Chapter 11 - Compensation in the Public Sector Flashcards
11.1 INTRODUCTION - CRESN
CORE Expectations of Public Officials: Public officials must be politically responsive, understand societal needs, and manage high-performing institutions.
Rewards and Work Behavior: REWARDS are powerful tools to influence employees’ behavior and align them with institutional goals.
Economic Relationship in Employment: Compensation is an ECONOMIC exchange where employees offer work in return for financial rewards.
Compensation’s Role: SALARY packages reflect the value of the positions and are crucial in attracting and retaining skilled workers.
Satisfaction of Employee : Compensation meets basic and advanced NEEDS, from necessities like food to status symbols like luxury items.
Public Employer’s View of Compensation: Compensation is a major BUDGET item and has a significant effect on an institution’s financial standing.
11.2 CONCEPT OF COMPENSATION - FIPEM
It is the FINANCIAL and non-financial rewards employees receive for their work to achieve institutional objectives.
Compensation is categorized into INTRINSIC (self-fulfilling work-related) and extrinsic (external rewards controlled by the employer).
Intrinsic Rewards Involves PERSONAL satisfaction from work, like meaningful tasks, autonomy, and personal growth opportunities.
EXTRINSIC Rewards: These include both financial (e.g., salaries, bonuses) and non-financial rewards (e.g., office location, social praise).
To MOTIVATE employees to meet institutional objectives , employers use external rewards
11.3 COMPENSATION OBJECTIVES - ARMMIC
Compensation Guidelines: Objectives help define the nature of compensation systems and serve as benchmarks against which the system’s success is measured.
Classical Objectives (FARM): Focus, Attract, Retain, Motivate – the core goals of any compensation system.
ATTRACTING Qualified Candidates: A well-designed compensation system draws high-quality applicants who are a good fit for the institution.
RETAINING Employees: Competitive compensation ensures that employees remain satisfied and less likely to seek jobs elsewhere.
MAINTAINING Equity: Internal and external comparisons ensure fair compensation, reducing disparities and increasing morale.
MOTIVATING Employees: Both financial and non-financial rewards motivate employees to higher performance levels.
INCENTIVIZING Performance: Proper compensation provides a strong incentive for employees to stay productive and loyal.
COMPLIANCE with Legal Requirements: Compensation must comply with relevant laws, including labor regulations and collective agreements.
11.4 Compensation policy
11.5 EXTERNAL AND INTERNAL FACTORS INFLUENCING THE DESIGN OF COMPENSATION SYSTEMS
11.5.1 EXTERNAL FACTORS - LELUS ASE
Government LEGLISATION: Laws such as the Constitution and the Labor Relations Act influence compensation policies.
> The Constitution.
The Labour Relations Act 66 of 1995.
The Basic Conditions of Employment Act 75 of 1997 (BCEA).
The Employment Equity Act 55 of 1998 (EEA).
ECONOMIC Conditions: Factors like inflation, employment levels, and cost of living impact compensation decisions.
LABOUR Market Dynamics: Supply and demand for certain skills affect wage levels, with rare skills commanding higher salaries.
UNIONS: Trade unions influence compensation through negotiations, ensuring fair wages for employees.
SOCIAL Trends: Changes in societal expectations, like work-life balance and benefits, drive modifications in compensation policies.
11.5.2 Internal Factors - ASN
ABILITY to Pay: An institution’s financial health directly influences its ability to offer competitive compensation.
Institutional STRATEGY : Compensation systems must align with the institution’s mission, culture, and strategic objectives.
Employee NEEDS: Employees at different life stages and career levels have varying compensation preferences (e.g., benefits vs. salary).
11.6 Elements of a compensation system -
11.6.1 Applying particular criteria for determining compensation levels
REQUIREMENS FOR EFFECTIVE COMPENSATION PLANS - LAP
- LAY down high but attainable standards of performance
Incentive schemes must set performance standards that are challenging yet ACHIEVABLE .
This balance ensures that employees remain motivated to strive for high performance without feeling overwhelmed or discouraged.
*Establish a PAY-for-performance work culture
Employees should clearly understand that their compensation is tied to how well they PERFORM
TYPES OF INCENTIVE SCHEMES - ISGCIT
INDIVIDUAL Incentive Schemes
> E.g STANDARD-hour Plans - Compensation is based on how efficiently employees meet time standards for specific tasks.
GROUP
> based on their COLLECTIVE performance of groups
INSTITUTION-wide Incentive Schemes
> All employees benefit when the organization meets or exceeds its overall TARGETS
EMPLOYEE BENEFITS - NAML
Employee benefits are defined as NON-wage compensation that employers provide to their employees, beyond regular pay.
Employee benefits aim to ATTRACT talent, retain valuable employees, and motivate workers
Examples include MEDICAL Aid, Housing Allowance, Car Allowance
LEGALLY Mandated Benefits
> Some benefits are mandated by law, which employers are required to offer.
> E.g Leave provisions under the Basic Conditions of Employment Act (BCEA), such as annual leave and public holidays.
Unemployment Insurance as per the Unemployment Insurance Act, ensuring compensation during periods of unemployment.
Compensation for Occupational Injuries and Diseases as outlined in the Compensation for Occupational Injuries and Diseases Act, covering employees who suffer work-related injuries or illnesses.
*Requirements of affirmative incentive compensation plans - PLACCT
Pay-for-Performance Culture: Establishing a work culture where compensation is closely linked to performance is crucial. This motivates employees to achieve higher productivity and aligns their efforts with institutional goals.
Link to Institutional Objectives: The incentive plan should be designed to foster employee identification with the institution’s values and objectives, enhancing loyalty and alignment with broader goals.
Attainable Performance Standards: The standards set for earning incentives should be high yet realistic, ensuring that employees see the goals as achievable and are motivated to strive for them.
Clear Incentive Structure: Incentive schemes can be individual, group-based, or institution-wide. Individual incentives, like piece-rate plans, reward personal productivity, while group incentives, such as team-based bonuses, encourage collaborative performance.
Competitiveness in the Labor Market: By incorporating incentives, institutions can attract and retain talent, making the institution more competitive in the job market.
Transparency and Objectivity: Performance measures should be as objective and quantifiable as possible to avoid perceptions of bias or unfairness. This increases trust in the system and supports sustained motivation.
