Rewards and Benefits Unit 2

Classification

A series of classes covers the range of jobs.▪ Job descriptions are compared to class descriptions to determine class level.▪ Greater specificity of the class definition improves the reliability of the evaluation.▪ It also limits the number of jobs easily classified.▪ Jobs within each class are considered equal and will be paid equally.

Benchmark Job approach survey

Benchmark jobs have stable job content, are common, and include sizable numbers of employees

Disadvantages of Point

Can become bureaucratic and rule-bound

Advantages of classification

Can group a wide range of work together in one system

Advantages Point

Clear basis of comparison with compensable factors• Communicate what is valued

Comptencines

Collection of knowledge, skills, abilities and other characteristics (KSAO's) that are needed for effective performance of the job.

Market pay line

Combine internal structure and external market rates

Point method

Compensable factors based on:▪ the strategic direction of the business, and▪ how the work contributes to the objectives and strategy.2. Factor degrees numerically scaled.3. Weights reflect the relative importance of each factor.

Steps of point method

Conduct job analysis, determine compensable factors, scale the factors, weight factors by importance, select criterion pay structure, communicate and train users, apply to remaining jobs, develop online support

Assumptions about job content

Content has intrinsic value outside external market

Benchmark jobs

Contents are well known and relatively stable.○ The job is common across employers, not unique to one employer.○ A reasonable proportion of the work force is employed in this job.

Establish a purpose

Create a structure that:● supports organization strategy,● supports work flow,● is fair to employees, and● motivates behavior toward organization objectives.

Disadvantages of classification

Descriptions might leave too much room for manipulation

Benchmark conversion/survey leveling

Differences are quantified when job content does not sufficiently match survey jobs.

Single vs multiple plans

Different evaluation plans for different types of work

Disadvantages of ranking

Difficulty increases with amount of jobs• No clear basis of comparison

Generalist/multiskill based: breadth

Earn pay increases by acquiring new knowledge

Decisions for internal allignment

Establish purpose of the evaluation• Single or multiple plans• Choose among alternative approaches• Obtain involvement of relevant stakeholders• Evaluate plan's usefulness

Essential criteria of competency based

Fairness in the plan's administration.• Availability of sufficient information.• Adequate communication and employee involvement.

Human capital

General and specific skills require an investment in human capital

Assumption about measurement

Honing instruments will provide objective measures

Pay structure

Is anchored by the organization's external competitive position and reflected in its pay-policy line.

Skill-based structure

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

Assumption about negotiations

Negotiation brings rationality, establishes rules of the game and invites participation

Value Evaluation

Order jobs on relative contribution of the:• Skills• Duties• Responsibilities

Alternation Ranking

Orders job descriptions alternately at each extreme.▪ Evaluators agree on which jobs are the most and least valuable, then the next, etc.

Job structure (pay)

Orders jobs on the basis of internal factors (reflected in job evaluation or skill certification).

Specialist: depth

Pay is based on knowledge of the person doing the job, rather than on job content or output.

Sorting and signaling

Pay policies signal to applicants the attributes that fit the organization. Applicants may signal their attributes by investments they have made in themselves

Variation

Quartiles and percentiles are a common measure.

Central tendency

Reduces a large amount of data into a single number.

Person Based structure

Skills and competencies

Assumptions about relative value

Stakeholders can reach consensus on value

Surveys

Systematic process of collecting data and making judgments about compensation paid by other employers.

Job structure

Systematically determining the relative worth of jobs using job content, skills required, value to the organization, organizational culture, and external markets

Marginal Product of labor

The additional output associated with the employment of one additional person, with other production factors held constant.

Pay level

The average of the array of rates paid by an employer: (base + bonuses + benefits + value of stock holdings) number of employees

External competitiveness

The pay relationships among organizations - the organization's pay relative to its competitors.

Broad banding

The size of differentials between grades should support career movement through the structure.

Overlap

The size of differentials between grades should support career movement through the structure.

Pay mix

The various types of payments, or pay forms, that make up total compensation.

Paired comparison

Uses a matrix to compare all possible pairs of jobs.▪ When all comparisons are completed, the job judged "more valuable" becomes the highest ranked job, and so on.

Assumptions about external market

Value cannot be determined without external market

Low-high approach

Wages of lowest- and highest-paid benchmark jobs used as anchors for skill-based structures.

Outcomes of skill-based plans

Well accepted by employees. Become increasingly expensive.•A plan's success is determined by how well it aligns with the organization's strategy.•May fit better in a firm with low labor costs.•"Jack-of-all-trades"? Or master of none?

Content Evaluation

What work is performed and how it gets done.Order jobs by:• Skills• Duties• Responsibilities

Internal allignment

Work relationships within

Efficiency Wage

an above-market wage that a firm pays to increase workers' productivity

Frequency distribution

base paytotal cash (base+bonus)total compensation (base+bonus+stock+benefit

Total compensation data

base paytotal cash (base+bonus)total compensation (base+bonus+stock+benefit

Pay range

exists whenever two or more rates are paid to employees in the same job.

Organization Data

financial data and reporting relationships,turnover and revenues.

Marginal revenue of labor

is the additional revenue generated when the firm employs one additional person, with other production factors held constant. Money generated by the sale of the marginal product. Since employers seek to maximize profits, the employer will hire until the marginal revenue equals the costs associated with the most recent hire.

Job competition

job requirements may be relatively fixed. Thus, workers may compete for jobs based on their qualifications, not based on how low of a wage they are willing to accept. Thus, wages are sticky downward.

Reservation Wage

job seekers will not accept jobs with pay below a certain wage, no matter how attractive other job aspects

Diminishing marginal productivity

means each additional employee has a progressively smaller share of production factors to work with

Relevant market

occupation, geography, and competitors.

Relevant labor markets include

the same occupations or skills,employees within the same geographic area, orthe same products and services.

Compensating Differentials

work with negative characteristics requires higher pay to attract/retain workers

Advantages of Ranking

• Fast• Simple, easy to understand• Least expensive (initially)• Easy to explain