Compensation and Reward
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)
