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