Job evaluation systems and pay grade structures: do they match?

Job evaluation is usually applied in an organization in order to assess the relative value of jobs on the basis of which jobs are assigned to classes of pay grades. Thus, the assumption is that job value scores match with pay grade structures, and allow adequate predictions of basic job wages or salaries in practice. The validity of this assumption is questioned in this article. Data of five job evaluation systems (number of jobs: 16,809) were used to assess the effects of three system manipulations, concerning the number of anchors per scale (characteristic), the nature and the number of scales, and the weights of scales. Total job value scores of the manipulated data and the associated pay grades were compared with the non-manipulated ('original') scores. It turned out that even when two sets of job value scores are highly correlated (around 0.99), pay grade classification agreement was always less than 90 per cent, and in many instances much less. This result has important implications for the use of job evaluation in practice: when a fine grained system of pay grades applies, total job value scores may be deficient. Implications for a better match between total job worth values and pay grade classes are discussed.     

Public-sector pay in China: 1949–2001

Despite the quantitative and qualitative significance of the public sector in China, insufficient studies have been carried out to advance our knowledge of its pay policy and practice and any changes that may have taken place in the wake of the market economy. This paper provides an overview of the three major reforms in China's public-sector pay in the last five decades and assesses its likely impact on public-sector employees' income in relation to that of workers in enterprises. It focuses on the role of the state in the pay determination process, factors influencing the wage distribution, changes in pay structure and grading systems and causes for earning differentials. It reveals a very different approach to pay determination from those more familiarly seen in the UK and indeed Europe and the US. The exploration of the conflicts and tensions characteristic of the public-sector pay system in China will enhance our understanding of the pressures and dilemmas facing different governments.     

Attitudes to pay systems:an exploratory study within and across cultures

The present study investigates employees’preferences for criteria that are used in pay systems, namely, performance, cost of living, tenure, educational qualification, collective bargaining, skill, market rate, responsibility and special demands. The study also explored variation and similarities of employees’preferences for the criteria across four countries, namely Australia (N = 162), Indonesia (N = 100), Malaysia (N = 129) and Hong Kong (N = 39). The results indicate that the respondents prefer multiple criteria to determine their pay. Preferences for length of service and educational attainment were found to be significantly different across countries, particularly between Australian and Asian samples (Indonesian and Malaysia). This variation is, in part, attributed to cultural differences. Other variables, such as age, educational qualification, position, and industry sector, have been found to be significant correlates of preference for pay systems. Implications for reward management have been discussed.     

LOCAL PAY DETERMINATION

Abstract. Theoretical models of local pay are reviewed, ranging from neoclassical perspectives, unemployment/wage trade-off models, and segmented labour market approaches. The empirical work on U.S. North-South differentials is discussed. For the U.K., studies of the extent of and trends in geographical pay differentials are considered, as well as behavioural explanations focusing on the role of excess demand. The issue of adjustment processes is then discussed, both in theory and in relation to empirical work for the U.S. and U.K. This discussion focuses largely on geographical spillover effects, in terms of origins, evidence, and issues of identification. Finally, the impact of certain impediments in the adjustment process are considered, specifically in relation to the U.K. These concern the role and influence of national wage bargaining, as well as factors inhibiting labour migration, stemming from the housing market and the climate of the national labour market.     

Modernising pay in the UK public services: trends and implications

The emerging character of the UK government's public sector pay reforms during the second and third (New) Labour terms of office is reviewed and contextualised. Three settings are examined where pay reform has been actively employed – with the accent on harmonisation, simplification and devolution of practice, with the express intention of restoring public service workforce morale, while improving services to clients – namely, local government, the National Health Service and the Higher Education sector. The evidence is interpreted as illustrating undoubted change, but also significant areas where progress has been less than intended, measured against the government's original programme goals. Equal pay considerations appear to have dominated all three projects reviewed: the failure to date of public sector managements to capitalise on opportunities the new pay architecture affords them to change local working practices may be attributed to a combination of factors discussed in the article. These have given rise to tensions as efforts have been pursued to transplant private sector pay techniques, somewhat hastily in some cases, without due consideration of the institutional context within which public services and proximal institutions function.     

Corporate governance and pay for performance: evidence from Germany

This paper investigates how two distinctive features of the German corporate governance system—concentrated ownership structure and representation of employees on firm supervisory boards—influence the sensitivity of managerial pay to firm profitability. There is a positive, though very small, link between pay and profitability for widely held firms. The presence of a largest owner seems hardly to affect this link in any economically significant way. However, the link between pay and profitability is smaller and indeed not significantly different from zero in firms whose largest owner is a German financial institution. This suggests that large owners tend to act as a substitute for rather than a complement to performance related pay in Germany. We thank Dennis Leech for allowing us to use his algorithms for computing voting power indices, and Brian Cheffins, Tim Guinnane, Andrew Harvey, Dennis Leech, Hamish Low, Sheilagh Ogilvie, Melvyn Weeks and two anonymous referees for helpful comments. The research reported in this paper was started during a joint visit to CES, University of Munich, and completed during visits of Edwards and Weichenrieder to the University of Konstanz and the ifo Institute for Economic Research in Munich. We thank the three institutions for their hospitality, especially Bernd Genser and Hans-Werner Sinn. A previous version of this paper was circulated under the title “The Measurement of Firm Ownership and its Effect on Managerial Pay”.     

The Marketization of Local Services and the Fragmentation of Labour Markets

This paper is a product of the ESRC's Local Governance research programme which considers the employment implications of the introduction of market forces into the provision of local government services in the United Kingdom. It discusses the fragmentation of labour markets as both a process and outcome of the commercialization of local service provision. In contrast to privatization scenarios, marketization suggests the blurring of the distinction between public and private employment deriving from the commercialization of municipal services and the transmission of local authority work organization and culture into the private sector. An assessment of employment change, workforce recomposition and bargaining capacity is offered which leads to the development of new models for institutional restructuring. ‘Sectoral de-differentiation’ is a concept developed to address the evolution of new labour market patterns and a ‘public capsule’ model is offered to explain the locality and service variations in marketization outcomes.     

The impact of equity markets and corporate governance on labour market flexibility

Drawing from various literatures, this article explores links between equity markets and labour market flexibility. Various data sources are used to test relationships for a set of OECD countries, controlling for other likely influences on flexibility such as government and industrial relations institutions. The results are generally supportive as regards employment flexibility: equity market trading activity is associated with shorter job tenure, higher activity rates, and greater employment change over the cycle. However, the relationship between equity markets and pay flexibility is less statistically robust to the addition of controls.     

The impact of creativity on performance in non-profits

• This article examines how creative climate affects learning orientation and its relationship to organizational performance. The study also assesses creativity's link with market orientation, entrepreneurial orientation, and organizational flexibility. Past research on creativity climate has explored areas such as the arts, high-tech, information technology, media, and the sciences. The focus of this study is to assess creativity's role in managerial decision-making in the non-profit sector. Sound use of creativity can improve planning, implementation, and control by non-profit organization executives.

Copyright © 2005 John Wiley & Sons, Ltd.     

The determination of wages of newly hired employees: Survey evidence on internal versus external factors

This paper reports findings on the relative importance of internal versus external factors in the setting of wages of newly hired workers. The evidence, from a rich firm-level survey on wage and price-setting procedures in 15 European Union countries, suggests that external labour market conditions are less important than internal pay structures in determining hiring pay, with internal pay structures binding even more often when there is labour market slack. When explaining their choice firms allude to fairness considerations and the need to prevent a potential negative impact on effort. Cross-country differences are found to depend on institutional factors: countries in which collective agreements are more prevalent and collective agreement coverage is higher report more often internal pay structures as the main determinant of hiring pay. Within-country differences are found to depend on firm and workforce characteristics: there is a strong association between the use of external factors in hiring pay, on the one hand, and skills (positive) and tenure (negative) on the other.     

The responsiveness of wages to labour market conditions in the UK

If wages are more flexible in the sense that pay is more responsive to labour market conditions, this has important implications for the workings of the aggregate economy. First, the real fluctuations generated by both demand and supply shocks are smaller, and second, the economy can operate at a higher level of activity relative to potential without adverse inflationary consequences (i.e., the NAIRU is lower). Our empirical analysis of wage flexibility suggests that UK wages have become more responsive to labour market conditions since the mid-1980s, at least relative to the previous decade. Furthermore, this has happened within certain industrial sectors. Finally, a part of this move towards greater responsiveness has been due to the decline in national pay bargaining over the relevant period. However, the majority of this change is due to some other factors.     

The outcomes of variable pay systems: tales of multiple costs and unforeseen consequences

Two veins of research predominate in evaluations of variable pay systems. The first seeks to associate superior financial performance with the use of incentive schemes and the second assesses the success of variable pay systems in effecting behavioural and attitudinal change. This paper argues that both of these approaches suffer from limitations and presents a framework for examining a neglected aspect of the implementation of variable pay systems by considering their operational outcomes and impact on organizations. It contemplates why little evaluation of this kind is conducted and presents a detailed qualitative analysis of the findings from six multiple case studies conducted among medium-sized organizations in the engineering sector. The article contributes to the literature in the area by revealing significant unanticipated costs in management time, administration and staff recruitment and training as a result of pay system change through applying the framework developed, identifying the relative effectiveness of the pay systems and illustrating the scope for organizational context to influence pay system outcomes. It concludes by arguing that the scope for error in managing pay systems raises questions about how far pay systems are effective sources of competitive advantage.     

Unequal and low pay in the public sector

This article assesses unequal and low pay in the public sector, and UNISON’s action on these issues. It is argued that gendered employment and pay are crucial to an understanding of sources of conflict and pressures for institutional change. The case is made for ‘mainstreaming’ women in accounts of public sector industrial relations.     

The dimensionality and determinants of pay satisfaction: a cross-cultural investigation of a group incentive plan

This paper proposes and empirically examines a conceptual framework for investigating the dimensionality and determinants of pay satisfaction. Satisfaction with group incentive plans is found to be a distinct dimension of the multidimensional pay satisfaction construct, whereas procedural justice and pay for performance perception are found to be its significant determinants. Cross-cultural comparisons are made using data collected from a multinational firm's employees in the US and Hong Kong. National culture is found to have direct and moderating effects on pay satisfaction. Implications for academics and human resource managers are discussed.     

STEEL: A CLASSIC CASE OF INDUSTRIAL RELATIONS CHANGE IN BRITAIN*

The interrelations between the search for greater flexibility and the decentralization of industrial relations have received comparatively little attention. The developments within British Steel over the past decade indicate how these two developments can interact. Against a background of a stagnant market for steel, overcapacity, changing state attitudes towards the nationalized sector and a national steel strike, management at British Steel have used local agreements as a key vehicle for introducing widespread restructuring and changes in work organization. In particular, the tying of local bonus payments to achieved performance and to changes in work organization has enabled management to introduce fundamental changes to traditional work arrangements with little worker or union resistance.     

Dilemmas in the management of temporary work agency staff

Temporary jobs account for an increasing proportion of new engagements in the UK labour market, with temporary work agencies or 'labour market intermediaries' occupying a central role in the regulation of entry into some organisations. Such evolving arrangements have been found to have their contradictions, even for the host organisation. This article explores the internal and external pressures to use a temporary work agency as a means of recruiting labour at host organisations. It considers some of the HRM issues that stem from the use of such workers, including the tendency to devolve HRM to the managers of such agencies operating within the host organisation. Central to this article is a consideration of the potential sustainability of organisations' use of temporary agency workers, engaging with this concern from the perspective of organisational cost‐effectiveness.     

Pay Comparability Across and Within UK Boards: An Empirical Analysis of the Cash Pay Awards to CEOs and Other Board Members

Drawing on the literature on social comparison and equity theories, this paper analyses the determinants of, and the relationships between, the cash pay awards of CEOs and other board members for a sample of large UK companies over the period 1992–95. Our results suggest that external labour market and internal (i.e., within board) pay comparisons are important in explaining both CEO and other directors' pay awards. In the case of CEOs, however, there is evidence of an asymmetric adjustment to prior period pay anomalies, whereby the pay of the relatively underpaid executives displays significantly greater sensitivity to external market comparison pay levels. This asymmetric adjustment process results in a 'bidding-up' of average CEO pay relative to other board members over the four year period investigated.     

金融业开放与中国制造业竞争力提升

研究目标：探究外资银行进入对制造业企业加成率变化的影响和作用机制。研究方法：基于异质性企业和新增长理论,将企业异质性和新熊彼特模型有机整合到统一框架中提出命题,根据中国工业企业和海关数据库,通过外资银行进入这一外生冲击对银行业开放后的制造业企业“加成率效应”进行实证研究。研究发现：总体上外资银行进入后,进入区域内企业平均加成率显著增加。行业层面异质性渠道检验表明,行业与技术前沿差距越小、行业外部融资依赖度越高、与银行业投入产出关联度越大,外资银行进入“加成率效应”越大。分所有制类型的结果显示,民营和外资企业的正向效应更为显著,且大型民营企业的正向效应值最大。分地区和要素密集度的结果显示,东部和劳动密集型企业的正向“加成率效应”较大。研究创新：首次从企业盈利水平视角出发探讨外资银行进入对下游制造业加成率的影响。研究价值：证实金融业开放有利于提升我国制造业企业市场势力。     

Determinants of variable pay for top managers of foreign subsidiaries in Finland

There is a large body of research dealing with top management compensation from an agency theory perspective. Difficulties in monitoring top management (the agent) are exacerbated in the multinational corporation, where there are significant information asymmetries between headquarters and foreign subsidiaries. Headquarters may use variable pay for subsidiary top managers to reduce the agency problems. By studying 110 foreign-owned subsidiaries located in Finland, this paper attempts to identify determinants of variable pay to the subsidiary general manager. In line with agency theory, the results suggest that the roles played by the subsidiary influence the compensation strategy used for the subsidiary general manager. However, while agency theory predicts that the cultural distance beween the home country of the multinational corporation and the location of the foreign subsidiary would have an effect on the compensation system, no such effect was found. Instead, in accordance with the institutionalization perspective, we found a significant 'nationality effect' on the use of variable pay.     

European integration and the pay policies of British multinationals

European economic integration has generated intense interest in the prospect of a European labour market. This article brings new evidence to bear on the issue of employer responses to European integration and concludes that British owned multinational companies have, as yet, only made partial moves towards the Europeanisation of their pay determination arrangements.