Chapter 11 Flashcards
All forms of pay or rewards to going to employees and arising from their employment
Employee Compensation
Pay in the form of wages (daily compensation), salaries (monthly or annual compensation), incentives, commissions, and bonuses
Direct Financial Payments
Pay in the form of financial benefits such as insurance and vacations
Indirect Financial Payments
create a reward strategy that is in line with the company’s overall objectives, so that the compensation plan is effective in motivating employees to contribute to the company’s success.
Aligned Reward Strategy
- Encompass traditional pay, incentives, and benefits
- But also “rewards” such as more challenging jobs (job design), career development, and recognition
Total Rewards
Postulates that people are motivated to maintain a balance between what they perceive as their contributions and their rewards
Equity Theory of Motivation
Refers to how a job’s pay rate in one company compares to the job’s pay rate in other companies
External Equity
Refers to how fair the job’s pay rate is when compared to other jobs within the same company
Internal Equity
Refers to the fairness of an individual’s pay as compared with what his or her coworkers are earning for the same or very similar jobs within the company, based on each person’s performance.
Individual Equity
Refers to the “perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay”
Procedural Equity
- If there is a problem in external equity, conduct a ______?
Salary Surveys
If there is a problem in internal equity, conduct a ____?
Job Analysis and Job Evaluation
If there is a problem in individual equity, conduct _____?
Performance Appraisal and Incentive Pay
They use it to help ensure that employees view the pay process as procedurally fair
Communication, grievance mechanisms, and employees’ participation
Act known as the “Wage Rationalization Act”
Republic Act 6727 Sec. 1
process by which unions and employers negotiate an employment agreement, including compensation.
Collective Bargaining
- Small firms
- Involves conducting formal or informal salary surveys to determine what other companies in the same labor market are paying for similar jobs.
Market - Based Approaches
- Involves assigning values to each of the company’s jobs
- helps produce a pay plan in which each job’s pay is equitable based on what other employers are paying for these jobs and based on each job’s value to the employer
Job Evaluation Methods
Where you pay rates are equitable both internally (based on each job’s relative value) and externally (when compared with what other employers are paying)
Market - Competitive Pay Plan
Factors that establish how the jobs compare to one another, and that determine the pay for each job
Compensable Factors
Preparing Job Evaluation Steps
- Identifying the need
- Getting Cooperation
- Choose a Job Evaluation Committee
- Perform the Evaluation
- Usually consists of about five members, most of whom are employees.
- This committee is typically made up of individuals from various departments or functional areas within the organization who have knowledge and expertise in the jobs being evaluated.
Choose a Job Evaluation Committee
Simplest Job Evaluation method
Ranking Method
Job Ranking Method Steps
- Obtain Job Information
- Select and Group Jobs
- Select Compensable Factors
- Rank Jobs
- Combine Ratings
- Compare current pay with what others are paying based on salary survey
- Assign a new pay scale
- Special ranking method
- Requires ranking each of a job’s “factors”
- Then adding up the points representing the number of “degrees” of each factor each job has
Factor Comparison Method
- Also known as Job Grading
- Method where jobs are categorized into groups based on their value for pay purposes
- Simple and widely used job evaluation method in which raters categorize jobs into groups
Job Classification
- Groupings jobs based on a set of rules for each group or class
- Such as amount of independent judgment, skills, physical effort, and so forth, required
- Usually contain similar jobs
Classes
- Often contain dissimilar jobs but same job difficulty
- Such as secretaries, mechanics, and firefighters
- Grades descriptions are written based on compensable factors listed in classification systems.
Grades
Most popular job evaluation method
Point method
- It is when you calculate the job by adding up the points for each factor
- Can be used to determine the job’s relative value compared to other jobs within the organization
Total Point Value
- A number of groups have developed standardized point plans
- Many thousands of employers use these systems
“Packaged” Point Plans
representative of the jobs the employer needs to evaluate
Benchmark Jobs
What is the 4th step
convert Percentages to points for each factor
What is the 5th step
define each factor’s degree
What is the 6th step
Determine for each factors its factor degree points
the heart of job evaluation involves determining the amount or degree to which job contains the selected compensable factors
7th step: review job descriptions and job specifications
Steps 1 – 7 provides us with information based on which we can evaluate the jobs
8th step: evaluate the jobs
A pay system in which the employer’s actual pay rates are competitive with those in the relevant labor market
Market - Competitive Pay System
- Shows the relationship between the value of the job and the average wage paid for this job
- Play a central role in assigning wage rates to jobs
Wage Curves
- Study how each job’s points relate to its current pay rate, we start by drawing an internal wage curve
- Plotting each job’s points and the wage rate the employer is now paying for each job produces a scatterplot
9th Step: Draw the current (Internal) Wage Curve
composed of jobs of approximately equal difficulty
Pay Grade
Equals an employee’s pay rate divided by the pay range midpoint for his or her pay grade
Compa Ratio
Span control, the number of functional divisions over which the executive has direct responsibility, and management level
Job Complexity
Total profit and rate of return
Ability to Pay
Aim to encourage the executive to take actions that drive up the value of the company’s stock and include things like stock options
Long term incentives
Usually, cash or stock bonuses for achieving progress toward strategic goals
Short term incentives
Include things such as supplemental executive retirement pension plans
executive benefits and perks
Single payments generally to reward the manager for achieving a specific goal
bonuses
Includes the person’s fixed salary
base pay
Where an employee’s pay is based on the skills and knowledge they possess, rather than their job title or position.
Competency - Based Pay
Consolidating salary grades and ranges into just a few wide levels or “bands,” each of which contains a relatively wide range of jobs and salary levels
Broad Banding
refers to the requirement to pay men and women equal wages for jobs that are dissimilar but of comparable value (for instance measured in points) to the employer.
Comparable Worth
Encompass not only compensation and benefits but also personal and professional growth opportunities and a motivating work environment
Total Rewards
