Chapter 9: Compensation Management Flashcards
involve cash and non-cash rewards employees receive in exchange for their work
compensation systems
the wages paid by employers to employees for the work they do
direct compensation
include bonuses, commissions, and stock paid as short-term or long-term incentives
direct compensation
used to try and enhance motivation and job satisfaction
compensation systems
perceptions of fair and adequate pay are based on _____ and _____ levels of pay
absolute
relative
are the base pay and form the foundation of compensation systems
wages and salaries
perceived equity of a pay system across different jobs within the org
internal equity
perceived fairness in pay, relative to what other employers are paying for the same type of work
external equity
what are the 4 phases to the compensation process
- establishing the compensation philosophy
- reviewing the job analysis
- pricing job
- matching employees to pay
guiding principle for how the org manages compensation
compensation philosophy
3 types of compensation philosophies
- lead strategy
- match strategy
- lag strategy
company pays rates that are higher than the relative marketplace
lead strategy
company matches the market by paying comparable rates
match strategy
company will pay rates lower than those of the relative marketplace
lag strategy
3 approaches to pricing jobs are
job evaluation
market-pricing
skill-based evaluation
systematic process of assessing job content and ranking jobs according to a set of job characteristics and worker traits
job evaluation
form of job evaluation where jobs are ranked subjectively according to their worth to the org
job ranking
form of job evaluation that works by assigning each job a grade
job grading
assigns jobs to predetermined job classifications according to their worth to the org
job grading
form of job evaluation that assesses the relative importance of the job’s key factors in order to arrive at relative job worth
point system
most precise form of job evaluation but is more difficult to develop
point system
focuses on external competitiveness
market-pricing
how much orgs should pay for jobs based on what their competitors are offering for similar work
market-pricing
discover what other employers in the same labour market are paying for specific key jobs
wage and salary surveys
are benchmarks against which analysts compare compensation levels
wage and salary data
pays employees for their flexibility to do different jobs in the org, conduct simple and more complex tasks, and to work with few/no supervisors
skill-based pay
greatest advantage to skill-based pay is
flexibility of the workforce
pay system based on employee’s mastery skills or knowledge
skill-or-knowledge based pay
skill-based pay can reward the employee based on
depth, breadth, self-management
gaining greater expertise in existing skills
depth
increases in the employee’s range of skills
breadth
gaining higher level if management-type skills
self-management
seen in white collar careers, where there is a dual ladder
depth-based pay systems
establishing appropriate pay level for each job and grouping the different pay levels into structures
matching employees to pay
reflects a jobs relative and absolute worth
pay levels
a jobs relative worth is determined by its ranking through the ________ process
job evaluation
job that is commo in the org and labour market and is used to determine pay scales
key job
a pay increase given to individual workers according to an evaluation of their performance
merit raise
a rate of pay higher than the contractual or formerly established rate for the job
red-circled rate
index that indicates how an individual’s or groups salary relates to the mid-point of their relevant pay grades
compa-ratio
- compa-ratio of above 1 =
- compa-ratio of below 1 =
- larger # of employees bunched at top of pay grade
- caused by many new employees or may indicate high turnover
the federal and provincial gov have established __________ that regulate the rights, restrictions, obligations of nonunionized workers
employment standards
provide the clearest link between pay and performance or productivity
variable pay
cost advantage of variable pay plan is that the award must be
re-earned every year
compensation that is directly tide to an employee’s performance, productivity, or both
incentive pay
better performance is reinforced on a regular basis using
incentive pay
the employer wins in this case because wages are given in proportion to performance, not for indirect measure of time worked
incentive pay
5 types of individual incentive plans
- piecework
- production bonuses
- commissions
- discretionary bonus plans
- spot awards
type of incentive system that compensates workers for each unit of output
piecework
incentives paid to workers for exceeding a specified level of output
production bonuses
used in conjunction with a base wage rate or salary
production bonuses
commonly paid in sales jobs
comissions
employees are paid base wages and then are paid bonus at discretion of management
discretionary bonus plans
recognize special contributions as they occur
spot awards
employees may receive this for a project or task that is usually accomplished in a short period
spot awards
if team cohesiveness is strong, this effect may take place
freeloader effect
allows groups of workers to receive bonuses for exceeding predetermined levels of output
production incentive plan
tend to be short range and related to very specific group production goals
production incentive plan
shares company profits with the workers
profit-sharing plans
gives employees genuine ownership and voting power when it comes to major decisions relating to the company’s future
employee stock ownership plans (ESOPs)
the concept that job that have comparable worth to the org should be equally paid
equal pay for work of equal value
principle/policy where equal rates of pay for all employees performing the same kind and amount of work
equal pay for equal work
policy to eliminate the gap between the income of men and women, ensuring the salary ranges correspond to the value of work performed
pay equity
5 methods for determining a competitive wage/ salary levels
- consultant reports
- conduct own research
- Job Bank
- collective agreements
- professional associations
purpose is to identify which jobs in a company should be paid more than others based on compensable factors like level of responsibility, skills, effort, and working conditions
job evaluation
to establish pay level for each job = combination of info from (3)
- job evaluation
- wage and salary survey
- whether company has lag, match or lead philosophy
tie employee pay to their performance or productivity
incentive pay
merit increase become part of the
base salary
variable pay is only a
one-time lump sum reward
aligning your ______ system with the businesses _______ is a top priority
compensation
objectives
