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