Top Banner

Click here to load reader

Chapter11 compensation

Oct 20, 2014

ReportDownload

Business

 

Strategic Human Resource Management - Mello

CHAPTER 11

COMPENSATION

PowerPoint Presentation by Charlie CookCopyright 2002 South-Western. All rights reserved

Copyright 2002 South-Western. All rights reserved.

12

The Importance of Compensation

Impacts an employers ability to attract and retain employees.Ensure optimal levels of employee performance in meeting the organizations strategic objectives.Compensations componentsDirect compensation in the form of wages or salaryBase pay (hourly, weekly, and monthly)Incentives (sales bonuses and or commissions)Indirect compensation in the form of benefitsLegally required benefits (e.g., Social Security)Optional (e.g., group health benefits)

Copyright 2002 South-Western. All rights reserved.

13

Copyright 2002 South-Western. All rights reserved.

14

Equity Theory

Internal equityFairness of pay differentials between different jobs in the organization can be established by job ranking, job classification, point systems and factor comparisons.External equityFairness of organizational compensation levels relative to external compensation is assessed by collecting wage and salary information to guide in setting the organizations pay strategy to lead, meet or lag labor market wages.

Copyright 2002 South-Western. All rights reserved.

15

Equity Theory (contd)

Individual EquityFairness about pay differentials among individuals who hold the same job in the organization is established by using:Seniority-based pay systems that reward longevity with the organization.Merit-based pay systems that reward employee performance.Incentive plans that allow employees to receive part of their compensation based on their job performance.Skills-based pay systems where compensation is based on employees possessing skills that the firm values.Team-based pay plans that encourage cooperation and flexibility in employees.

Copyright 2002 South-Western. All rights reserved.

16

Equity Theory (contd)

Copyright 2002 South-Western. All rights reserved.

17

Equity Theory (contd)

Copyright 2002 South-Western. All rights reserved.

18

Copyright 2002 South-Western. All rights reserved.

19

Job Evaluation: Point System Method

Copyright 2002 South-Western. All rights reserved.

110

Five Levels of the Compensable Factor Technical Skills

Copyright 2002 South-Western. All rights reserved.

111

Copyright 2002 South-Western. All rights reserved.

112

Job Evaluation Methods

Copyright 2002 South-Western. All rights reserved.

113

Legal Issues in Compensation

Title VII of Civil Rights Act of 1964Protects workers rights to fair treatment.Equal Pay Act of 1963Requires equal pay for equal work.Comparable WorthArgues that standards of equal pay for equal work should be replaced with the doctrine of equal pay for equal value.Objective, measurable data to support an assessment of the value of different jobs is lacking.There is no basis in current law for the arguments of comparable worth.

Copyright 2002 South-Western. All rights reserved.

114

Legal Issues in Compensation (contd)

Fair Labor Standards Act of 1938Regulates the minimum wageSets overtime policy (time and one-half after forty hours)Establishes exempt classes for managers and other professional employees.

Copyright 2002 South-Western. All rights reserved.

115

Key Strategic Issues in Compensation

Determining compensation relative to the market.Striking a balance between fixed and variable compensation.Deciding whether or not to utilize team-based versus individual pay.Creating the appropriate mix of financial and non-financial compensation.Developing a cost-effective compensation program that results in high performance.

Copyright 2002 South-Western. All rights reserved.

116

Reading 11.1: Compensating Teams

Reasons for tailoring compensation to individuals:Motivation comes from within the individual as opposed to the group.The development of skills and behaviors is an individual undertaking.Fairness in dealing with teams does not mean equal pay for all.Team compensation is not a payoff but a means of nurturing behavior that benefits the team.

Copyright 2002 South-Western. All rights reserved.

117

Reading 11.2:New Thinking for the New Millennium

Strategic approaches to may compensation (pay) systems more responsive:Pay the person for individual worth (knowledge, skills and competencies) rather than for the value of a job they perform.Reward excellence through a pay for performance compensation that establishes a clear relationship between a significant amount of pay and attainment of organizational objectives.Individualize the pay system to give employees choices in how they are rewarded and what reward they receive.