7. COMPENSATION

Question 1

What are the basic factors that determine the pay plan or compensation

Answer 1

(Direct financial payments and indirect financial payments such as insurance)

The factors:

• legal
• union
• collective labor agreements
• company strategy/ policy
• equity

Question 2

The reward system should be aligned with strategy, this means…

Answer 2

Rewards should provide a clear match between each reward and the specific business goal

Question 3

What is external equity?

Answer 3

How a job’s pay rate in one company compares to job’s pay rate in other companies

Question 4

Internal equity

Answer 4

How fair the job’s pay rate is, when compared with jobs of same company

Question 5

Individual equity

Answer 5

Fairness of an individuals’ pay compared with coworkers’ pay

Question 6

Procedural equity

Answer 6

Perceived fairness of procedures to make decisions regarding allocation of pay

Question 7

Types of equity

Answer 7

• external
• internal
• individual
• procedural

Question 8

What 2 basic approaches do managers use to setting pay rates?

Answer 8

• market-based approaches

- job evaluation methods

Question 9

What is job evaluation

Answer 9

Comparison of the worth of a job to another. It involves assigning values to each job = results on salary structure

Question 10

What are the job evaluation methods to determine value of job? (COMPENSABLE FACTORS)and ways of rating it?

Answer 10

• greater qualifications
• more responsibilities
• more complex job duties
• ranking (by departments)(factor: job difficulty. Explain factors to evaluators) (several ratings, rating committee does average
• job classification (grading and grouping into classes )
• point method (evaluating several compensable factors)=results in quantitative view

Question 11

What is the system to find the adequate salary structure ?

Answer 11

• job description
• job evaluation
• performance appraisal

-market-competitive pay (employers pay rates are competitive with those on labor market)

Pay