9 - compensation

Question 1

What is pay?

Answer 1

Pays is a powerful tool for meeting the organization’s goals and a major cost. It has a large impact on employee attitudes and behaviors.
It influences the kinds of people who are attracted to (or remain with) the organization.
Employees attach great importance to pay decisions when they evaluate their relationships with their employer.

Question 2

What are the decisions about pay?

Answer 2

Job structure, pay level, pay structure.

Question 3

what is job structure?

Answer 3

Relative pay for different jobs within the organization.

Question 4

What is pay structure?

Answer 4

Pay policy resulting from job structure and pay-level decisions.

Question 5

What are the issues in developing a pay structure?

Answer 5

• Legal requirements
• market forces
• organisation’s goals

Question 6

What are the pay structure legal requirements?

Answer 6

Equal pay for equal work, minimum wage, overtime pay, restrictions on child labor.

Question 7

What are the pay structure market forces?

Answer 7

Product markets, labor markets.

Question 8

What are the pay structure organisation’s goals?

Answer 8

High-quality workforce, cost control, equity and fairness, legal compliance.

Question 9

What is equal employment opportunity?

Answer 9

Two employees who do the same job cannot be paid different
wages because of gender, race, or age.

Question 10

What are minimum wages?

Answer 10

The lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour. In Germany, wages often result of collective bargaining processes.

Question 11

What is pay for overtime?

Answer 11

Overtime pay is required, whether or not the employer specifically asked or expected the employee to work more than (usually) 40 hours.

Question 12

What are exempt employees?

Answer 12

Managers, outside salespeople, and other employees not covered by FLSA requirement for overtime pay.

Question 13

What are nonexempt employees?

Answer 13

Employees covered by FLSA (Fair Labor Standards Act; U.S) requirements for overtime pay.

Question 14

What are product markets?

Answer 14

• The organization’s product market includes organizations that offer competing goods and services.
• Organizations compete on quality, service, and price.
• The cost of labor is a significant part of an organization’s costs.

Question 15

What are labor markets?

Answer 15

• Organizations must compete to obtain human resources in labor markets.
• Competing for labor establishes the minimum an organization must pay to hire an employee for a particular job.

Question 16

What is pay level?

Answer 16

The average amount the organization pays for a particular job.
Pay at:
- The rate set by the market
- A rate above the market
- A rate below the market

Question 17

What is the information we should gather about market pay?

Answer 17

• Benchmarking
• Pay surveys
• Trade and industry groups
• Professional groups

Question 18

What is benchmarking?

Answer 18

A procedure in which an organization compares its own practices against those of successful competitors.

Question 19

What is job evaluation?

Answer 19

An administrative procedure for measuring the relative internal worth of the organization’s jobs.

Question 20

What are compensable factors?

Answer 20

The characteristics of a job that the organization values and chooses to pay for, e.g.:
- Experience
- Education
- Complexity
- Working conditions
- Responsibility

Question 21

What are key jobs?

Answer 21

Jobs that have relatively stable content and are common among many organizations.

Question 22

How can organisation’s make the process of creating the job structure and pay structure more practical?

Answer 22

By defining key jobs.
Research for creating the pay structure is limited to the key jobs that play a significant role in the organization.

Question 23

What are pay rates?

Answer 23

1. Organization obtains pay survey data for its key jobs.
2. Pay policy line is established.
3. Pay rates for non-key jobs are then determined.

Question 24

What is pay policy line?

Answer 24

a graphed line showing the mathematical relationship between job evaluation points and pay rate.

Question 25

What are pay grades?

Answer 25

Sets of jobs having similar worth or content, grouped together to establish rates of pay.

Question 26

What are pay ranges?

Answer 26

Set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade.

Question 27

What should the HR department do to make sure that policies and practises match?

Answer 27

The HR department should compare actual pay to the pay structure.
Compa-ratio is the common way to do this.

Question 28

What is compa-ratio?

Answer 28

The ratio average pay to the midpoint of the pay range.
If the average equals the midpoint, CR is 1.
If CR is greater than 1, the average pay is above the midpoint.
If CR is less than 1, the average pay is below the midpoint.

Question 29

What are the alternatives to job-based pay?

Answer 29

Delayering, skill-based pay systems.

Question 30

What is delayering?

Answer 30

• Reducing the number of levels in the organization’s job structure.
• More assignments are combined into a single layer.
• These broader groupings are called broad brands.
• More emphasis on acquiring experience, rather than promotions.

Question 31

What is skill-based pay systems?

Answer 31

• Pay structures that set pay according to the employees’ levels of skill or knowledge and what they are capable of doing.
• This is appropriate in organizations where changing technology requires employees to continually widen and deepen their knowledge.

Question 32

What are the three yardsticks that employees compare their pay and contributions against?

Answer 32

1. What they think employees in other organizations earn for doing the same job.
2. What they think other employees holding different jobs within the organization earn for doing work at the same or different levels.
3. What they think other employees in the organization earn for doing the same job as theirs.

Question 33

What is pay equity?

Answer 33

If employees conclude they are under-rewarded, they are likely to make up the difference in one of three ways:
1. They might put forth less effort (reducing their inputs).
2. They might find a way to increase their outcomes (e.g. stealing).
3. They might withdraw (by leaving the organization or refusing to cooperate).
Employees’ beliefs about fairness also influence their willingness to accept transfers or promotions.