Post on 05-Apr-2018
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Human ResourceManagement
Wage, Salary and RewardAdministration
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Chapter Content:
We will cover the following:
Remuneration & its Components
Compensation Administration Process
Wage & salary Administration
Different types of reward
Different types of Incentives and Incentives
Plan
International Compensation.
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Remuneration & Its Components
Hourlyand
monthly
RatedWagesand
Salaries
Direct Indirect
Remuneration
Financial Non Financial
Incentives
Individual
Plans
GroupPlans
FringeBenefits
P.F,Gratuity,Medical
Care,Accident
Relief,Health and
Group
insurance
Perquisites
CompanyCar, Club
Membership,
PaidHolidays,Furnished
House, Stockoption
scheme, etc
Job Content
Challenging job,Responsibilities,
Recognition,
Growthprospects,
Supervision,Working
conditions, Jobsharing, etc.
Definition: Remuneration' is a general term covering the
monetary and related entitlements of employees - paid by
employers in return for the work of employees.Components:
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Compensation Administration Process
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Job Analysis
It contains two parts: Job Description & Job
Specification. This can help to know about
the duties and responsibilities will be
covered by the specific job and also thequality of the people engaged in that job.
This is necessary to set a rationale pay
structure for a specific position.
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Job Evaluation
FactorComparison
Ranking Classification
Point
Method
JobEvaluationMethods
Job Evaluation: The systematic determination of the
relative worth of jobs within an organization.
Methods of Job Evaluation
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Quantitative Job Evaluation Methods
Factor Comparison Job Evaluation Method
Step 1. Obtain job information
Step 2. Select key benchmark jobs
Step 3. Rank key jobs by factor
Step 4. Distribute wage rates by factors
Step 5. Rank key jobs according to wages
assigned to each factor
Step 6. Compare the two sets of rankings toscreen out unusable key jobs
Step 7. Construct the job-comparison scale
Step 8. Use the job-comparison scale
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The Point Method of Job Evaluation
Step 1. Determine clusters of jobs to be
evaluated
Step 2. Collect job information Step 3. Select compensable factors
Step 4. Define compensable factors
Step 5. Define factor degrees
Step 6. Determine relative values of factors
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Job Evaluation Methods: Ranking
Ranking each job relative to all other jobs,
usually based on some overall factor.
Steps in job ranking:Obtain job information.
Select and group jobs.
Select compensable factors.Rank jobs.
Combine ratings.
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Job Evaluation Methods: Job Classification
Raters categorize jobs into groups or classesof jobs that are of roughly the same value
for pay purposes.
Classes contain similar jobs.Grades are jobs that are similar in difficulty but
otherwise different.
Jobs are classed by the amount or level ofcompensable factors they contain.
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Developing Pay Surveys
Select Employers with Comparable Jobs
Determine Jobs to be Surveyed
Decide What Information Is Needed
Conduct Survey
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Pay StructuresCommon Pay Structures
Hourly and salaried
Office, plant, technical, professional, managerial
Clerical, information technology, professional,supervisory, management, and executive
Factors that affect Remuneration/Pay Structure:
External:
Labor market Cost of Living
Society
The economy
Geographic LocationInternal Factor:
Business Strategy
Job Evaluation & Performance Appraisal
The employee
Kind of business
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Establishing
Pay Structures
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Wage & Salary
Wages: Wages are compensation. This includes
basic wages, allowances, bonuses etc. On theemployers points of view, wages form that part ofcost of production which is attributed ascompensation paid to labor. Wages are paid in theform of time rate or piece rate to the workers, who
are directly involved in the production orcommercial activities.
Salary: This is compensation paid to the indirect
labor in the form of cash. Indirect labor involvessupervisors, managers and supporting staff likeoffice assistants, clerks, etc. Salaries are paid inthe form of time rate, mostly on monthly basis.
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Wage & Salary On the basis of the employee needs and ability of the
organization, there are various kinds of wages. Wages are
generally four types: Subsistence wages
Minimum Wages
Fair Wages
Living Wages
Subsistence wages: This is level of wage bellows theminimum level which can lead inhuman life to theemployees.
Minimum Wages: This is a wage level fixed bygovernment which is considered adequate, taking intoaccount the cost of living. All the organizations are boundto follow this direction so that no employee is paid a wageless than the minimum wage fixed by governmentirrespective of grade, class or nature of work.
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Wage & Salary
Fair Wages: This is fixed by employer. This level
of wage varies from industry to industry. Themain criteria are the capacity of payment. Fairwage is a wage above the minimum wage butbelow the living wage.
Living Wages: Living wage is one which shouldenable the earner to provide for himself and hisfamily not only the bare essentials of food,clothing and shelter, but a measure of frugalcomfort, including education for his children,protection against ill health, requirement ofessential social needs and a measure of insuranceagainst the more important misfortune including
old age.
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Reward
People do what they do to satisfy someneed and they look for a payoff or reward.
The most obvious reward is pay, but there
are many others, including: promotions
desirable work assignments
peer recognition work freedom
Types of Reward
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Types of Reward
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Types of Reward
Intrinsic versusExtrinsic Rewards Intrinsic rewards (personal satisfactions) come
from the job itself, such as: pride in ones work
feelings of accomplishment being part of a work team
Extrinsic rewards come from a source outside thejob
include rewards offered mainly by management Money
Promotions
Benefits
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Types of Reward
FinancialversusNon-financialRewards
Financialrewards include: wages
bonuses profit sharing
pension plans
paid leaves
purchase discounts Non-financialrewards emphasize making life on
the job more attractive; employees vary greatly onwhat types they find desirable.
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Types of Reward
Performance-basedversusMembership-BasedRewards
Performance-basedrewards are tied to specific
job performance criteria. commissions piecework pay plans
incentive systems
group bonuses merit pay
Membership-basedrewards such as cost-of-livingincreases, benefits, and salary increases are
offered to all employees.
I i C i
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Incentive Compensation
Incentives can be added to the basic pay structure toprovide rewards for performance. It may be 3types:1. Individual Incentives
2. Group Incentives
3. Plant-wide Incentives
Individual Incentives include merit pay plans (annual increase, based on
performance)
piecework plans (pay based on number of unitsproduced typically in a specified time period.)
time-savings bonuses and commissions
Work best where clear objectives can be set and tasks
are independent.
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Incentive Compensation
Incentive Compensation Plans:
Group Incentives Incentives can be offered to groups, rather than
individuals, when employees' tasks are interdependentand require cooperation.
Plant-wide Incentives: Direct employee effortstoward organizational goals (such as cost
reduction) Scanlon Plan - supervisor and employee committeessuggest labor-saving improvements
IMPROSHARE - formula is used to determine bonusesbased on labor cost savings
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Different types of Incentive Plan
Incentive Plan /Incentives Payments
There are following three types of incentive plans:
The Rowan plan
Taylors Differential Piece Rate Plan Emersons Efficiency Plan
Halsey System
Bedeaux system
Taylors Differential Piece Rate System
Merrick Differential Piece Rate System
Gantt Task Method
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Rowan Plan
In Rowan Plan, bonus paid to the employee is
equal to the proportion of time saved to thestandard time. Under the Rowan plan, standard
time and rate per hour are fixed. If the time taken
to complete the job in equal to or exceeds the
standard time, the employee is paid for the time
taken at the rate per hour. If the time taken is less
than the standard time, the employee is entitled to
bonus, in addition to the time wages. The bonustakes the form of a percentage of workers time-
rate. This percentage is equal to the proportion of
the saved time, to the standard time.
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Example of Rowan Plan
Standard time = 10 hrs
Rate per hour = Tk.1 Case-1
Time Taken = 10 hrs
Earnings = 10X1= Tk. 10.00
Case-2
Time Taken = 12 hrs Earnings = 12X1= Tk. 12.00
Case-1
Time Taken = 8 hrs
Earnings = 8X1= Tk. 8.00 Bonus =2/10x8=Tk. 1.60
Tk. 9.60
H l Pl
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Halsey Plan
In this method bonus paid to a worker is equal to 50% oftime saved multiplied by rate per hour. a standard time is
fixed on the basis of previous performance for thecompletion of a job. When the work is completed in lessthan the standard time, for the time actually spent on the
job, he is paid at an hourly rate on a percentage (50%) ofthe time saved by him.
Standard Time = 10 Hrs; Rate per hour = Tk. 1
Case-1: Time taken = 10 hrs
Earnings = 10*1= Tk 10
Case-2: Time taken = 12 hrs
Earnings = 12*1=Tk 12
Case-3: Time taken = 8 hrs Earnings:
Time wages = 8*1 = Tk 8.00
Bonus = *2*1 = Tk 1.00
Tk 9.00
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Taylors differentiate piece rate system
An efficient (output exceeds standard) worker is
paid 120% of the piece rate and an inefficient
(output bellow standard) worker is paid only 80%
of the piece rate. Example: Standard output: 100 units, Standard
Rate: Tk 1.
Earnings at 120 units output=120*120/100*1=144
Earnings at 90 units output = 90*80/100*1=72
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Emersions Plan
In this method upto 67% of efficiency, only time rate is
paid to the worker. Beyond this, a graduated bonus of 20%at 100% efficiency is paid. Thereafter, an additional bonusof 1%, for each additional bonus of 1% for each additional1% efficiency is added
Example: Standard output is 100 units in 10 hrs and rate
per hour = Tk 1 Earnings at 50 units in 10 hrs= 10*1=Tk 10 [as the
efficiency is
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Executive Compensation Components
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Executive Compensation
ProgramsSalaries of Top Managers
Executive salaries, bonuses and stock
options may seem high.
Top twenty CEOs average more than $100million in total compensation.
Competition for executive talent raises the
price of hiring an executive. High salaries can be a motivator for
executives and lower-level managers
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Executive Compensation
ProgramsSupplemental Financial Compensation
Deferred bonusespaid to executives over
extended time periods, to encourage them to
stay with the company. Stock optionsallow executives to purchase
stock in the future at a fixed price.
Hiring bonusescompensate for the deferredcompensation lost when leaving a former
company.
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Executive Compensation Programs
Supplemental Non-financial Compensation:
Perquisites
Perks may include the following:
Golden parachutes protect executives when a
merger or hostile takeover occurs by providing
severance pay or a guaranteed position
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International Compensation
International compensation packagesgenerally consider the following fourfactors: Base Pay: The pay of employees in
comparable jobs at home. Differentials: Compensation given to offset
higher costs of living abroad.
Incentives: Inducements given to encourage
employees to accept overseas assignments. Assistance Programs: Payment for expenses
involved in moving a family abroad and inproviding some services overseas.