***Mathguy 18*** Unit 1 Compensation and Benefits

BHR 3301, Compensation and Benefits 1

Course Learning Outcomes for Unit I Upon completion of this unit, students should be able to:

3. Discuss issues involved in determining an organization’s total compensation strategy. 3.1. Outline the steps involved in creating an organization’s total compensation strategy. 3.2. Explain tests that can be used to determine if an organization’s pay model coincides with its

strategic plan.

6. Interpret the role of compensation and its influence on employee behavior. 6.1. Explain the reasons why a fair and reasonable compensation plan matters to an organization. 6.2. Discuss how various forms of pay can affect an employee’s attitude toward his/her job and

organization.

Reading Assignment Chapter 1: The Pay Model Chapter 2: Strategy: The Totality of Decisions

Unit Lesson With constant changes in the economy, the issue of compensation and benefits has become a big issue/concern for many. Many of us have been affected, or know someone who has been affected, by the decline in jobs within our economy. Job decline leads to company lay-offs and/or cuts in compensation and benefits. The cuts could be fewer benefits offered by the company, elimination of company rewards and incentives, or higher benefit costs. Compensation can be considered one of the most powerful tools used to influence employees. Companies utilize different strategies to ensure they are providing quality compensation in order to be successful. It is vital for companies to know what works and what does not within the realms of compensation. How do companies make decisions about what strategies should be used to ensure success? What processes and models are used? How do companies determine what benefits/incentives to offer? All of these questions will be addressed in Unit I. Unit I is comprised of the first two chapters of the textbook; these two chapters will introduce the pay model and pay strategy. Being able to identify and explain key concepts of each chapter will set the foundation for the remaining units. Chapter 1 begins with a discussion of the role of poorly-designed compensation plans in the current economic situation. It provides an overview of the key components of a compensation system. The definition of compensation is initially explored from different perspectives. This chapter also provides detailed information on the various forms of pay. The final focus, which may be considered as the major focus, is the introduction of the pay model. The pay model provides a structure for understanding compensation systems. Chapter 2 focuses on the key aspects of decisions made during the creation of compensation strategy. A key factor to remember is that the way employees are compensated can be a source of sustainable competitive advantage. The three tests to identify if a pay strategy provides competitive advantage are discussed. The steps involved in developing a total compensation strategy are described. Best-fit and best-practices are two alternative approaches to developing a compensation strategy which are discussed in this chapter.

UNIT I STUDY GUIDE

Introducing the Pay Model and Pay Strategy

BHR 3301, Compensation and Benefits 2

UNIT x STUDY GUIDE

Title

According to the best-fit approach, one size does not fit all. In order for companies to be successful, management must understand the total compensation strategy. Managing compensation strategically means fitting the compensation system to the business and environmental conditions. After reviewing these two chapters, you should be able to relate this to real world experiences. Compensation is more than money, although money is an important factor. We need money to pay our bills, care for our families, and enjoy some of the simple pleasures in life. Many of us feel as though money can make things a lot easier—especially if we have enough of it. However, many of us never feel as though we have enough. Money is important, but there are other forms of compensation that many employees tend to expect, also. Not only will you have a clear understanding of compensation, you will also have a better understanding of how businesses determine pay strategy. You should be able to relate this information to your current employer and understand why they make some of the decisions that are made in order to be successful. Keep this in mind: company failure can lead to lay- offs and closure, which ultimately leads to no compensation.

Suggested Reading Click here to access the Chapter 1 PowerPoint Presentation. Click here to access a PDF of the presentation. Click here to access the Chapter 2 PowerPoint Presentation Click here to access a PDF of the presentation.

Key Terms

1. Compensation 2. Compliance 3. Cost-of-living 4. Employee contribution 5. External competitiveness 6. Incentive 7. Innovator 8. Merit pay 9. Motivation

10. Pay mix 11. Pay model 12. Pay techniques 13. Strategy 14. Work/life balance benefits