Chapter 8 Flashcards
How are rewards allocated among employees perceive from the manager’s and scholar’s point of view?
It sends a message about what management believe IS IMPORTANT and the types of activities it encourages
What is direct compensation & indirect?
Direct: employee wages & salaries, incentives, bonuses and commissions
Indirect: all other forms, ex: extended healthcare & dental plans & flexible work hours, rewarding jobs
** Most organizations will tend to have direct compensation that are tied to the success of org. & contribution of that success through the individual (or team)
What is total reward? What is the key structure of rewards?
Direct + Indirect = total rewards
- Not just a monetary value
- RECOGNITION & REWARD**
- total reward system should be transparent to all employees
Key: to structure rewards that will motivate employees & reach org. objectives
-> Align individual benefit package with the org. overall concern
Designing rewards & recognition system is BEST for what reasons?
- research has shown that reward strategy have better work performance than those that don’t
- rewards: to retain people with scarce skills
What are the 5 components of a total reward program?
- compensation
- benefits
- work-life balance
- recognition of performance
- learning, development & opportunities
What is the most significant goal driving pay & rewards changes?
Improve employee’s focus on achieving business goals
What is equitable compensation?
Compensation received is perceived to be equal to the value of the WORK performed
**Research demonstrates that employee perception on equity & inequity can have dramatic effect on their work behaviour & productivity
What are the variable pay & incentives types? (3)
- Pay per performance (raise productivity & lower labour cost) - bonuses, commissions, group incentive program - to differentiate avg. performers and outstanding performers
- Hourly work
- Piecework
Describe the internal factors & external factors affecting the wage mix.
Internal:
- Compensation strategy: reflects wage relationship among job & skills, what competitors are paying, admin decisions concerning pay elements like overtime
- Worth of job: measured by level of skill, effort, responsibility & working conditions of the job.. the worth of a job is determined by comparing with others in the org.
- Employees relative worth: effective performance appraisal system between those who deserve the raises & those that does not
- Employer’s ability & willingness to pay: economic conditions & competition ex: recession
External:
- Overall economy: Canada is an export driven economy, businesses have to be sensitive with projections
- Labour-Market Conditions: reflects s&d for qualified labour within an area, employment laws
- Area wage rates: formal wage structure should align with those being paid within comparable jobs area, wage survey (low cost)
- Cost of living: uses CPI as a measure to determine changes in pay rates
- Collective Bargaining: gain wage settlements that are equal if not higher than those established by other unions within the area. Generally, wages are higher in areas where organized labour is strong
- Legal requirements: pay equity, minimum hourly wage
What happens if there is an absence of performance management system?
There is a tendency to compare employees against each other
Incentive plans are also known as what? What is the goal of incentives?
Aka: Variable pay programs
Incentives are designed to encourage employees to put out more effort to complete their job task.
Financial incentives: maintain high level of productivity & quality
Employee benefit programs should be base on specific objectives that must be compatible with the org. rewards & recognition plan
What are the types of incentive plans?
- Individual bonus: incentive payment that supplements the basic pay
- Team/group-based: a plan that rewards team members with an incentive bonus
- Merit Raises: common for salaried employees
- Profit-Sharing: plan in which employers pays special sums based on the profit of the org.
- Employee stock ownership: not so popular
What are the pros & cons of employee benefits program?
Pros:
- Legally required benefits (ex: Canada Pension Plans & QPP, Employment Insurance, provincial hospital, leaves without pay, pay for statutory holidays, minimum vacation pay)
- Voluntary employee benefits: dental & extended health coverage, life insurance, retirement & pension plans, vacations pay (org. provide more paid vacation than is required by law), sick leaves, wellness programs, employee assistance programs, childcare & eldercare, educational assistance plans
Cons:
- Very expensive
- Legally required benefits can cost over 15% of an org. annual payroll
- The costs are increasing
- Overall benefits, firms spend about 35-45% of their annual payroll
- Due to the high costs of health and welfare benefits, orgs. want to contain costs. This is especially of concern when studies have shown that benefits do not have the motivational impact they are often assumed to have. However, studies have also shown that reducing or removing benefits can have a negative effect on employee attitudes.
What is the purpose of a compensation structure?
To pay employees appropriately in a way that can be explained.
