureau of Labor Statistics. Trade associations also conduct surveys routinely for their members, or companies may hire consulting firms to gather such information. Salary surveys conducted by others should be used when they contain all the information needed by the company in question. When no such surveys exist, companies generally conduct their own (Milkovich, 2004).
After the pay practices of other companies have been identified, the organization must determine how competitive it wants to be (or can afford to be). Specifically, it must set a pay policy stipulating how well it will pay its employees relative to the market (i.e., what competitors pay for similar jobs). The determination of a pay policy is a crucial step in the design of a pay system. If pay rates are set too low, the organization is likely to experience recruitment and turnover problems. If set too high, however, the organization is likely to experience budget problems that ultimately may lead to higher prices, pay freezes, and layoffs (Gomez, 2008).
The majority of firms pay at the market rate, which is the rate offered by most of the competitors for labor. Those paying above market are referred to as “market leaders.” These typically are companies with the ability to pay and the desire to attract and retain top-notch employees (e.g., “cream of the crop”). Those paying below market (“market laggards”) generally do so because they are unable to pay higher salaries. Such companies often attempt to attract employees by linking pay to productivity or profits so that the employees can earn more if the company does well.
When setting its pay policy, a company must consider its strategic plan. For example, if long-term employee commitment is a strategic goal, then the organization should attempt to develop compensation strategies that will enhance retention, such as establishing a generous retirement plan for long-service employees or adopting a profit-sharing system tied to tenure.
Once market rates for jobs are determined and a pay policy is established, an organization must price each of its jobs. Since market rates identified by a salary survey usually are restricted to benchmark jobs, how do organizations determine these rates for their non-benchmark jobs? Using the data collected on the benchmark jobs, an organization would determine the statistical relationship (i.e., simple linear regression) between job evaluation points and prevailing market rates. This regression line is referred to as the pay policy line. The appropriate pay rates for non-benchmark jobs are set based on this line.
Periodic Review of the Compensation System
To keep the organization’s pay policy up to date, it should be reviewed at least annually. During your annual review, the organization needs to ask itself it the pay policy is still in align with the organization strategic plan. That’s the most important question. Is the organization getting the kind of employees it wants or is it just making do? What’s the turnover rate? Do employees seem to care about the business?
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Gomez-Mejia, L. Balkin, D (2008) McGraw-Hill Companies. UOP e-resources https://ecampus.phoenix.edu/content/eBookLibrary/content/eReader.h
Kleiman, Lawrence S. Human Resource Management: A Tool for Competitive Advantage. Cincinnati, OH: South-Western College Publishing, 2000.
Milkovich, G., & Newman, J. (2004) Compensation, 8e. New York. The McGraw-Hill Companies.
Mann, A. Gregory, (2006). A Motive to Serve: Public Service Motivation in Human Resources Management and the Role of PSM in the Nonprofit Sector. Public Personnel Management, Vol. 35 Issue 1, p33-48. Retrieved from EBSCO Host database on April 23, 2008
Milkovich, G., & Newman, J. (2004) Compensation, 8e. New York. The McGraw-Hill Companies.
University of Phoenix (2004). Virtual Organizations, Kudler Fine Foods Intranet and Internet. Retrieved April 23, 2008, from https://ecampus.phoenix.edu