Compensation 255The nonprofits with the largest budgets paid executive directors the
most.Internal Equity
Internal equity is the standard that requires employers to set wages for jobs
within their organizations that correspond to the relative internal value of
each job. Positions that are determined to be more valuable to the organi-
zation receive higher wages. Typically high - level employees receive greater
compensation than low - level employees.
The internal value of each position to the organization is determined
by a procedure known as job evaluation, which determines the worth of
one job relative to another. To institute internal equity into its compensa-
tion structure, Congress passed the Classifi cation Act of 1923. Prior to the
establishment of the system, federal employees were paid according to
which agency they worked for, and wages were determined at the discre-
tion of agency management. The lack of procedures and standardization
permitted disparities among employees performing the same type of work.
Different positions were often given the same title, and similar positions
were often given different titles. Pay was not necessarily related to the work
performed. The act created the Personnel Classifi cation Board, which
mandated that positions be grouped according to similar responsibilities
and duties and be compensated accordingly. Employees would be paid
according to the value of their work, which would be determined accord-
ing to the job ’ s compensable factors, such as level of education and amount
of experience required, the amount of responsibility, and job hazards.
Exhibit 9.1 lists some of the most common compensable factors.
A variety of factor comparison systems are used to determine job value.
Compensable factors are identifi ed, weighed, and assigned point values that
refl ect their weight. Jobs are broken down into their compensable factors
and rated along a continuum of points or rank - ordered. After the compen-
sable factors have been rated or ranked, they are summed to derive a totalMajor gifts offi cer $ 71,968/ $ 76,559
Chief of direct marketing $ 71,857/ $ 72,201
Director of volunteers $ 43,208/ $ 42,493
Webmaster $ 53,171/ $ 54,128
Director of human resources $ 68,399/ $ 68,008