Chapter 9 Flashcards
What is Direct Compensation?
Wages and salaries, incentives, bonuses and commissions
What is Indirect compensation?
Benefits, retirement plans, insurance, supplied by employers
What is non-financial compensation?
Employee recognition programs, rewarding job, flexible hours, work environment
What are total rewards?
Capture all three components, including career advancement. work-life balance, job security
What is Strategic Compensation?
It links compensation to company mission, goals, values and culture.
What are goals of Strategic compensation?
a. To reward employee’s past performance
b. Remain competitive
c. Maintain Salary equity
d. mesh employee future performance with organizational goals
e. to control the compensation budget
f. attract new skilled employees
g. to reduce unnecessary turnover
What is Pay Equity?
Employee’s perception that pay is equal to the work performed
Describe Equity Theory.
Achieved when their input/output ratio equals input/output of referenced others. (Feelings of underpaid, overpaid or paid fairly)
One theory of motivation is based on the proposition that employees exert greater effort if they have reason to anticipate it will result in valued award. What is this theory?
Expectancy theory.
Questions asked of expectancy theory:
- Is task worth doing?
- Will I receive the rewards?
- Will I be able to accomplish the task?
What are the Internal Factors affecting the pay mix?
- Compensation Strategy
- Value of Job
- Employee relative worth
- Employer’s ability to pay
What are the External Factors affecting the pay mix?
- Conditions of labour market
- Area wage rates
- Cost of living
- Collective bargaining
- Legal Requirements
What is Collective Bargaining?
- Any changes to pay and hours of work must be negotiated with union
- Impact of CB agreement extends beyond the segment of labour force that is unionized
What does the Cost of Living include?
Real wages, Consumer Price Index and Escalator Clauses
Wages increase larger than CPI, strengthening purchasing power
Real wages
What is the Consumer Price Index?
A measure of the average change in prices over time.
What are Escalator Clauses?
Clauses in collective agreements that provide for quarterly cost-of-living, adjustments in wages, basing the adjustments on changes in the consumer price index
What is Job Evaluation?
Systematic process of determining the relative worth of jobs and which jobs require more payment.
What are the methods of job evaluation?
Ranking, classification, point system, hay profile
Explain Job Ranking
Jobs are evaluated based on their relative worth.
- Does not provide precise measurement
- Indicate relative importance of jobs
- Only good for small number of jobs
What is Job Classification System?
Jobs are classified and grouped to predetermined wage rates. (Government jobs)
What is the Point System?
Assigns points to determine the value for skills, efforts responsibilities and work conditions. (Point Manual - Contains description of factors)
Explain Work Valuation.
Measure job’s worth through it’s value to the organization. Financial, operational, customer service objectives. (New method)
What is the Hay Profile Method?
Job evaluation for executive or managerial positions using; knowledge, mental activity and accountability.
What survey uses external surveys of other organization’s labour market?
Wage and Salary Survey
A curve scatter gram representing the relationship between relative worth of jobs and wage rates
Wage curves
What are Pay Grades?
Groups of jobs within a particular class that are paid the same rate
What are Rate Ranges?
A range of rates for each pay grade.
What do you call payment rates above the average pay range?
Red Circle Rates
Explain Broad Banding.
Collapses traditional wage grades into wide salary bands.
What is Competency-based Pay?
Pay based off of skill level or increased job knowledge
