Chapter 11: Strategic Pay Plans Flashcards
Employee Compensation
includes all forms of pay going to employees and arising from their employment
Two main Compnents
Direct Financial payments (wages, salaries, incentives, commissions, and bonuses)
indirect financial payments (financial benefits like employer-paid insurance and vacations )
5 Components of Total Employment rewards
- Compensation
- Benefits
- Work-life programs
- Performance and recognition
- Development and career opportunities
Impact of rewards (purpose
purposes of rewards are to attract, retain, motivate, and engage employees
Engagment
refers to a positive emotional connection to the employer and a clear understanding of the strategic significance of the job, which results in discretionary effort on the part of the employee
basic condsiderations in determining pay rates
- Legal considerations
- union influences
- compensation policies
- equity and its impact on pay rates
legal considerations
- employment/labour standards act (minimum pay, hours, overtime pay, statutory holidays, termination pay, record of pay information. )
- pay equity act
- Human Rights Act
- Canada/Quebec Pension Plan
- other legislation (worker’s comp., EI)
Establishing pay rates
- Job evaluation
- Conduct wage/salary survey
- Combine job evaluation and salary survey to determine pay
- Job Evaluation
- a systematic comparison to determine relative worth of jobs within a firm
- benchmark job
- compensatable factors
benchmark job
critical to operations or commonly found in other organizations
- Conduct a wage /salary survey
- aimed at determining prevailing wage rates
- determine rates for benchmark jobs
- determine market rates for jobs
- collect data on benefits, recognition programs, etc.
- avoid upward bias
- informal surveys good for easily recognized jobs
- formal surveys are most comprehensive
Combine Jo Evaluation and Salary Survey information
- Wage Curve
- Pay rages
Wage curve
a graphic description of the relationship between the value of the job and the average wage paid for this job
pay ranges
a series of steps or levels within a pay grade, usually based on years of service.
Broadbanding
reducing the number of salary grades and ranges into just a few wide levels or “bands”, each of which then contains a relatively wider range of jobs and salary levels
-advantage: greater flexibility in employee compensation
Pay for knowledge
- competency-based pay (mangers, professionals )
- skill-based pay (manufacturing employees)
- pay for knowledge program should include:
- competencies/skills directly important to job performance
- new competencies that replace comptencies that are no longer important
- on the job training, not “in the classroom”
Pay Equity
- wage gap has narrowed by remains at 30%
- gap attributed to systemic discrimination
- aim is to provide equal pay to male and female-dominated job classes of equal value
- must ensure no gender bias in job evaluation
- long-term solution is to eliminate male and female-dominated jobs
pay equity
Providing equal pay to male-dominated job classes and female-dominated job classes of equal value to the employer.
Equity Theory
a theory suggesting that people are motivated to maintain a balance between what they perceive as their contributions and their rewards.
External Equity
An employee perception of pay as fair given the pay rates in other organizations.
Internal equity
An employee perception of pay as fair given the pay rates of others in the organization.
Individual Equity
refers to the fairness of an individual’s pay as compared with what his or her co-workers are earning for the same or very similar jobs within the company, based on each person’s performance.
Procedural Equity
refers to the “perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.”
compenable factor
A fundamental, compensable element of a job, such as skill, effort, responsibility, and working conditions.
