1 Total Rewards and Compensation Total Rewards and Compensation Total Rewards Total Rewards Monetary and non-monetary rewards used to Monetary and non-monetary rewards used to attract, motivate, and retain employees attract, motivate, and retain employees Rewards System Strategic Objectives Rewards System Strategic Objectives Legal compliance Legal compliance Cost effectiveness Cost effectiveness Internal and external equity for employees Internal and external equity for employees Recognizing contribution to maximize Recognizing contribution to maximize performance and manage talent performance and manage talent
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
11
Total Rewards and CompensationTotal Rewards and Compensation
Total RewardsTotal Rewards Monetary and non-monetary rewards used to Monetary and non-monetary rewards used to
attract, motivate, and retain employeesattract, motivate, and retain employeesRewards System Strategic ObjectivesRewards System Strategic Objectives Legal complianceLegal compliance Cost effectivenessCost effectiveness Internal and external equity for employeesInternal and external equity for employees Recognizing contribution to maximize Recognizing contribution to maximize
performance and manage talentperformance and manage talent
22
Compensation ApproachesCompensation Approaches
Traditional Approach
Total Rewards Approach
• Compensation primarily base pay
• Bonuses for executives only
• Fixed benefits tied to seniority
• Pay grade progression based on organizational promotions
• One organization-wide pay plan for all employees
• Variable pay used with base pay
• Annual/long-term incentives provided to all employees
• Flexible and portable benefits offered
• Knowledge-based broadbands determine pay grades
• Multiple pay plans consider job family, location, and business units
33
Total Rewards Components
44
Compensation Philosophies
55
HR Metrics for Compensation
66
Typical Division of HR Responsibilities: Compensation
77
Compensation System Design Compensation System Design IssuesIssues
Valuing Jobs with Job Valuing Jobs with Job Evaluation MethodsEvaluation Methods
Job EvaluationJob EvaluationMeans used to identify the relative worth of jobs Means used to identify the relative worth of jobs
within an organization.within an organization.
Compensable FactorCompensable Factor Job value common among a group of jobs.Job value common among a group of jobs. Something for which an organization Something for which an organization
chooses to compensate an employee.chooses to compensate an employee.
1919
Examples of Compensable Factors for Examples of Compensable Factors for Different Job FamiliesDifferent Job Families
2020
Job Evaluation MethodsJob Evaluation Methods
Job Evaluation Methods
Point Method
Ranking Method
Classification Method
Factor-Comparison Method
2121
Job Evaluation MethodsJob Evaluation Methods
Point methodPoint method
Ranking methodRanking method
Classification methodClassification method
Factor-comparison methodFactor-comparison method
2222
Valuing Jobs Using Market PricingValuing Jobs Using Market Pricing
Market PricingMarket Pricing Using market data to identify the relative value of Using market data to identify the relative value of
jobs based on what other firms pay for similar jobsjobs based on what other firms pay for similar jobs..
Advantages Disadvantages
• Ties organizational pay levels to the external job market, without “internal” job evaluation distortion.
• Communicates to employees that the compensation system is “market linked.”
• It relies on market survey data.
• A specific job may differ from a “matching” job in the survey.
• The market data’s scope (range of sources) is a concern.
• Tying pay levels to market data can lead to wide fluctuations.
2323
Pay SurveysPay Surveys
Collection of data on compensation Collection of data on compensation rates for workers performing similar rates for workers performing similar jobs in other organizations.jobs in other organizations.
Benchmark JobsBenchmark Jobs
Jobs found in many organizationsJobs found in many organizations..
Pay StructuresPay StructuresJob FamilyJob Family Group of jobs with common organizational Group of jobs with common organizational
characteristics.characteristics.
Common Pay StructuresCommon Pay Structures Hourly and salariedHourly and salaried Office, plant, technical, professional, managerialOffice, plant, technical, professional, managerial Clerical, information technology, professional, Clerical, information technology, professional,
supervisory, management, and executivesupervisory, management, and executive
Pay GradesPay Grades Groupings of individual jobs having approximately the Groupings of individual jobs having approximately the
same job worth.same job worth.
2525
Compensation
Administration Process
2626
More on Pay StructuresMore on Pay StructuresMarket BandingMarket Banding
Grouping jobs into pay grades based on similar Grouping jobs into pay grades based on similar market survey amounts.market survey amounts.
Market LineMarket Line
Shows relationship between job value as Shows relationship between job value as determined by job evaluation points and job determined by job evaluation points and job value based on pay survey rates.value based on pay survey rates.
Shows distribution of pay for surveyed jobsShows distribution of pay for surveyed jobs
Linear trend line to be developed by the Linear trend line to be developed by the least-least-squares regression method.squares regression method.
2727
Market-Banded Pay Grades Example (Bank)
*Computed by averaging the pay survey summary data for the jobs in each pay grade.
2828
Example of Pay Grades and Pay Ranges
2929
Pay RangesPay Ranges
BroadbandingBroadbanding Using fewer pay grades having broader pay ranges Using fewer pay grades having broader pay ranges
that in traditional systems.that in traditional systems. BenefitsBenefits
Encourages horizontal movement of employeesEncourages horizontal movement of employees
Is consistent with trend towards flatter Is consistent with trend towards flatter organizationsorganizations
Creates a more flexible organizationCreates a more flexible organization
Encourages competency developmentEncourages competency development
Emphasizes career developmentEmphasizes career development
3030
Individual PayIndividual Pay
Rates Out of RangeRates Out of Range Red-Circled EmployeeRed-Circled Employee
An incumbent (current jobholder) who is paid An incumbent (current jobholder) who is paid above the range set for the job.above the range set for the job.
Green-Circled EmployeeGreen-Circled Employee
An incumbent who is paid below the range set for An incumbent who is paid below the range set for the job.the job.
Pay CompressionPay Compression Pay differences among individuals with different levels Pay differences among individuals with different levels
of experience and performance in the organization of experience and performance in the organization are reduced.are reduced.
3131
Pay Adjustmen
t Matrix
Compa-ratioCompa-ratio The pay level divided by the The pay level divided by the
midpoint of the pay range.midpoint of the pay range.