Harmonisation and Standardisation€¦ · •define common terms used in reward management •explain the purpose of compensation or reward •explain the determination of rewards
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Slide 9.1
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
UNIT 6
REWARD MANAGEMENT
Introduction to Human Resource Management
Slide 9.2
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
OBJECTIVES
•define common terms used in reward management
•explain the purpose of compensation or reward
• explain the determination of rewards
• explain the process of job evaluation
• understand the types of reward systems
•know the other considerations in rewards management
Slide 9.3
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Definitions of common terms
• Pay• Most straightforward term
• Can include non-monetary payment, sick pay, maternity pay and pensions
• Reward• Used when systems are designed to motivate (Theory X overtones)
• Carrot and stick approach (theory X)
• Could be monetary or non-monetary
Slide 10.3
Slide 9.4
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Definitions of common terms – cont.
wages
• Used to describe payments made weekly, often based on an hourly rate and/or paid in cash
• Less likely to involve fringe benefits
• Expectation of short-term thinking from employees –incentives are usually quick and precise
• Less emphasis on job security
salaries
• Used to describe payments paid monthly, based on an annual salary figure
• Normally paid directly into a bank
• Possibility of fringe benefits
• Traditionally linked with job security
• Managerial role
Slide 9.5
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Purpose of compensation or reward
• Attract suitable employees.
•Equal pay for equal work
• Retain employees who perform well.
• Foster motivation and commitment.
• Create conditions where it is possible to establish
congruence between personal and organisational
goals.
Slide 9.6
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Influences on Payment system
•What the organisation can afford to pay
•What other organisations are paying
•National or international rates of pay within the
organisation
• Trade unions and employees demand
• the scarcity of particular skills
•The performance of the individual
• Job evaluation (emphasising internal relativities).
• External influences (e.g. government policy on the
minimum wage).
Slide 9.7
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Job evaluation
• Job evaluation is ‘a method of determining on a systematic basis the relative importance of a number of jobs.’
• Jobs are ranked according to demands made on the job holder.
• Provides a basis for a ‘fair and orderly grading structure.’
• Does not determine actual pay.
Slide 10.7
Margaret Foot and Caroline Hook, Introducing Human Resource Management, 6th Edition, © Pearson Education Limited 2012
Slide 9.8
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Job evaluation
• Non-quantitative approach
• Quantitative approach
• Other approaches to job evaluation
• Advantages and disadvantages
Slide 9.9
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Non-quantitative approach
• Whole job Ranking: ranking the jobs based on the
job descriptions. Jobs are then arranged based
on difficulty or value to the organisation.
• Paired comparisons
•Comparing jobs against other jobs to determine
the relative worth of each job (based on job
descriptions).
• Job classification: putting jobs into slots on a
predetermined framework of grades or classes
(with definitions).
Slide 9.10
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Analytical / Quantitative approach
to Job Evaluation
• Points system: Range of Points are assigned to the
factors, such as those above. Each factor
receives a range of points. The most
important job receives the greatest number
of points.
Slide 9.11
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Cont. Quantitative job evaluation
• Points system• Decide on criteria for evaluating all jobs, e.g.
• skill
• responsibility for people
• responsibility for equipment and materials
• responsibility for other employees
• mental effort
• physical effort
• working conditions.
• Each factor receives a range of points to allow for the award of maximum points. Points are aggregated.
• The importance of a factor is the weighting it receives
• Rate each job accordingly
Slide 9.12
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Cont. Quantitative job evaluation
• Points system (Continued)• Advantages
• easy to understand
• can be used to explain differences between jobs and justify differences of pay.
• The use of ‘Benchmark jobs’
• Disadvantages
• contains some subjectivity – need for care over sex bias
• can be time-consuming and costly to develop.
• Assessment is static and not dynamic as it looks at a point in time
Slide 10.12
Margaret Foot and Caroline Hook, Introducing Human Resource Management, 6th Edition, © Pearson Education Limited 2012
Slide 9.13
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Advantages of job evaluation
• Objective and logical.
• Fair (removes managerial bias).
• Favourably viewed by industrial tribunals.
Slide 9.14
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Disadvantages of job evaluation
• Objectivity is questionable, including the choice of
benchmark jobs.
• Costly to install and maintain.
• Too bureaucratic in a world characterised by
flexibility and adaptability.
• Promotes a job demarcation mentality, out of
keeping with today’s conditions of changing job
boundaries and need for flexible job descriptions.
• Strong emphasis on the job itself leads to turning a
blind eye to performance.
Slide 9.15
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Different Types of reward systems
• Time rates
• Individual payment by result (piece work)
• group incentives
• measured day work
• profit sharing
• performance-related pay or merit pay
• skill-based pay
• Cafeteria or flexible benefits system
Slide 9.16
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Time rates
• When a reward system is related to the number of hours
worked it is referred to as Time rate.
• Weekly or monthly wage; the minimum wage!
• Value or worth of job could be determined by job
evaluation
• Easy to administer; labour cost can be predicted
• No differentiation between good and bad performers
on same grade ( no motivation to increase output).
Slide 9.17
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Individual Payment by results (PBR)
•Links pay to the quantity of individual’s output (eg
piece work, commission received by sales people)
•Rewards extra effort .
•Advantages:
• Links pay, including commission, to output (cost adv.)
• Minimises need for supervision.
•Disadvantage:
• Increased output could, however, be at the expense
of quality.
•Difficulty in measuring output
Slide 9.18
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Group Incentives
• Based o the same principles as the individual payment by results system, but focused on the collectivist approach
Slide 9.19
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
•This is an individualised payment scheme.
•Pay rates are agreed for a specified level of
performance.
• management carefully monitors the level of
performance
Measured day work
Slide 9.20
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Profit Sharing
•Links rewards to group outcomes like meeting set target
• With profit sharing, a bonus or payment based on
the company’s profits is given to employees.
•Linking pay to profits is said to increase the
commitment of employees.
• Bonus could be based on performance of a
department, division or organisation and it is a
percentage of profits.
• Gain-sharing applies to cost cutting rather than
profits; employees receive a proportion of the gains.
•
Slide 9.21
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Performance-relatedpay schemes (Merit rating)
• links individual’s pay progression to his/ her level of
performance or competence.
•It does not relate to just the quantity of a product
produced.
•Used for mainly non-manual workers but can be used
for manual workers as well.
Slide 9.22
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Skill-based pay
• Input (e.g. knowledge, competencies), as opposed
to output, is rewarded.
• Rewards employees for acquiring and utilising a
broader range of skills.
• Skill-based pay can be used to encourage desired
outcomes (e.g. multi-skilling).
• Introduction of skill-based pay requires good
planning, consultation and participation, and training
(technical and teamworking skills).
Slide 9.23
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Cafeteria or flexible benefits system
• this is a type of non-monetary award.
•Selecting various packages within an overall compensation
package.
•Employees choose benefits to meet their needs from a menu of
remuneration eg life/accident insurance, medical and dental care,
care for children
•The flexible system has a number of elements; for example,
salary, holiday entitlement, private health insurance, loans at
preferential rates, company car.
•Most schemes are applicable to executive and managerial
staff.
Slide 9.24
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Other considerations
• Pensions: (form of deferred pay; final salary, money
purchase and stake holder schemes).
• HRM and rewards (both extrinsic and intrinsic): a
primary consideration is to devise reward strategies
that support corporate objectives, and a sub-set of
this aim is to support high performers.
Slide 9.25
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
Areas to ignore
• 305 (The equal pay act 1970) – 307 (the national Minimum wage act 998)
• 322 -323
• 325 - 334
Slide 9.26
Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008
• the end of Unit 6
• END OF SEMESTER ONE
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