Chapter 11 Compensation
36 likes11,037 views
The document discusses different types of compensation and reward plans. It describes intrinsic and extrinsic rewards, financial and non-financial rewards, and performance-based and membership-based rewards. Various laws regarding compensation are also summarized, including the Fair Labor Standards Act and Equal Pay Act. The document outlines different methods for job evaluation and establishing pay structures, as well as special cases of compensation like incentives and executive compensation.
Chapter 11 Compensation
- 2. 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 promotions Ø desirable work assignments Ø peer recognition Ø work freedom
- 3. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 3 Rewards Review bonuses piecework commission incentive plans merit pay plans cost of living increase labor market adjustment profit sharing time-in-rank increase protection Program pay for time not worked services/ perks assigned parking space preferred assignments business cards own secretary impressive title participation in decision making greater job freedom more responsibility opportunities for growth diversity of activities Financial Non-financial Extrinsic Implied membership-based Performance based Explicit membership-based Intrinsic
- 4. 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 work Ø feelings of accomplishment Ø being part of a work team Øextrinsic rewards come from a source outside the job, mainly by management: Ømoney Øpromotions Øbenefits Intrinsic versus Extrinsic Rewards
- 5. 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 wages Ø bonuses Ø profit sharing Ø pension plans Ø paid leaves Ø purchase discounts Ømake life on the job more attractive; employees vary greatly on what types they like
- 6. 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 criteria Ø commissions Ø piecework pay plans Ø incentive systems Ø group bonuses Ø 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
- 7. 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 employers can research compensation facts and issues at www.salary.com http://salary.nytimes.com/ http://www.salaryexpert.com/ Øattracts Ømotivates Øretains competent employees.
- 8. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 8 Compensation Administration The Fair Labor Standards Act requires Øminimum wage Øovertime pay Ørecord-keeping Øchild labor restrictions exempt employees include professional and managerial employees not covered under FLSA overtime provisions nonexempt employees eligible for premium pay (time and one-half) when they work more than 40 hours in a week
- 9. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 9 Compensation Administration Civil Rights Act: Øbroader than Equal Pay Act Øprohibits discrimination on the basis of gender Øused 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.
- 10. 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 conditions Øcollective bargaining Øindividual skill differences
- 11. 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. ordering method classification method point method
- 12. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 12 Job Evaluation and the Pay Structure Establishing the Pay Structure compensation surveys 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. wage curves wage structure 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.
- 13. 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
- 14. 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
- 15. 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
- 16. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 16 Special Cases of Compensation Group Incentives Incentives 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
- 17. 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 See http://www.scanlonleader.org/index.php/Plans-ect./Plans-ect.html
- 18. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 18 Special Cases of Compensation Ø Competency-based compensation Ø Rewarded for skills, knowledge and behaviors Øleadership Øproblem solving Ødecision making Østrategic 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
- 19. Fundamentals of Human Resource Management, 10/e, DeCenzo/Robbins Chapter 11, slide 19 Special Cases of Compensation Øincentives for empowered work teams to exceed established goals and share equally in rewards Ødepends on: Øclarity of team purpose and goals Øability of the team to obtain needed resources Øeffective team communication skills and trust Team-Based Compensation
- 20. 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
- 21. 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
- 22. 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 insurance club memberships expense accounts free financial, legal and tax counseling company cars supplemental disability insurance interest- free loans supplemental retirement accounts postretirement consulting contracts
- 23. 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
- 24. 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 home Ø differentials: compensation given to offset higher costs of living abroad Ø 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: