Business Question

E-Sonic is a fictional online music company that is just starting out. E-Sonic’s mission is to create the world’s leading music distribution entity; ensuring its parent company Sonic Records’ prominence in the industry’s future. As a consultant for E-Sonic, you built a point evaluation method and acquired compensation survey data for benchmark jobs.

 

  1. The compensation survey data you acquired has an “as of” date of December 2019. Let’s imagine you’ve been asked to update the salaries to the current cost-of-living in Seattle, WA. Use the following CPI-U data from the BLS website:
  • What was the CPI-U in December 2019? (2.5 pts)
  • What is the most recent CPI-U? (2.5 pts)
  • By what percent would need to adjust the compensation survey salaries? (2.5 pts)

 

 

  1. Using the job evaluation points and the updated compensation survey data, you ran a regression analysis to predict salaries thereby integrating the internal pay structure with external market rates. After running the regression in Excel, you found that the market pay line is  and the R2 = 0.82.
  • How would you interpret the market pay line? (2.5 pts)
  • How would you interpret the R2? (2.5 pts)

 

 

  1. Using the market pay line equation in Problem 2, what would be the market salary for individuals with job evaluation points of… (10 pts)
  • 500
  • 800
  • 1000
  • 1200

 

 

  1. E-Sonic plans to gain a competitive advantage by offering a unique online music platform that uses advanced technology to attract customers.
  • Based on this information, what strategy do you think they use to gain a competitive advantage? And what pay policy might they use based on this strategy? (5 pts)
  • If they decide to use this pay policy, would they need update the market pay line? If yes, how would they do it? (5 pts)

 

 

  1. E-Sonic decided to establish 3 pay grades after determining its pay line. Grade A ranges from 400-800 job evaluation points, Grade B ranges from 800-1000 job evaluation points, Grade C ranges from 1000-1400 job evaluation points. They also decided the range spread for Grade A and Grade B is 20% above and below the midpoint and the range spread for Grade C is 30% above and below the midpoint. Using the market pay line from Problem 2, complete the pay structure. (10 pts)

 

Pay Grade Job Evaluation Points Range Minimum Range Midpoint Range Maximum Range Spread (% above & below midpoint)
 

 

A

 

 

  

 

400-800

       20% above and below the midpoint
 

 

B

 

 

  

 

800-1000

       20% above and below the midpoint
 

 

C

 

 

  

 

1000-1400

       30% above and below the midpoint

 

 

  1. Using the pay structure that you created in Problem 5, calculate the compa-ratio for each individual below. What does each compa-ratio tell us about their pay rate?
  • Mike is in Grade A and he is paid $40,160.71. (2.5 pts)
  • Jhon is in Grade B and he is paid $53,465.66. (2.5 pts)
  • Lupe is Grade C and she is paid $75,789.45. (2.5 pts)