Ch 7 - Rewarding and recognizing employees Flashcards
Define financial rewards/compensation vs nonfinancial
Financial:
- Direct : wages, salary, incentives, bonuses, commissions
- Indirect: benefits supplied by employer (dental, life)
Non-financial: No monetary value
- Recognition, interesting work, flexible hours, etc
What are the strategic advantages of having good compensation?
Higher performance in the organization by:
- Motivating employees
- helps achieving the organization’s goals
- reinforcing the organization’s culture
Some of the more common goals of good compensation programs are…
- Reward employee past peformances
- Remain competitive in the labour market
- Maintain salary equity among employees
- Mix employees’ performance with org. goals
- Control compensation budget
- Attract, motivate, and retain staff
- Influence enployee work behaviours and attitudes
To achieve compensation programs’ goals, organizations must ensure which 3 actions/steps?
- Offer equitable compensation: pay equal to the amount of work according to the employee (Equity theory)
- Pay for performance: tie direct financial rewards to employee, team or organization. (Incentive plans) Draws the line between average performers and outstanding performers - salary, bonuses, etc
- Choose appropriate basis: hourly work, piece work, or salary (pay per period of time)
What is Equity theory?
Empoyees are motivated if a sense of fairness in rewards distribution
Social comparision with others
Employee rewards and contribution should be equal to colleagues
A combination of internal and external factors influence directly or indirectly the rates at which employees are paid.
What are these factors?
Internal:
- Compensation strategy of organization (objectives)
- Worth of job: equity, job evaluation of its worth
- Employee’s relative worth: individual performance
- Employer’s ability to pay: org’s resources/profit
External:
- General economy: economic position
- Conditions of labour market: supply/demand for employees
- Area wage rates
- Cost of living
- Collective bargaining
- Legal requirements
What is a job evaluation system and what are the major different ones?
Job Evaluation Systems: determines the relative worth of the job
Job Ranking: compensation determined by rank
Job Classification: jobs classified and grouped based on certain factors, same compensation within groups
Point System: determines a job’s relative worth by using a quantitative system of points
Factor Comparision: uses compensable factors, compensation based on comparision with those of key jobs within the organization
What are the different compensation structure tools that can be combined to determine the wage rate?
- Wage and salary surveys: Maintains external equity
- Wage curves: relationship between relative worth of jobs and their wage rates
- Pay grades: groups of jobs in similar class that are paid the same wage rate. MIght already be established if done during the job evaluation with the classification system
- Rate ranges: range rates for each pay grades –> incentives for employees to want a promotion or a job of a higher grade
- Other ways (not job based) Competency-based: based off skills and and knowledge of the employee
Broadbanding: Grouping salary groups together to have less different pay options/ranges. diminishes employees’ obsession with grades
Job evaluation systems vs compensation structure tools?
Job evaluation system: helps determines the net worth of the job
Compensation structure: helps determines the actual wage rate of the job
What are incentive plans and name various types?
Incentive plans: tie employee compensation with attaining organizational goals (individually or in teams)
Examples:
- individual bonus
- Team/Group based incentives
- Merit raises
- Gainsharing
- Profit sharing
- Employee stock ownership plans
What are incentive plans used for and do they work?
Are used to attract, retain. motivate and improve organizational performance.
They work but need the right implementation.
- Reward the employees that value the most
- Salary or lump sum
- Are outcomes being achieved ?
- Address both short-term and long-term business performances
Define employee benefits
What are their objectives?
indirect form of financial compensation intended to improve employees’ quality of life (work and personal)
Can be voluntary or mandatory
Objectives:
- Meet employee health and security requirements
- Attract and motivate employees
- Retain top performers
- Maintain favourable competitive position
- Improve employee satisfaction
What are some of the mandatory benefits?
Required by law.
- Canada and Quebec Pension Plan: contributions both from the employee and employer
- Employment Insurance (EI): income protection to employees who were between jobs
- Provincial hospital and medical services:
- Leaves without pay
- Other benefits related to employment standards : holidays
What are some of the voluntary benefits?
The organization chooses to provide them or not.
- Health and welfare benefits: dental, health coverage & life insurance
- Retirement and pension plans: defined benefits or defined contribution plans
- Pay for time not worked: vacations with pay, paid holidays and sick leave
- Employee wellness programs: seek to enhance employee health and wellbeing
- Employee assistance programs: referrals, counselling
- E_ducational assistance plans_: help employees keep up to date in their fields
- Childcare and eldercare: helps employees with children and elders arrangements
The term pay-for-performance can encompass all of the following EXCEPT:
A) merit pay.
B) base salary.
C) cash bonuses.
D) gainsharing plans.
B) Base Salary
Pay-for-performance: rewards outstanding performers. In the means of bonuses, extra compensation, etc…
