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compensation & benefits > 4. pay theories > Flashcards

4. pay theories Flashcards

1
Q

what is the cost of business?

A

high employee cost

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2
Q

if business cost is a concern, why would an organization want to pay higher than the minimal?

A

the organization hangs on to the belief that higher salary will shape positive behaviour

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3
Q

with behaviour shaper, which will it attract?

A
  • attract better employees
  • lower attrition
  • higher productivity
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4
Q

what dont the organizations pay as high as possible if it may bring about positive behaviour?

A

the keyword is may and it may not guarantee plus the affordability of the organization

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5
Q

what is off-shoring?

A

work flow to the people

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6
Q

what are the characteristics of off-shoring?

A
  • many locations : go wherever the labour supply exists
  • same work, different pay : but employees may not know
  • different COL at each location : makes it difficult for employees to compare/easier to compare
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7
Q

what is in-shoring?

A

poeple flow to the work

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8
Q

what are the characteristics of in-shoring?

A
  • one location, many people : import the supply
  • same work, different pay : employees will know and compare
  • same COL at host locations, different COL at source locations : more difficult
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9
Q

what is on-site?

A
  • located at the company premises

- look at the market rate in the country

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10
Q

what is off-site?

A
  • located away from the company premises
  • look at market rate in your own country
  • may have to consider piece-rate, or kpi-related pay
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11
Q

what is off-shore?

A
  • located in another country

- look at the market rate in another country

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12
Q

what is in-shore?

A
  • import labour to your company’s location

- look at market rates of sources countries

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13
Q

what is out-shore?

A
  • give away work to a vendor

- negotiate with vendor contact value

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14
Q

what are the components of pay brand?

A
  • pay policy: how much?

- pay mix: what type?

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15
Q

what are the objectives of externally competitive?

A
  • control cost and increase reveunes

- attract and retain employees

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16
Q

what are the three policies?

A
  1. match
  2. lead
  3. lag
17
Q

what is match policy?

A
  • averae rate of pay is approx. equal to the average for the relevant labour market
  • matches an organization’s wage costs to those of its product competitors
18
Q

what are the advantages of match policy?

A
  • ability to attract potential employees will be approx. equal to its labour market competitors
  • avoids being disadvantaged in pricing product
19
Q

what is the lead policy?

A

maximizes the ability to attract and retain quality employees and minimizes employee dissatisfaction with pay

20
Q

what is the advantage of lead policy?

A

may also offset less attractive features of work

21
Q

what is the disadvantage of lead policy?

A

higher labour cost will be passed on to the consumer

22
Q

what is lag policy?

A

low costs which may hinder the firm’s ability to attract potential employees

23
Q

what will happen if the pay level remains at lag?

A
  • may increase employee commitment
  • foster teamwork
  • may possibily incrase productivity
24
Q

what is annual base salary (ABS)?

A

guaranteed pay excluding allowances that fluctuate/disappear

25
Q

what is annual total salary (ATS)?

A
  • total fixed and variable pay including bonus, stock options, allowances, commission, incentives
26
Q

what is annual total compensation (ATC)?

A
  • total package of salary and benefit

- monetize the benefits: leave, medical, insurance

27
Q

what is the advantages and disadvantages of base pay ?

A
  • advantage - tells how competitors are valuing the work in similar job
  • disadvantage - fails to include performance incentives and other forms, so will not give true picture if competitors offer low base but high incentives
28
Q

what is the advantages and disadvantages of total cash (base + bonus)?

A
  • advantage - tells how competitors are valuing work; also tells the cash pay for performance opportunity in the job
  • disadvantage - all employees may not receive incentives, so it may overstate the competitors’ pay; plus does not include long-term incentives
29
Q

what is the advantages and disadvantages of total compensation?

A
  • advantage - tells the total value competitors place on this work
  • disadvantage - all employees may not receive all the form. dont set base equal to competitors’ total compensation. risks high fixed cost
30
Q

what is pay mix?

A

how much of fixed vs how much of variable

31
Q

what would be a good pay mix?

A
  • 100% fixed is not advisable
  • at junior job level - fixed should be higher than variable
  • at senior job level - variable can and should become more significant

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