Human Resources Administration Research Paper
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Compensation Management
9 chapter nine
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Learning Objectives
1. Explain the objectives of effective compensation management.
2. Describe how wages and salaries are determined.
3. Identify the major issues that influence compensation management.
4. Explain the differences between “equal pay for equal work” and “equal pay for work of equal value.”
5. Evaluate the advantages and disadvantages of incentive systems.
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition Introduction to
Compensation Management • Cash and non-cash rewards employee receive in exchange for
their work
• Effective compensation management Ø Employees more likely to be satisfied, motivated, and
contribute to objectives
• Compensation perceived inappropriate Ø Performance, motivation, and satisfaction may decline
dramatically Ø Turnover may occur Ø Dissatisfaction with absolute or relative pay
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Objectives of Compensation
Effective
Compensation
Legal Compliance
Administrative Efficiency
Control Costs
Retain Employees
Acquire Staff
Ensure Equity
Reward Behaviour
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Compensation Management: Identify and Study Jobs (Phase I)
Phase I Job Analysis
• Initial job analysis • Identify and study jobs - Position descriptions - Job descriptions - Job standards
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Compensation Management: Internal Equity (Phase II)
• Determine relative worth or value of jobs
• Provides for internal equity • Job evaluation methods
– Job ranking – Job grading – Point systems (compensable
factors)
Phase II Job Evaluation
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Compensation Management: External Equity (Phase III)
• Discover what other employers are paying for specific key jobs
• Internal and external equity • Sources of data:
– ESDC – Private Consultants – Employer Associations – Professional Associations
Phase III Wage & Salary
Surveys
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Compensation Management: Matching Internal and External Worth (Phase IV)
• Establishing the pay level for each job – Combines job evaluation rankings,
survey wage rates, and other considerations e.g. organization’s pay policy
– Wage-trend line developed • Creating compensation structure
– Job classes and rate ranges
Phase IV Pricing Jobs
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Challenges Affecting Compensation
Challenges Affecting
Compensation
Prevailing wage rates
Union power
Productivity
Government constraints
Wage & Salary policies
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Pay Equity
• Canadian Human Rights Act prohibits discrimination because of sex
• It is illegal for companies to pay women less than men if their jobs involve equal skills, effort, responsibilities, and conditions
• Government enforces these provisions
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Pay Equity
• Equal pay for equal work (Equal Pay) Ø Part of Canada Labour Code since 1971
Ø Employers must pay men and women the same wage or salary when they do the same work
• Equal pay for work of equal value (Pay Equity)
Ø Jobs of comparable worth to the organization should be paid equally
Ø Part of Canadian Human Rights Act since 1978
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Incentive Systems Benefits Problems
• Performance is reinforced regularly
• Reinforcement is quick and frequent
• Desired behaviours are likely to continue
• Wages paid in proportion with performance
• Administration can be complex
• May result in inequities • Employees may not
achieve standards due to uncontrollable forces
• Union resistance • Employees may focus on
only one aspect
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Individual vs. Team-based Incentives
INDIVIDUAL
• Piecework
• Production bonuses
• Commissions
• Executive incentives
TEAM-BASED
• Production incentives • Profit-sharing plans • Stock ownership
(ESOPs) • Nonmonetary
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
New Approaches to Pay
• Skill- or knowledge-based pay
Ø Based on the employee’s skills or knowledge
Ø Autonomous work groups
• Variable pay
Ø Performance-linked compensation approach
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Total Rewards
• Broadbanding Ø Consolidation of pay grades into a few broad
bands • Tailor-Made perks • International Pay
CANADIAN HUMAN RESOURCE MANAGEMENT
Eleventh Edition
Pay & Organizational Strategy
Areas That Impact Pay Systems Performance-
related
Identifying valued rewards
Motivating performance
Attraction & retention
Motivating development
Motivation & Punishment
Setting goals