Chapter Managing Compensation Managing Human Resources Power Point

Learning Outcomes After studying this chapter, you should be able to: 1. 2. 3.

Learning Outcomes (Cont’d) After studying this chapter, you should be able to: 6. 7.

Compensation q. Pay is a statement of an employee’s worth by an employer. q.

Goals of compensation To Attract Employees To Retain Employees To Motivate Employees Copyright ©

Compensation Management and Other HRM Functions Supply of applicants affects wage rates Aid or

Strategic Compensation Planning q. Strategic Compensation Planning Ø Links the compensation of employees to

Linking Compensation to Organizational Objectives q. Alignment between business strategy and compensation objectives. Ø

Common Strategic Compensation Goals 1. To reward employees’ past performance. 2. To remain competitive

The Pay-for-Performance Standard q. Pay-for-Performance Standard Ø The standard by which managers tie compensation

Designing a Pay-for-Performance System q. How will performance be measured? q. How will monies

Motivating Employees through Compensation q. Pay Equity Copyright © 2011 by Nelson Education Ltd.

Figure 9– 1 Relationship between Pay Equity and Motivation The greater the perceived disparity

Expectancy Theory and Pay q. Expectancy Theory Copyright © 2011 by Nelson Education Ltd.

Figure 9– 2 Pay-for-Performance and Expectancy Theory Copyright © 2011 by Nelson Education Ltd.

Motivating Employees through Compensation (cont'd) q. Pay Secrecy Copyright © 2011 by Nelson Education

The Bases for Compensation q. Hourly Work q. Piecework q. Salary Workers Copyright ©

The Wage Mix q. How are the wages for my job determined? Internal Factors

The Wage Mix—Internal Factors q. Employer’s Compensation Strategy q. Worth of a Job q.

The Wage Mix—External Factors q. Labour Market Conditions q. Area Wage Rates Copyright ©

The Wage Mix—External Factors q. Cost of Living Copyright © 2011 by Nelson Education

Consumer Price Index (CPI) q A measure of the average change in prices over

The Wage Mix—External Factors q. Collective Bargaining Copyright © 2011 by Nelson Education Ltd.

Job Evaluation Systems q. Job Evaluation Copyright © 2011 by Nelson Education Ltd. 9–

Different Job Evaluation Systems SCOPE OF COMPARISON BASIS FOR COMPARISON Job vs. job Job

Job Evaluation Systems (Cont'd) q. Job Ranking System Copyright © 2011 by Nelson Education

Job Evaluation Systems (Cont'd) q. Job Classification system Copyright © 2011 by Nelson Education

Point System q. The Point Manual Copyright © 2011 by Nelson Education Ltd. 9–

Work Valuation Methods q. Work Valuation Ø A job evaluation system that seeks to

The Compensation Structure q. Wage and Salary Survey q. Labour Market Copyright © 2011

Collecting Survey Data q. Outside Sources of Data q. Problems with Surveys Copyright ©

The Wage Curve q. Pay Grades q. Rate Ranges q. Red Circle Rates Copyright

Figure 9– 4 Freehand Wage Curve Copyright © 2011 by Nelson Education Ltd. 9–

Figure 9– 5 Single Rate Structure Copyright © 2011 by Nelson Education Ltd. 9–

Figure 9– 6 Wage Structure with Increasing Rate Ranges Copyright © 2011 by Nelson

The Wage Curve (cont’d) q. Competence-based Pay q. Broadbanding Copyright © 2011 by Nelson

Government Regulation of Compensation Canada Labour Code Minimum labour standards for all employees falling

Significant Compensation Issues q. Equal Pay for Work of Equal Value q. Wage-Rate Compression

Reducing Wage-Rate Compression q. Give larger compensation increases to more-senior employees. q. Emphasize pay-for-performance

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Chapter Managing Compensation Managing Human Resources Power. Point Presentation by Monica Belcourt, York University and Charlie Cook, The University of West Alabama

Learning Outcomes After studying this chapter, you should be able to: 1. 2. 3. 4. 5. Explain employer concerns in developing a strategic compensation program. Indicate the various factors that influence the setting of wages. Differentiate the mechanics of each of the major job evaluation systems. Explain the purpose of a wage survey. Define the wage curve, pay grades, and rate ranges as parts of the compensation structure. Copyright © 2011 by Nelson Education Ltd. 9– 2

Learning Outcomes (Cont’d) After studying this chapter, you should be able to: 6. 7. Identify the major provisions of the laws and regulations affecting compensation. Discuss the current issues of equal pay for work of equal value and pay compression. Copyright © 2011 by Nelson Education Ltd. 9– 3

T o ta l C o m p e n s a ti o n Direct Indirect Wages / Salaries Time Not Worked Commissions • Vacations • Breaks • Holidays Insurance Plans Bonuses Gainsharing • Medical • Dental • Life Security Plans • Pensions Employee Services • Educational assistance • Recreational programs Copyright © 2011 by Nelson Education Ltd. 9– 5

Compensation Management and Other HRM Functions Supply of applicants affects wage rates Aid or impair recruitment Recruitment Pay rates affect selectivity Selection standards affect level of pay required Pay can motivate training Training and Development Increased knowledge leads to higher pay Training and development may lead to higher pay Low pay encourages unionization Copyright © 2011 by Nelson Education Ltd. Compensation Management Labour Relations A basis for determining employee’s rate of pay Pay rates determined through negotiation 9– 7

Strategic Compensation Planning q. Strategic Compensation Planning Ø Links the compensation of employees to the mission, objectives, philosophies, and culture of the organization. Copyright © 2011 by Nelson Education Ltd. 9– 8

Linking Compensation to Organizational Objectives q. Alignment between business strategy and compensation objectives. Ø Change in business strategy requires change in compensation strategy. Copyright © 2011 by Nelson Education Ltd. 9– 9

Common Strategic Compensation Goals 1. To reward employees’ past performance. 2. To remain competitive in the labour market. 3. To maintain salary equity among employees. 4. To mesh employees’ future performance with organizational goals. 5. To control the compensation budget. 6. To attract new employees. 7. To reduce unnecessary turnover. Copyright © 2011 by Nelson Education Ltd. 9– 10

Designing a Pay-for-Performance System q. How will performance be measured? q. How will monies to be allocated for compensation increases. q. Which employees will be eligible? q. How will payouts be made? q. How often will payouts occur? q. How large will the payouts be? q. Will employees perceive the rewards as valued? Copyright © 2011 by Nelson Education Ltd. 9– 12

Figure 9– 1 Relationship between Pay Equity and Motivation The greater the perceived disparity between my input/output ratio and the comparison person’s input/output ratio, the greater the motivation to reduce the inequity. Copyright © 2011 by Nelson Education Ltd. 9– 14

Different Job Evaluation Systems SCOPE OF COMPARISON BASIS FOR COMPARISON Job vs. job Job vs. scale Copyright © 2011 by Nelson Education Ltd. JOB AS A WHOLE JOB PARTS OR FACTORS (NONQUANTITATIVE) (QUANTITATIVE) Job ranking system Factor comparison system Job classification system Point system 9– 26

Government Regulation of Compensation Canada Labour Code Minimum labour standards for all employees falling within federal jurisdiction Employment Standards Acts Example: minimum work week and provision for 1. 5 times in overtime payment. Pay Equity Fair employment practices applied to members of designated groups, regulated provincially. Copyright © 2011 by Nelson Education Ltd. 9– 39

Reducing Wage-Rate Compression q. Give larger compensation increases to more-senior employees. q. Emphasize pay-for-performance and reward meritworthy employees. q. Limit the hiring of new applicants seeking exorbitant salaries. q. Design the pay structure to allow a wide spread between hourly and supervisory jobs or between new hires and senior employees. q. Provide equity adjustments for selected employees hardest hit by pay compression. Copyright © 2011 by Nelson Education Ltd. 9– 41