Case calculating Pay Ranges The market pay regression line eraging isy 900.05 Your company's poy po Bercent. You are a compensation 5 pesmidpoints, and minimums for all four pay grades lyst and yo u r company's pay policy is to lead the market your manager has asked you to calculate the poy Questions Calculate the formula for the pay policy Complete the following table (the range spred JOB PAY EVALUATION RANGE DA POINTS MINIMUM MIDPONT e s indicated in the GRADE ANGE D ANGE MAGMUM RANGE RANGE SPREAD ABOVE AND BELOW MIDPOINT) ABOVE AND 1-249 250-499 10% 15% 3 500-749 750-1000 20% 30% Draw a graph of the pay policy line including the range for each pay grade. APPENDIX 8-A: CALCULATING A MARKET LINE USING REGRESSION ANALYSIS Using the mathematical formula for a straight line, y= + bx where y-dollars x =job evaluation points o the y value in dollars) at which x = 0 (ie, the straight line crosses the y-axis) b = the slope of the line Using the dollars from the market survey data and the job evaluation points from the internal job structure, solving this equation enables the analyst to construct a line based on the relationship between the internal job structure and market rates. An upward-sloping line means that more job evaluation points are associated with higher dollars The market line can be written as Pay for job A = a + (b* Job evaluation points for job A) Pay for job B = a + b * Job evaluation points for job B), etc. The issue is to estimate the values of a and b in an efficient manner so that errors of prediction are minimized. T what “least squares” regression analysis does.