Post on 21-Apr-2017
Chapter 11
Compensation
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 2
Introduction
but the focus in this chapter is pay.
they all help maintain employee commitment
There are many work motivators, including
Ø promotionsØ desirable work assignmentsØ peer recognitionØ work freedom
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 3
Rewards Review
bonuses
piecework
commission
incentiveplans
merit payplans
cost of living increase
labor marketadjustment
profit sharing
time-in-rankincrease
protectionProgram
pay for timenot worked
services/perks
assignedparking space
preferredassignments
businesscards
ownsecretary
impressivetitle
participation indecision making
greater jobfreedom
moreresponsibility
opportunitiesfor growth
diversityof activities
Financial Non-financial
Extrinsic
Impliedmembership-based
Performancebased
Explicitmembership-based
Intrinsic
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 4
Types of Reward Plans
Øintrinsic rewards (personal satisfactions) come from the job itself, such as:
Ø pride in one’s workØ feelings of accomplishmentØ being part of a work team
Øextrinsic rewards come from a source outside the job, mainly by management:
ØmoneyØpromotionsØbenefits
Intrinsic versus Extrinsic Rewards
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 5
Types of Reward Plans
Øfinancial rewards:
Financial versus Nonfinancial Rewards
Ønonfinancial rewards:
Ø wagesØ bonusesØ profit sharingØ pension plansØ paid leavesØ purchase discounts
Ømake life on the job more attractive; employees vary greatly on what types they like
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 6
Types of Reward Plans
Ø performance-based rewards are tied to specific job performance criteriaØ commissionsØ piecework pay plansØ incentive systemsØ group bonusesØ merit pay
Ø membership-based rewards such as cost-of-living increases, benefits, and salary increases are offered to all employees
Performance-based versus Membership-Based
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 7
Compensation Administration
An effective, fair compensation program
Companies derive their compensation programs from job evaluation, which defines the appropriate worth of each job.
Both employees and employerscan research compensation
facts and issues atwww.salary.com
http://salary.nytimes.com/http://www.salaryexpert.com/
Øattracts Ømotivates Øretainscompetent employees.
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 8
Compensation Administration
The Fair Labor Standards Act requiresØminimum wageØovertime payØ record-keepingØchild labor restrictions
exempt employeesinclude professional and managerial employeesnot covered under FLSA overtime provisions
nonexempt employeeseligible for premium pay (time and one-half)when they work more than 40 hours in a week
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 9
Compensation Administration
Civil Rights Act:Øbroader than Equal Pay ActØprohibits discrimination on the basis of genderØused to support comparable worth concept Øsalaries established based on skill,
responsibility, effort, and working conditions
Equal Pay Act of 1963 requires that men and women hired for the same job be paid the same.
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 10
Job Evaluation and the Pay Structure
ØJob analysis information determines the relative value, or rank, of each job in the organization.
Research wage information at the Bureau of Labor Statistics
http://www.bls.gov/bls/blswage.htm
Job evaluation helps set pay structure.
Other pay structure factors:Ølabor market conditionsØcollective bargainingØindividual skill differences
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 11
Job Evaluation and the Pay Structure
Job Evaluation Methods
A committee places jobs in a simple rank order from highest (worth highest pay) to lowest.
Jobs placed in grades to compare their descriptions to the benchmarked jobs. Look for a common denominator (skills, knowledge, responsibility).
Jobs are rated and allocated points on several criteria. Jobs with similar point totals are placed in similar pay grades. Offers the greatest stability.
orderingmethod
classificationmethod
pointmethod
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 12
Job Evaluation and the Pay Structure
Establishing the Pay Structure
compensationsurveys
Used to gather factual data on pay rates for other organizations. Information is often collected on associated employee benefits as well.
Designates pay ranges for jobs of similar value. Results in a logical hierarchy of wages, in overlapping ranges.
wagecurves
wagestructure
Drawn by plotting job evaluation data (such as job points or grades) against pay rates (actual or from survey data).Indicates whether pay structure is logical.
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 13
Job Evaluation and the Pay Structure
External factors also influence pay structure.
Øgeographic differences (local supply and demand)
Ølabor supply (low supply = higher wages and vice versa)
Øcompetition (HR can match, lead, or lag)
Øcost of living as determined by the CPI
Øcollective bargaining (unions)
employees must know how the pay structure is derived
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 14
Special Cases of Compensation
Incentive Compensation Plans
incentives can be added to the basic pay structure to provide rewards for performance
individual
group
organization-wide
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 15
Special Cases of Compensation
Ømerit pay plans (annual increase, based on performance)
Øpiecework plans (pay based on number of units produced typically in a specified time period)
Øtime-savings bonuses and commissions
Individual Incentives
these work best where clear objectives are set and tasks are independent
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 16
Special Cases of Compensation
Group IncentivesIncentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation.
Advantages Disadvantages
ØCan be costly to install and administer.ØDe-emphasizes individual performance, which can result in excessive peer pressure.ØRequires open communication with employees on costs, profitability, etc. If the performance targets are not carefully selected, adverse results may occur. See: http://www.hrdm.net/en/group_incentive.htm
ØFocuses the group on specific performance targets.ØSince rewards are controllable by individuals, the programs can be very motivational.ØThe program can be integrated with other corporate initiatives and leads to improved communication and employee relations
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 17
Special Cases of Compensation
Organization-wide Incentives
Ødirect employee efforts toward organizational goals (such as cost reduction)
ØScanlon Plan - supervisor and employee committees suggest labor-saving improvements.
ØIMPROSHARE - formula is used to determine bonuses based on labor cost savings.
See http://www.qualitydigest.com/jul/gainshre.html
Seehttp://www.scanlonleader.org/index.php/Plans-ect./Plans-ect.html
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 18
Special Cases of Compensation
Ø Competency-based compensationØ Rewarded for skills, knowledge and behaviors
Ø leadershipØproblem solvingØdecision makingØstrategic planning
Ø Broad-banding: pre-set pay levels that determine what people are paid based on their type and level of competency.
Paying for Performance
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 19
Special Cases of Compensation
Ø incentives for empowered work teams to exceed established goals and share equally in rewards
Ødepends on:Øclarity of team purpose and goalsØability of the team to obtain needed resourcesØeffective team communication skills and trust
Team-Based Compensation
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 20
Executive Compensation Programs
Ø executive pay can run 400 times higher than that of the average worker
Ø 2008 saw a decline in exec compensation, mostly due to economic and political forces.
See:http://online.wsj.com/article/SB123375514020647787.html
Ø competition for executive talent raises the price of hiring an executive
Ø high salaries can be a motivator for executives and lower-level managers
Salaries of Top Managers
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 21
Executive Compensation Programs
Supplemental Financial Compensation
Ødeferred bonuses – paid to executives over extended time periods, to encourage them to stay with the company
Østock options – allow executives to purchase stock in the future at a fixed price
Øhiring bonuses – compensate for the deferred compensation lost when leaving a former company
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 22
Executive Compensation Programs
mortgage assistance
Supplemental Nonfinancial Compensation Perquisites
perks may include
paid life insuranceclub
memberships
expense accounts
free financial, legal and tax counseling
company cars supplemental disability insurance
interest-free loans
supplemental retirement accounts
postretirement consulting contracts
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 23
Executive Compensation Programs
Supplemental Nonfinancial Compensation Perks
Ø Golden parachutes protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position.
For the history of the golden parachute, see:http://www.businessweek.com/magazine/content/05_50/b3963111.htm
Read about the top 10 golden parachute recipients:http://www.time.com/time/specials/packages/completelist/0,29569,1848501,00.html
Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 24
International Compensation
Ø base pay: the pay of employees in comparable jobs at homeØ differentials: compensation given to offset higher costs of
living abroadØ incentives: inducements given to encourage employees to
accept overseas assignments Ø assistance programs: payment for expenses involved in
moving a family abroad and in providing some services overseas
HR needs to understand the statutory requirements of each country
International compensation packages generally utilize the “balance-sheet approach,” using these four factors: