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External Equity
Pay Structures
Prepared By
Kindly restrict the use of slides for personal purpose.
Please seek permission to reproduce the same in public...
External Equity
• “External equity exists when
employees in an
organization perceive that
they are being rewarded
fairly i...
External Equity
• External equity exists when
an organization's pay rates
are at least equal to the
average rates in the
o...
External Equity
• Employers want to ensure
that they are able to pay
what is necessary to find,
keep and motivate an
adequ...
External Equity
• Employees also compare
their roles and pay to roles
and pay in other
organizations. Unfortunately
they d...
External Equity
• Generally, employees
consider much more than
base pay in determining
external equity. For some
more emph...
External Equity
• The use of salary surveys is
critical in your ability to
determine if your
compensation and benefits
are...
External Equity
• It is important to ensure that
the key responsibilities and
goals of the roles being
compared are simila...
External Equity
Example
• A number of nonprofit
organizations have tried to
address quality of life
concerns by only requiring
full-time e...
Example
• It is important that if the
base pay for a specific role
from group one was to be
compared to the same role
in g...
Example
• While the difference in hours
may seem small, if a person
who worked a 37.5 hour week
made $40,000/year, they
wo...
External equity -  pay structures - Manu Melwin Joy
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External equity - pay structures - Manu Melwin Joy

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External equity - pay structures - Manu Melwin Joy

  1. 1. External Equity Pay Structures
  2. 2. Prepared By Kindly restrict the use of slides for personal purpose. Please seek permission to reproduce the same in public forms and presentations. Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. Phone – 9744551114 Mail – manu_melwinjoy@yahoo.com
  3. 3. External Equity • “External equity exists when employees in an organization perceive that they are being rewarded fairly in relation to those who perform similar jobs in other organizations”.
  4. 4. External Equity • External equity exists when an organization's pay rates are at least equal to the average rates in the organization’s market or sector.
  5. 5. External Equity • Employers want to ensure that they are able to pay what is necessary to find, keep and motivate an adequate number of qualified employees. Creating a compensation structure that starts with competitive base pay is critical.
  6. 6. External Equity • Employees also compare their roles and pay to roles and pay in other organizations. Unfortunately they do not always compare with similar types of organizations or even in the same sector.
  7. 7. External Equity • Generally, employees consider much more than base pay in determining external equity. For some more emphasis may be placed on employee benefits, job security, physical work environment or the opportunity for advancement in deciding if external equity exists.
  8. 8. External Equity • The use of salary surveys is critical in your ability to determine if your compensation and benefits are comparable to similar roles in other organizations.
  9. 9. External Equity • It is important to ensure that the key responsibilities and goals of the roles being compared are similar; as is the sector the organization is aligned with.
  10. 10. External Equity
  11. 11. Example • A number of nonprofit organizations have tried to address quality of life concerns by only requiring full-time employees to work a 35-hour week, while many other organizations require their employees to work 37.5 or even 40 hours per week.
  12. 12. Example • It is important that if the base pay for a specific role from group one was to be compared to the same role in group two, that the difference in hours is understood and accounted for.
  13. 13. Example • While the difference in hours may seem small, if a person who worked a 37.5 hour week made $40,000/year, they would be making $20.51/hour. If the person working the 35- hour week were also being paid $20.51/hour, their annual salary would only be $37,328 per year. This could seem inequitable unless the difference in hours was clear.

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