HR Chapter 11
establishing pay rates step 1 via salary surveys
aimed at determining prevailing wage rates, when good they provide specific wage rates for specific jobs. formal written questionnaire ones of these the most expansive but telephone ones of these and newspaper ads are also sources of info
cons of competency based pay
can pay program implementation problems, has cost implications for paying for unused knowledge, skills and behaviors,is a complex program, besafek if program improves productivity
broadbanding
compensation trend involving consolidating salary grades and ranges into only a few wide lvls or bands consisting of a relatively wide range of jobs and salary lvls the wide bands allow for more flexibility in assigning workers to different job grades but the limited permanence in job responsibilities can be unsettling to new employees
computerized job evaluations
computerized system which uses structured questionaires and statistical models to streamline the job evaluation process.
employee compensation
consists of all forms of pay that employees get and what arises from their employment. Has 2 main components direct financial payments and indirect financial payments
factor comparison
consists of different jobs being ranked a bunch of times once p/each of many compensable factors - rankings p/job then combined into an overall numerical rating p/job
reasons to use competency based pay
traditional pay plans may backfire if high-performance work system= the goal, pay for skills, knowledge and competencies=more strategic and measurable skills, knowledge and competencies core of any co's performance management process
how to address equity issues
use salary surveys by monitoring and maintaining external equity, conducting a job analysis and job evaluation to maintain internal equity, look at performance appraisal and incentive pay to maintain individual equity, maintain communications, grievance mechanisms, and employee participation that will help ensure employees view the pay process as transparent and fair
strategic compensation plans
uses compensation plans to support companies strategic aims, focuses employee attention on values of winning, execution and speed and being better faster and more competitive
employee retirement income security act
(ERISA) law that provides government protection of pensions for all employees with company pension plans and regulates vesting rights (employees that leave before retirement may claim compensation from the pension plan)
advantages of computer aided job evaluations (CAJE)
- simplifies the job analysis - helps keep job description up to date - increases evaluation objectivity - reduces time spent in commitee meetings - eases the burden of system maintenance
fair labor standards act
1938 first passed but has been amended many times consists of minimum wage, max. hrs, overtime pay, equal pay, record keeping and child labor provisions familiar to most workers. covers majority of usa workers virtually all those engaged in production and or sale of goods for interstate and foreign commerce. additionally agricultural workers and those employed by certain larger retail and service companies included. state fair labor standards laws cover most employers not covered by the fair labor standards act (FLSA).
title VII of the 1964 civil rights act
act which makes it unlawful for employers to discriminate against any individual with respect to hiring, compensation, terms, conditions or privileges of employment due to race, color, religion, sex or national origin
equal pay act
amendment to the fair labor standards act. states that employees of one sex may not be paid wages at a rate lower than that paid to employees of the opposite gender for doing basically equal work. Specifically if the work requires equal skills, effort and responsibility and involves similar working conditions, employees of both genders need to receive equal pay , unless the differences in pay stem from a seniority system, merit system, quantity or quality of production or any other factors besides sex
compensating managers
can be done through base pay, short-term incentives, long term incentives, and executive benefits and perks
pay grade
consists of jobs of approx.= difficulty or importance determined by a job evaluation. when using the pt method of job evaluation this consists of jobs that fall within a range of pts if the ranking method was used though grade consists of specific number of rates and if calssification system used then jobs already categroized into classes or grades
factor comparison job evaluation method
consists of obtaining job info, selecting key benchmark jobs, ranking key jobs by factors, distribute wage rate by factors, rank key jobs in accordance with wages assigned p/different factors, compare different sets of rankings to screen out unusable key jobs, construct job-comparison scales, use the job comparison scale
correcting out of line pay rates
consists of raising underpaid jobs to the min. of rate range p/pay grade, involves the freezing of rates or cutting pay rates for overpaid (red circle) jobs to max. in pay range p/pay grade
competency based pay lemaaseh
consists of the main parts of skill/competency knowledge based pay programs or a system which defines specific skills and a process for tying ones pay to their skills, training systems which allow employees to seek and acquire skills, formal competency testing system, work design which allows employees to move among jobs to permit work assignment flexibility
competencies
demonstratable characteristics of someone including their knowledge, skills and behaviors which enable them to perform
the pt method of job evaluation
determine clusters of jobs to be evaluated, collect job info, select compensable factors, define compensable factors, define factor degrees determine relative values of factors
direct financial payments
employee compensation like wages salaries, incentives, commissions and bonuses
aligned rewards strategy
employers basic task here to create bundle of rewards or total reward package specifically aimed at eliciting employee behaviors to do this firms need to support and achieve their competitive strategies. HR or compensation managers according to this strategy will write policies in conjuction with top management in manners that policies consistent with firms strategic aims.
the family and medical leave act
entitles eligible employees both men and women to take max. of 12 wks of unpaid job protected leave for the birth of a child or care of a child, spouse or parent
long term incentives
ex- stock options, formof compensation
indirect financial payments
financial benefits like employer paid insurance and vacations
incentives
financial rewards paid to workers whose production exceeds a predetermined standard
how to compensate professional employees
for professional jobs employers can use job evaluations,can use compensable factors based focused on problem solving, creativity, job scope, technical knowledge and expertise. firms use the pt and factor comparison methods but job classification is the most popular. professional jobs also market priced to establish values for benchmarked jobs
base pay
form of compensation with fixed salary and guaranteed bonuses
executive benefits and perks
form of compensation, consists of retirement plans, life insurance and health insurance without a deductible or coninsurance
compensable factors in establishing pay rates
fundamental, compensable element of a job like skills, effort, responsibility and working conditions
wage structure
graph where pay rate or range tends to appear as vertical boxes within each grade showing min, max. and mdpt pay rates p/graph)
pros of competency based pay
has higher quality and lower absenteeism and fewer accidents
IBM's strategic compensation plan
has marketplace rules, consists of fewer jobs that are evaluated differently in broadbands, has managers manage and has big stakes for stakeholders
4 degrees of supervision
highest deg-gives much gets little high degree-gives much-gets much low degree-gives none-gets little low degree-gives none, gets much
individual equity
how fair individuals pay is what them and their co-workers earn for the same or similar jobs within their company
internal equity
how fair jobs pay rates is when compared to other jobs within the same company
external equity
how one jobs pay rate in one company compares to the jobs pay rate in other companies
prep for a job evaluation
identifying the need for a job evaluation, getting employee cooperation, choosing an evaluation commitee, performing an actual evaluation
sources for salary surveys
includes consulting firms, professional associations, and government agencies. us department bureau of labor statistics conducts 3 of these: area wage, industry wage and professional, administrative, technical and clerical PATC surveys
how to develop an aligned rewards strategy
involves determining a companys key success factors or what companies need to do to be successful in fulfilling their mission and achieving their desired competitive position, establish what employee behaviors or actions needed to successfully implement competitive strategies for them, determining proper compensation programs we should use to reinforce employee behaviors that could help implement competitve strategies, determining the purpose of each program in reinforcing desired behaviors, deciding measurable requirements for compensation programs to meet to determine it is successful in fulfilling its purpose figuring out how well current compensation programs match these requirements
developing pay ranges
involves flexibility in meeting external job market rates, allows employees to more easily move into higher pay grades, allows for rewarding performance differences and seniority
steps in job ranking
involves obtaining job info, selecting and grouping jobs, selecting compensable factors, ranking jobs and combining ratings
ranking as part of job evaluation
involves ranking jobs relative to other jobs usually based on overall factors
job classification
involves raters categorizing jobs into groups or classes of roughly the same value for pay purposes. - different classes contain similiar jobs - grades are jobs similiar in difficulty but otherwise different - jobs classed by the amount or lvl of compensable factors they consist of
grades
job classification system like the class system, while grades tend to contain dissimilar jobs, like mechanics grade descriptions written based on compensable factors listed in classification systems
benchmark jobs
jobs used to anchor employer's pay scales and around which other jobs are arranged in order of relative worth. representative of the entire range of jobs employers need to evaluate (e.g. accounting clerk should be common amongst employers)
short term incentives
like cash or stock bonuses,type of compensation
sample definitions of factors which are typically used in the factor comparison process
mental requirements consisting of possessing or actively applying mental traits like memory, general edu and specialized knowledge like chem; skills that are acquired like facilitating muscle coordination only acquired by performance of work and not be confused with general edu. or specialized knowledge involves a great amount of training in the interpretation of sensory impressions (e.g. in operating an adding machine), physical requirements or making a physical effort doing things like standing and physical status like age, responsibility for money (e.g. savings) . For supervision. 1. Primarily the complexity of supervision given to subordinates; the number of subordinates is a secondary feature. Planning, direction, coordination, instruction, control, and approval characterize this kind of supervision. 2. Also, the degree of supervision received. If Jobs A and B gave no supervision to subordinates, but A received much closer immediate supervision than B, then B would be entitled to a higher rating than A in the supervision factor. and working conditions or A. Environmental influences such as atmosphere, ventilation, illumination, noise, congestion, fellow workers, etc. B. Hazards—from the work or its surroundings. C. Hours.
the point method
overall aims to determine degree which jobs being evaluated contain selected compensable factors. involves identifying several compensable factors for jobs along with the degree which each factor is present in the different jobs (e.g. if 5 compensable factros to responsiiblity in a job and you assign different pts p/degree of each compensable factor (like responsiiblity and effort) present p/job then you can figure out total pt. value p/job by adding up corresponding degree pts. p/factor resulting in quanttiative pt ratngs p/job.
possible compensation policy issues
pay p/performance, pay for seniority, the pay cycle, salary increases and promotions, overtime and shift pay, probationary pay, paid and unpaid leave, paid holidays, salary compression, geographic costs of living interests
competency based pay
paying an employee based on their range, depth, types of skills and knowledge as opposed to their job titles.
procedural equity
perceived fairness of the process and procedures to make decisions related to allocation of pay
the age discrimination in employment plan
prohibits age discrimination against employees 40+ yrs old in all aspects of employment including compensation
americans with disabilities act
prohibits discrimination against qualified ppl with disabilities in all areas of employment including compensation
comparable worth
refers to requirements men and women to have equal wages for comparable jobs which dont neccessarily have equal value to ones employer(s) - addresses issue of women with jobs dissimilar to men and jobs that tend to be consistently valued less than mens jobs
salary compression
salary inequity problem which is usually caused by inflation and results in longer term employees in positions were they earn less than workers entering the firm today
determinators of executive pay
set by board of directors taking into account factors like business strategy, corporate trends, and where you want to end up in the short and long term, firms pay ceos based on complexity of the jobs they fill. Boards reduce relative importance of base salary while boosting emphasis on performance based pay
wage curve
shows pay rates currently paid for jobs p/pay grade relative to pts. or rankings assigned to each job or grade by job evaluations - shows relationships btw values of jobs determined by 1 of the job evaluation methods and the current avg pay rates p/grades
the equity theory of motivation
states that peoples perceived inequity will lead them to be motivated to reduce or eliminate tension and perceived inequity
job evaluation in establishing pay rates
systematic comparison done in order to determine the worth of one job relative to another
potential factors which are lowering the earnings of women
womens starting salaries tend to be lower, salary increases for women in professional job settings are not reflective of above avg performance, in white collar jobs men change jobs more often allowing them to get promoted to higher up positions more so than women with more seniority where they work - for blue collar work women tend to be placed in depts. with lower paying jobs.
grade definitions for job evaluations
written descriptions of the level of e.g. responsibility and knowledge needed by jobs p/grasde. similar jobs combined into grades or classes.
