QuestionQuestion

1. A company’s pay-grade for a Systems Analyst has a minimum of $78,000 and a maximum of $105,000. John works as a systems analyst and is paid a salary of $98,000.
He received a job offer from a competitor which pays $115,000.
a. What is the scale midpoint for the above paygrade? What is the range? What is the compa ratio for the employee?
b. Considering the counter-offer received by John, what should the company do now to retain him? What effects, if any, it will have on the pay structure of the company?
Should the company expand the pay-grade or deal with John’s issue in other ways?
What other ways would you suggest?
2. As the Compensation Manager for a company, you are evaluating the company’s pay raise policies. You have gathered the following data about the consumer price index (CPI) for your metropolitan area:
Base Year: 1984 = 100.00
2014 = 138.70
2015 = 141.20
The average clerical wages in your company (that is, the average salary of all the clerical employees working in your firm in that particular metropolitan location) are as follows:
1984 = $18,000,
2014 = $25,000
2015= $26,200.
Many of your employees have complained that the wages have not increased in real terms and they are worse off than they were before. Has real wages increased or decreased?
What rationale would you advocate to the employees? Based on the CPI trends, if you have to make adjustments to the wages, how much increase (or decrease) would you recommend?
3. Based on the salary data given in question 2 above, how much will be the contribution of this company to Social Security (employer contribution only), Medicare, and unemployment insurance? Show your calculations.
4. Assume that you are the Chairman of the Board of Director for a company. You have to hire a new CEO for your company that manufactures domestic appliances such as washers, dryers, microwave ovens, cooking ranges, and refrigerators. You need to decide on the pay package for the CEOs. Your company has had some problems in retaining CEOs and many top managers as competitors have been grabbing your key executives. Discuss how you would go about deciding on the compensation package for the CEO. That is, what approach would you take to decide on the base salary, pay policy for the CEO, mix of various incentives, etc.

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Question 1
Midpoint
Scale midpoint = (Minimum + Maximum) / 2
Scale midpoint = ($78,000 + $105,000) / 2
Scale midpoint = $91,500
Range
Range = (Maximum - Minimum)
Range = $105,000 - $78,000
Range = $27,000
Compa ratio
Compa ratio = (Annual pay / Scale midpoint) x 100%
Compa ratio = ($98,000 / $91,500) x 100%
Compa ratio = 107.10%

The company should offer John a pay raise and combine it with financial rewards such as stock options. Since the company’s maximum pay for the position is $105,000, it should pay him the maximum, and give him stock options for $10,000 to match the competitor. This will not have any effect on the company’s pay-grade....

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