TOTAL REWARDS AND COMPENSATION
Identify the three elements of total rewards and give examples of each.
Explain the major laws governing employee compensation.
Outline the steps in developing a base pay system.
Define pay ranges and pay grades.
Identify four measures used to determine the effectiveness of compensation systems.
NATURE OF TOTAL REWARDS AND COMPENSATION
Total rewards: Monetary and nonmonetary rewards provided by companies to attract, motivate, and retain employees.
Strategic decisions can guide the design of compensation practices
Compliance with all applicable laws and regulations
Cost-effectiveness for the organization
Internal and external equity for employees
Performance enhancement for the organization
Performance recognition and talent management for employees
Enhanced recruitment, involvement, and retention of employees
ELEMENTS OF TOTAL REWARDS
LAWS GOVERNING COMPENSATION
Fair Labor Standards Act
Child labor provisions
Equal Pay Act
Lilly Ledbetter Act
STRATEGIC COMPENSATION DECISIONS (1 of 2)
Firms need to manage their compensation philosophy to ensure that employees believe they are being treated fairly.
Entitlement philosophy is at one end of the continuum, and performance philosophy is at the other end.
Entitlement philosophy: Assumes that individuals who have worked another year with the company are entitled to pay increases with little regard for performance differences.
Pay-for-performance philosophy: Assumes that compensation decisions reflect performance differences.
STRATEGIC COMPENSATION DECISIONS (2 of 2)
Communicating pay philosophy
Helps employees recognize the value of the total rewards package and how their work performance, tenure, and raises can affect their compensation
H R specialists develop and administer the compensation system and ensure that pay practices comply with all legal requirements
Managers help employees see the connections between their individual performance and the expected rewards
MARKET COMPETITIVE COMPENSATION
DEVELOPING A BASE PAY SYSTEM
Pay Grades – groupings of individual jobs that have approximately the same value to the organization.
Pay Ranges – defined as a set boundary for compensation which identifies the minimum and maximum amount of a specific pay grade.
Individual Pay (red/green circled employees).
HUMAN RESOURCE METRICS AND COMPENSATION
Proceed to and complete assignments related Chapter 11.