Compensating Human Resources

Skill and Knowledge-based Pay/Competency Pay

this sets pay levels on the basis of how many skills an employee has or how many jobs he/she can do

Performance-based Rewards

organizations want employees to perform at relatively high-levels and need to make it worth their efforts to do so

Balanced

pay benefits and other rewards should provide total reward package

Merit Pay Plans

usually awarded to employee on the basis of the relative value of their contributions to the organization

Base pay progression

movement of base pay over time from year to year

Individual incentive plans

this rewards individual performance on a real-time basis for meeting a goal or hitting a target

Establishing pay ranges involves two basic phases:

1. Determining the relative worth of the different jobs to the organization 2. Pricing the different jobs

Incentive forms of compensation

a method of compensating employees on the basis of output which means, more production, more earnings

Incentive pay/executive prerequisites or perks

an incentive plan established to give company executives the option to buy company stocks in the future at a predetermined price

Profit Sharing

at the end of the year, some portion of the company's profits is paid into a profit sharing pool, which is then distributed to all employees

Equitable

each person should be paid fairly, in line with his/her efforts, abilities, and training

Stock Ownership Plans

employees are gradually given a minor stake in ownership of a corporation

Benefits and prerequisites or perks

in addition to direct cash, compensation is also paid in the form of indirect cash or benefits that have monetary value

Variable pay

incentive or bonus pay that does not fall into base pay

Salary

income paid to an individual not on the basis of time but on the basis of performance; usually given to professional and managerial employees or those performing white-collar jobs

Ranking method

involves ranking each jobs relative to all other jobs, usually based on overall difficulty rather than on a number of compensable factors

Job evaluation

is the primary method used to determine the relative worth of jobs to the organization

Job classification or Job grading evaluation method

jobs are categorized into groups, the groups are called classes if they contain similar jobs, or grades if they contain jobs that are similar in difficulty but otherwise different

Secure

pay should be enough to help an employee feel secure and aid him/her in satisfying basic needs

Incentive-Providing

pay should motivate effective and productive work or reward desired behavior

Payment for time worked

pay surveys are used to establish competitive pay for the industry and job evaluation is the principal method for setting time-pay schedules

Point system

points are assigned to the degree of various compensable factors to do the job

Wage

refer to the hourly compensation paid to skilled and unskilled workers or those performing blue-collar jobs, with time as the basis in the computation

Premium pay

refers to the additional compensation required by law for work performed within eight (8) hours on nonworking days, such as rest days and special days

Intrinsic values

rewards inherent in the work itself

Compensation

set of rewards that organization provide to individuals in return for their willingness to perform various jobs and tasks within the organization

Cost-effective

taking into consideration the company's ability to pay

Acceptable to the employee

the employee should understand the pay system being followed by the company and should feel it is reasonable for the organization and for him/her

Base pay

the hourly wage or weekly/monthly salary earned

Organizational culture

the norms and values defining appropriate behavior in the organization culture. Quality of leadership and supervision are also defining elements of culture

Career opportunities

the prospects for development and growth

Group incentives

these are given when it is difficult to measure individual output or when cooperation is needed to complete a task or project

Spot Bonuses

these are spontaneous incentives awarded to individuals for accomplishment not readily measured by a standard

Piecework or payment by benefits

this is a system of pay based on the number of items produced or processed by each individual worker in a unit of time

Factor comparison method

this method is similar to the point system method however instead of points, monetary value is used