9. Managing Compensation Flashcards
hourly work
Work paid on an hourly basis
piecework
Work paid according to the number of units produced
consumer price index (CPI)
A measure of the average change in prices over time in a fixed “market basket” of goods and services
escalator clauses
Clauses in collective agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index
These clauses provide for cost-of-living adjustments (COLAs) in wages based on changes in the CPI. The most common adjustments are 1 cent per hour for each 0.3- or 0.4-point change in the CPI
real wages
Wage increases larger than rises in the consumer price index, that is, the real earning power of wages
job evaluation
A systematic process of determining the relative worth of jobs to establish which jobs should be paid more than others within an organization
job ranking system
The simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth
job classification system
A system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades
point system
A quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it
work valuation
A job evaluation system that seeks to measure a job’s worth through its value to the organization
Hay profile method
A job evaluation technique using three factors—knowledge, mental activity, and accountability—to evaluate executive and managerial positions
wage and salary survey
A survey of the wages paid to employees of other employers in the surveying organization’s relevant labour market
wage curve
A curve in a scattergram representing the relationship between the relative worth of jobs and wage rates
pay grades
Groups of jobs within a particular class that are paid the same rate
red circle rates
Payment rates above the maximum of the pay range
competency-based pay
Pay based on an employee’s skill level, variety of skills possessed, or increased job knowledge
pay equity
Equal pay for work of equal value
wage-rate compression
Compression of differentials between job classes, particularly the differential between hourly workers and their managers
Internal Factors that influence compensation
Employer’s Compensation Strategy
Worth of a Job
Employee’s Relative Worth
Employer’s Ability to Pay
External Factors that influence compensation
Labour Market Conditions
Area Wage Rates
Cost of Living
Collective Bargaining
Job Evaluation Systems
Non-quantitative:
- Job Ranking System
- Job Classification System
Quantitative:
1. Point System
Work Valuation
Job Evaluation for Management Positions
1. Hay profile method
Government Regulation of Compensation
The Canada Labour Code
Employment Standards Acts
Other Legislation
Broadbanding
Broadbanding simply collapses many traditional salary grades into a few wide salary bands. Broadbands may have midpoints and quartiles, or they may have
extremely wide salary ranges or no ranges at all. Broadbanding encourages lateral skill building while addressing the need to pay employees performing multiple jobs with different skill level requirements
Other legislation
Employment equity is under federal jurisdiction for all federally regulated companies, as well as for provincially regulated companies that are suppliers to the federal government.
Pay equity is covered provincially where applicable. As we discussed in Chapter 3, legislation relating to employment equity and pay equity is designed to ensure that fair employment practices are applied to all members of designated groups.
Significant compensation issues
(1) equal pay for work of equal value and (2) wage-rate compression
