Compensation and Reward

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Pay Structure

Array of pay rates for different work/skills within a single organization

Vicious Cycle

A cycle that bases pay of employees off of company achievements. Underperforming companies will result in an imbalance between risk and return

Virtuous Cycle

A cycle that has positive results since the increased company performance has a positive affect on the pay that employees receive. Risk and return are in balance

Compensation

All forms of tangible services and benefits employees receive as part of an employment relationship

Pay System Objectives

Attract/Retain Employees Motivate Performance Promote Skills/Knowledge Development Shape corporate culture

Disadvantages of Skill Based Pay

Average pay is greater Excessive labor costs if productivity increases Major training investment

Direct Pay

Base, bonus, and stock. Anything that comes in the form of money or cash

Job Classification

Classes or grades are defined to describe a group of jobs that may or may not be in the same job family

Job Analysis

Collect and summarize work content information that identifies similarities and differences in order to determine pay

Internal Alignment

Comparisons among jobs or skill levels inside single organization Creates a pay structure that can: - Support work flow - Consistant among employees - Directs their behavior toward organization objectives

Compensation Supports Customer Focused

Customer satisfaction incentives Value of job and skills based on customer contact

Compensation Objectives

Efficiency - Improve performance, Increase quality, Delight customers, and control labor costs Fairness Compliance Ethics

Job Ranking

Examine job description and arrange jobs according to value to company

Compensation Supports Cost Cutter

Focus on competitors labor costs Increase variable pay Emphasize productivity Focus on system control and work specs

Advantages to Skill Based Pay

Higher productivity Higher quality Lower costs

Grade

Horizontal grouping of different jobs that are considered substantially equal for pay purposes

Employee Contributions

How much emphasis is placed on pay for performance

Reservation Wage

Job seekers will not accept offer below a certain wage

Benchmark Jobs

Jobs that other positions can be compared to when they are being evaluated

Skill Based Pay Structures

Link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that is relevant to the work

Compensable Factors

Measurable qualities, features, or requirements that are common to many different jobs

Indirect Pay

Medical, dental, life, vacation. Anything that is of value and is given in exchange for work that is not money

Skill Analysis

Process to identify and collect information about skills required to perform work in an organization...just like job analysis

Point Factor Method

Numerical values are assigned to specific job components with the sum of values providing a quantitative assessment of the job's worth

Factors that determine relevant labor markets

Occupation Geography Competitors

Disparate Impact

Occurs when an apparently neutral practice results in unintentional wage discrimination

Disparate Treatment

Occurs when an employee who is a member of a protected group is intentionally paid less

External Competitiveness

Pay comparisons with competitors

Job Based Pay Structures

Pays employees for the job that they perform regardless of the skills that they possess

Validating Job Analysis

Reliability: Consistency of Results Validity: Accuracy of Results Acceptability: Job holders and supervisors are satisfied with the data collected Currency: Information is up to date Usefulness: Practicality of information collected

Compensation Supports Innovation

Reward Innovation Market-based pay Flexible job description

Universal Compensable Factors

Skill, Effort, Responsibility, and Working Conditions

Salary Survey

The process of collecting and making judgments about the compensation paid by other employers

Management of Pay System

The right people get the right pay for achieving the right objectives

Pay Structure Variance

Varies in: - Number of levels: Hierarchal nature - Differentials: Pay differences among levels - Criteria: Content (What is the work) and value (What is the work worth)


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