Day: December 7, 2016

#HR Word : #Comparable Worth

Comparable Worth

A wage system based on the idea of comparable worth ensures that wages are determined based on the ‘worth’ of jobs and the tasks they entail (which in turn would be determined by parameters such as the level of skill required), rather than market forces

The idea suggests that that the traditional theory of supply and demand is Not applicable in the case of female-dominated occupations being compared with male-dominated occupations as the pay differences are significantly due to discrimination against women, i.e. the phenomenon of female-dominated occupations being undervalued as compared to male-dominated occupations.

The ‘worth’ is the value provided by the job to the organization. Proponents point out that such a system would increase wages in female-dominated professions and reduce the pay gap between men and women, while critics say it would decrease job availability for women and also hinder economic progress.

For the idea to be put into practice, it is necessary that the two jobs being considered be comparable (i.e. minimum differences in effort, responsibility, skill and working conditions). 

Proponents agree that companies are entitled to their own unique value system, but argue that it should not systematically discriminate against women by citing irrelevant factors. 

Critics of comparable worth legislation point out that it would put constraints on employers’ ability to respond to labour market changes (e.g. in terms of adjusting pay levels). They also point out that the pay gap can be reduced by getting more women to join high-demand male dominated jobs such as those in science and engineering and that artificial measures to raise wages in female dominated occupations would raise costs of doing business and might encourage outsourcing or replacement by technology. They opine that comparable worth measures are opposed to market forces and point out that it stands to greatly influence employers’ ability to attract, motivate and reward.

#HR Word : Compa-#Ratio

Definition: Compa-ratio

A compa-ratio of ‘100 %’ would mean that the employee’s current salary for a job position and the range mid-point for a comparable position are equal.

 

Compa-ratio= (Employee’ s current salary )/(Range mid-point) X 100 %

 

Explanation

Compa-ratio is used by the employer to benchmark the salary being paid to the employee with that of the market. The ratio is determined on the basis of the strategy of the organization and the budget allocated for the workforce.

A salary range – minimum and maximum – is defined and the range mid-point is found. This procedure is followed for each grade level. This helps achieve internal equity. A Market Reference Point can be used instead of a range mid-point to achieve external equity. An employee’s work experience, performance, and skills would indicate the compa-ratio at which the salary is to be fixed.

Example

Current salary

$45,000

Salary range maximum

$60,000

Salary range minimum

$40,000

Salary range mid-point

$50,000

Compa-ratio = ($45,000/$50,000) X 100 %

90%