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chap_11_lesa_compensation.pptxIntroduction
1
but the focus in this chapter is pay.
they all help maintain employee commitment
There are many work motivators, including
promotions
desirable work assignments
peer recognition
work freedom
Rewards Review
2
bonuses
piecework
commission
incentive
plans
merit pay
plans
cost of living
increase
labor market
adjustment
profit sharing
time-in-rank
increase
protection
Program
pay for time
not worked
services/
perks
assigned
parking space
preferred
assignments
business
cards
own
secretary
impressive
title
participation in
decision making
greater job
freedom
more
responsibility
opportunities
for growth
diversity
of activities
Financial
Non-financial
Extrinsic
Implied
membership-based
Performance
based
Explicit
membership-based
Intrinsic
Types of Reward Plans
3
intrinsic rewards (personal satisfactions) come from the job itself, such as:
pride in one’s work
feelings of accomplishment
being part of a work team
extrinsic rewards come from a source outside the job, mainly by management:
money
promotions
benefits
Intrinsic versus Extrinsic Rewards
Types of Reward Plans
4
financial rewards:
Financial versus Nonfinancial Rewards
nonfinancial rewards:
wages
bonuses
profit sharing
pension plans
paid leaves
purchase discounts
make life on the job more attractive; employees vary greatly on what types they like
Types of Reward Plans
5
performance-based rewards are tied to specific job performance criteria
commissions
piecework pay plans
incentive systems
group bonuses
merit pay
membership-based rewards such as cost-of-living increases, benefits, and salary increases are offered to all employees
Performance-based versus Membership-Based
Compensation Administration
6
An effective, fair compensation program:
Companies derive their compensation programs from job evaluation, which defines the appropriate worth of each job.
Both employees and employers
can research compensation
facts and issues at
attracts
motivates
Retains competent employees
Compensation Administration
7
The Fair Labor Standards Act requires:
minimum wage
overtime pay
record-keeping
child labor restrictions
exempt employees
include professional and
managerial employees
not covered under
FLSA overtime provisions
nonexempt employees
eligible for premium pay
(time and one-half)
when they work more than
40 hours in a week
Compensation Administration
8
Civil Rights Act:
broader than Equal Pay Act
prohibits discrimination on the basis of gender
used to support comparable worth concept
salaries established based on skill, responsibility, effort, and working conditions
Equal Pay Act of 1963 requires that men and women hired for the same job be paid the same.
Job Evaluation and the Pay Structure
9
Job analysis information determines the relative value, or rank, of each job in the organization.
Research wage information at
the Bureau of Labor Statistics
http://www.bls.gov/bls/blswage.htm
Job evaluation helps set pay structure.
Other pay structure factors:
labor market conditions
collective bargaining
individual skill differences
Job Evaluation and the Pay Structure
10
Job Evaluation Methods
A committee places jobs in a simple rank order from highest (worth highest pay) to lowest.
Jobs placed in grades to compare their descriptions to the benchmarked jobs. Look for a common denominator (skills, knowledge, responsibility).
Jobs are rated and allocated points on several criteria.
Jobs with similar point totals are placed in similar pay grades. Offers the greatest stability.
ordering
method
classification
method
point
method
Job Evaluation and the Pay Structure
11
Establishing the Pay Structure
compensation
surveys
Used to gather factual data on pay rates for other organizations. Information is often collected on associated employee benefits as well.
Designates pay ranges for jobs of similar value. Results in a logical hierarchy of wages, in overlapping ranges.
wage
curves
wage
structure
Drawn by plotting job evaluation data (such as job points or grades) against pay rates (actual or from survey data).
Indicates whether pay structure is logical.
Job Evaluation and the Pay Structure
12
External factors also influence pay structure.
geographic differences (local supply and demand)
labor supply (low supply = higher wages and vice versa)
competition (HR can match, lead, or lag)
cost of living as determined by the CPI
collective bargaining (unions)
employees must know how the pay structure is derived
Special Cases of Compensation
13
Incentive Compensation Plans
incentives can be added to the basic pay structure to provide rewards for performance
individual
group
organization-wide
Special Cases of Compensation
14
merit pay plans (annual increase, based on performance)
piecework plans (pay based on number of units produced typically in a specified time period)
time-savings bonuses and commissions
Individual Incentives
these work best where clear objectives are set and tasks are independent
Special Cases of Compensation
15
Group Incentives
Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation.
Advantages
Disadvantages
Can be costly to install and administer.
De-emphasizes individual performance, which can result in excessive peer pressure.
Requires open communication with employees on costs, profitability, etc. If the performance targets are not carefully selected, adverse results may occur.
Focuses the group on specific performance targets.
Since rewards are controllable by individuals, the programs can be very motivational.
The program can be integrated with other corporate initiatives and leads to improved communication and employee relations
Special Cases of Compensation
16
Organization-wide Incentives
Direct employee efforts toward organizational goals (such as cost reduction)
Scanlon Plan - supervisor and employee committees suggest labor-saving improvements.
IMPROSHARE - formula is used to determine bonuses based on labor cost savings.
See http://www.qualitydigest.com/jul/gainshre.html
See http ://www.scanlon.org /
Special Cases of Compensation
17
Competency-based compensation
Rewarded for skills, knowledge and behaviors
leadership
problem solving
decision making
strategic planning
Broad-banding: pre-set pay levels that determine what people are paid based on their type and level of competency.
Paying for Performance
Special Cases of Compensation
18
incentives for empowered work teams to exceed established goals and share equally in rewards
depends on:
clarity of team purpose and goals
ability of the team to obtain needed resources
effective team communication skills and trust
Team-Based Compensation
Executive Compensation Programs
19
executive pay can run 400 times higher than that of the average worker
2008 saw a decline in exec compensation, mostly due to economic and political forces.
See: http://online.wsj.com/article/SB123375514020647787.html
competition for executive talent raises the price of hiring an executive
high salaries can be a motivator for executives and lower-level managers
Salaries of Top Managers
Executive Compensation Programs
20
Supplemental Financial Compensation
deferred bonuses – paid to executives over extended time periods, to encourage them to stay with the company
stock options – allow executives to purchase stock in the future at a fixed price
hiring bonuses – compensate for the deferred compensation lost when leaving a former company
Executive Compensation Program
21
mortgage assistance
Supplemental Nonfinancial Compensation Perquisites
perks may
include
paid life insurance
club memberships
expense accounts
free financial, legal and tax counseling
company cars
supplemental disability insurance
interest-free loans
supplemental retirement accounts
postretirement consulting contracts
Executive Compensation Programs
22
Supplemental Nonfinancial Compensation Perks
Golden parachutes protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position.
For the history of the golden parachute, see:
http://www.businessweek.com/magazine/content/05_50/b3963111.htm
Read about the top 10 golden parachute recipients:
http://www.time.com/time/specials/packages/completelist/0,29569,1848501,00.html
International Compensation
23
base pay: the pay of employees in comparable jobs at home
differentials: compensation given to offset higher costs of living abroad
incentives: inducements given to encourage employees to accept overseas assignments
assistance programs: payment for expenses involved in moving a family abroad and in providing some services overseas
HR needs to understand the statutory requirements of each country
International compensation packages generally utilize the “balance-sheet approach,” using these four factors:
Fill-in-the-blanks
24
1. _________ rewards come from the job itself; _________ rewards come from outside the job.
Intrinsic; extrinsic
2. Wages, bonuses, and pension plans are examples of _________ rewards.
financial
3. The _________ is the source of companies’ compensation programs.
job evaluation
4. Scanlon and IMPROSHARE are examples of ________ incentives.
organization-wide
5. Using pre-set pay levels that determine what people are paid based on their type and level of competency is called _______.
Broad-banding
6. _______ protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position.
Golden parachutes
