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ROBERT L. MATHIS
JOHN H. JACKSON
PowerPoint Presentation by Charlie CookThe University of West Alabama
Direct CompensationDirect CompensationDirect CompensationDirect Compensation
Base PayBase PayBase PayBase Pay
SalarySalarySalarySalary
WagesWagesWagesWages
The basic monetary compensation that an employee The basic monetary compensation that an employee receives, usually as a wage or salary.receives, usually as a wage or salary.
The basic monetary compensation that an employee The basic monetary compensation that an employee receives, usually as a wage or salary.receives, usually as a wage or salary.
Payments calculated on the amount of time worked.Payments calculated on the amount of time worked.Payments calculated on the amount of time worked.Payments calculated on the amount of time worked.
Consistent payments made each period regardless Consistent payments made each period regardless of the number of hours worked in the period.of the number of hours worked in the period.
Consistent payments made each period regardless Consistent payments made each period regardless of the number of hours worked in the period.of the number of hours worked in the period.
Variable Variable PayPay
Variable Variable PayPay
Compensation linked to individual, team, or Compensation linked to individual, team, or organizational performance.organizational performance.
Compensation linked to individual, team, or Compensation linked to individual, team, or organizational performance.organizational performance.
Continuum of Compensation PhilosophiesContinuum of Compensation PhilosophiesContinuum of Compensation PhilosophiesContinuum of Compensation Philosophies
Typical Components of Expatriate CompensationTypical Components of Expatriate CompensationTypical Components of Expatriate CompensationTypical Components of Expatriate Compensation
Market Competitiveness and Compensation Market Competitiveness and Compensation Market Competitiveness and Compensation Market Competitiveness and Compensation
Lead the Lead the MarketMarket
Lead the Lead the MarketMarket
Lag the Lag the MarketMarket
Lag the Lag the MarketMarket
Meet the Meet the MarketMarket
Meet the Meet the MarketMarket
Paying for higher qualified, more productive workers.Paying for higher qualified, more productive workers.Paying for higher qualified, more productive workers.Paying for higher qualified, more productive workers.
Attempting to balance employer costs and the need Attempting to balance employer costs and the need to attract and retain employees.to attract and retain employees.
Attempting to balance employer costs and the need Attempting to balance employer costs and the need to attract and retain employees.to attract and retain employees.
Paying all that the firm can afford. Taking advantage Paying all that the firm can afford. Taking advantage of the abundant supply of potential employees in a of the abundant supply of potential employees in a loose labor market.loose labor market.
Paying all that the firm can afford. Taking advantage Paying all that the firm can afford. Taking advantage of the abundant supply of potential employees in a of the abundant supply of potential employees in a loose labor market.loose labor market.
Individual vs. Team RewardsIndividual vs. Team RewardsIndividual vs. Team RewardsIndividual vs. Team Rewards
Distribute variable rewards at the team levelDistribute variable rewards at the team levelDistribute variable rewards at the team levelDistribute variable rewards at the team level
Make system simple and understandable.Make system simple and understandable.Make system simple and understandable.Make system simple and understandable.
Using Team-Based Reward SystemsUsing Team-Based Reward SystemsUsing Team-Based Reward SystemsUsing Team-Based Reward Systems
Use skill-based pay for the base.Use skill-based pay for the base.Use skill-based pay for the base.Use skill-based pay for the base.
Use variable pay based on business entity performanceUse variable pay based on business entity performanceUse variable pay based on business entity performanceUse variable pay based on business entity performance
Maintain a high degree of employee involvementMaintain a high degree of employee involvementMaintain a high degree of employee involvementMaintain a high degree of employee involvement
Perceptions of Pay FairnessPerceptions of Pay FairnessPerceptions of Pay FairnessPerceptions of Pay Fairness
EquityEquityEquityEquity
InternalInternalEquityEquity
InternalInternalEquityEquity
ExternalExternalEquityEquity
ExternalExternalEquityEquity
The perceived fairness between what a person does The perceived fairness between what a person does (inputs) and what the person receives (outcomes).(inputs) and what the person receives (outcomes).
The perceived fairness between what a person does The perceived fairness between what a person does (inputs) and what the person receives (outcomes).(inputs) and what the person receives (outcomes).
Employee compensation viewed as equitable in relation to the Employee compensation viewed as equitable in relation to the compensation of employees performing similar jobs in other compensation of employees performing similar jobs in other organizations.organizations.
Employee compensation viewed as equitable in relation to the Employee compensation viewed as equitable in relation to the compensation of employees performing similar jobs in other compensation of employees performing similar jobs in other organizations.organizations.
Employees receive compensation in relation to the knowledge, Employees receive compensation in relation to the knowledge, skills, and abilities they use in their jobs as well as their skills, and abilities they use in their jobs as well as their responsibilities and accomplishments.responsibilities and accomplishments.
Employees receive compensation in relation to the knowledge, Employees receive compensation in relation to the knowledge, skills, and abilities they use in their jobs as well as their skills, and abilities they use in their jobs as well as their responsibilities and accomplishments.responsibilities and accomplishments.
Procedural JusticeProcedural JusticeProcedural JusticeProcedural Justice Perceived fairness of the process and proceduresPerceived fairness of the process and proceduresused to make decisions about employees.used to make decisions about employees.
Perceived fairness of the process and proceduresPerceived fairness of the process and proceduresused to make decisions about employees.used to make decisions about employees.
Distributive JusticeDistributive JusticeDistributive JusticeDistributive Justice Perceived fairness in the distribution of outcomes.Perceived fairness in the distribution of outcomes.Perceived fairness in the distribution of outcomes.Perceived fairness in the distribution of outcomes.
Pay Openness/Pay Openness/SecrecySecrecy
Pay Openness/Pay Openness/SecrecySecrecy
The degree of openness or secrecy that an organization The degree of openness or secrecy that an organization allows regarding its pay system.allows regarding its pay system.
The degree of openness or secrecy that an organization The degree of openness or secrecy that an organization allows regarding its pay system.allows regarding its pay system.
Child labor (under 14 years old) is prohibitedChild labor (under 14 years old) is prohibitedChild labor (under 14 years old) is prohibitedChild labor (under 14 years old) is prohibited
Requires overtime payments for non-exempt employeesRequires overtime payments for non-exempt employeesRequires overtime payments for non-exempt employeesRequires overtime payments for non-exempt employees
Requires overtime (1Requires overtime (1½) pay for hours over 40 hours½) pay for hours over 40 hoursRequires overtime (1Requires overtime (1½) pay for hours over 40 hours½) pay for hours over 40 hours
Requires compensatory time at overtime (1Requires compensatory time at overtime (1½) pay rates½) pay rates Requires compensatory time at overtime (1Requires compensatory time at overtime (1½) pay rates½) pay rates
IRS Test for Employees and Independent ContractorsIRS Test for Employees and Independent ContractorsIRS Test for Employees and Independent ContractorsIRS Test for Employees and Independent Contractors
Figure 12–9Source: U.S. Internal Revenue Service, www.irs.gov.
Legislation on Equal Pay and Pay EquityLegislation on Equal Pay and Pay EquityLegislation on Equal Pay and Pay EquityLegislation on Equal Pay and Pay Equity
• Equal Pay Act of 1963Requires that men and women be paid the same for
performing substantially similar jobs with limited non-gender exceptions (e.g., merit and seniority).
• Pay Equity (or Comparable Worth)Similarity in pay for all jobs requiring comparable level
of knowledge, skills, and abilities, even if actual duties and market rates differ significantly.
• GarnishmentA court action in which a portion of an employee’s
Legal Issues and Job EvaluationLegal Issues and Job EvaluationLegal Issues and Job EvaluationLegal Issues and Job Evaluation
Americans with Disabilities ActAmericans with Disabilities ActJob evaluations may not identify job functions related Job evaluations may not identify job functions related
to physical demands as essential to physical demands as essential
Americans with Disabilities ActAmericans with Disabilities ActJob evaluations may not identify job functions related Job evaluations may not identify job functions related
to physical demands as essential to physical demands as essential
Gender IssuesGender IssuesTraditional job evaluations place less weight on Traditional job evaluations place less weight on
knowledge, skills, and working conditions for female-knowledge, skills, and working conditions for female-dominated jobsdominated jobs
Gender IssuesGender IssuesTraditional job evaluations place less weight on Traditional job evaluations place less weight on
knowledge, skills, and working conditions for female-knowledge, skills, and working conditions for female-dominated jobsdominated jobs
Valuing Jobs Using Market Pricing (cont’d)Valuing Jobs Using Market Pricing (cont’d)Valuing Jobs Using Market Pricing (cont’d)Valuing Jobs Using Market Pricing (cont’d)
• Disadvantages of Market Pricing It relies on market survey data that is limited or may
have been gathered in methodologically sound ways.
The responsibilities of a specific job in a company may be somewhat different from those of the “matching” job identified in the survey.
The market data’s scope (range of sources) is another concern.
Tying pay levels to market data can lead to wide fluctuations based on market conditions.
Market-Banded Pay Grades for Community BankMarket-Banded Pay Grades for Community BankMarket-Banded Pay Grades for Community BankMarket-Banded Pay Grades for Community Bank
Figure 12–13
*Computed by averaging the pay survey summary data for the jobs in each pay grade.