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Human Resource Management Mid-Term & Final > Chapter 9 & 10: Managing Compensation > Flashcards

Chapter 9 & 10: Managing Compensation Flashcards

1
Q

Three types of compensation

A
  1. Direct Compensation
  2. Indirect Compensation
  3. Nonfinancial compensation
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2
Q

Direct compensation

A

employee wages and salaries, incentives,
bonuses, and commissions

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3
Q

Indirect compensation

A

benefits supplied by employers.

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4
Q

Nonfinancial compensation

A

employee recognition programs, rewarding jobs,
organizational support, work environment, and
flexible work hours to accommodate personal
needs

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5
Q

Strategic Compensation

A

Links the compensation of employees to the mission, objectives,
philosophies, and culture of the organization.

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6
Q

Challenges to Strategic Compensation

A
  • Firm’s policies and practices
  • Firm’s compensation options
  • Equitability of the firm’s sytem
  • Appropriate of the system
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7
Q

Theories of Motivating Employees through compensation (Theoretical Explanations)

A
  • Equity Theory
  • Expectancy Theory
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8
Q

Equity Theory

A

An employee’s perception that compensation received is equal to
the value of the work performed

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9
Q

Expectancy Theory

A

A theory of motivation that holds that employees should exert
greater work effort if they have reason to expect that it will result
in a reward that they value

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10
Q

Establishing Base Pay Rates

A

Internal Equity
- Determine worth of each job –> Job evaluation
- Group similar jobs into pay grades
Establishing external equity
- Conduct a wage/salary survey
- Price each pay grade: wage curves
- Fine tune pay rates

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11
Q

Internal Equity: Job Evaluation, The Point Method

A
  1. Determine clusters of jobs to be evaluated
  2. Collect job information
  3. Select and define compensable factors
  4. Define factor degrees
  5. Determine factor weights
  6. Assign points to factors and degrees
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12
Q

Typical Compensable Factors

A
  • Skill
  • Effort
  • Responsibility
  • Working Conditions
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13
Q

Disadvantages of Job Evaluation

A
  • Does not provide a precise measure of each job’s worth
  • Final job rankings indicate the relative importance
    of jobs
  • Method can be used to consider only a reasonably small
    number of jobs
  • Too rigid, reduces flexibility
  • Reinforces top-down
  • Impedes changes
  • Does not reward behavior change
  • Discourages lateral moves
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14
Q

Factors to establish external equity

A
  • Wage surveys
  • Labour market conditions
  • Area wage rates
  • Cost of living (Consumer - - - Price Index – CPI)
  • Collective bargaining
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15
Q

External Equity: Market Pricing

A

Rely almost exclusively on external market pay rates

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16
Q

Base Pay Structure

A

Pay Grade
- Jobs of approximately equal value

Pay Range
The minimum and maximum pay rates for jobs in a particular pay grade

17
Q

Steps to Conduct JE’s Market Fit

A
  1. Conduct survey to determine competitor’s rates
  2. Survey results used to create market line
  3. Adjust market line to create pay policy line which reflects pay strategy
  4. Pay grades and ranges designed around policy line to align internal and external environment
18
Q

Factors to determine pay increases

A
  • Seniority
  • Cost-of-Living Adjustments (COLA)
  • Lump-Sum Increases (LSI)
19
Q

Seniority

A

Time spent in an organization or on a particular job that is used to
determine eligibility for organizational rewards and benefits.

20
Q

Cost-of-Living Adjustments (COLA)

A
  • A percentage increase in wages to maintain real wages in a period of
    economic inflation.
  • Adjustments are tied to changes in an economic measure (e.g., the
    Consumer Price Index).
21
Q

Lump-Sum Increases (LSI)

A

A one-time payment of all or part of a yearly pay increase that does
not increase base wages.

22
Q

Strategic Reasons for Incentive Plans

A
  • Variable Pay
  • Incentive Plans
23
Q

Variable Pay

A

Tying pay to some measure of individual, group, or
organizational performance

24
Q

Incentive Plans

A

Establishing a performance “threshold” to qualify for incentive
payments

25
Q

Requirements for a Successful Incentive Plan

A
  • Identify important
    organizational metrics that
    encourage employee behaviour.
  • Involve employees.
  • Find the right incentive payout.
  • Establish a clear link between
    performance and payout.
  • Set performance measures.
26
Q

Administering Incentive Plans

A

incentive systems are effective when:
* Incentives are based on actual differences
* Annual incentive budgets are large enough to reward and reinforce exceptional
performance
* Overhead costs are controllable

27
Q

Pay Equity

A

Equal pay for work of equal value

Human Resource Management Mid-Term & Final (11 decks)

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