Chapter 9 - Managing Compensation Flashcards
Compensation: 3 components
- direct
- indirect
- non-financial
Direct
encompasses employee wages and salaries, incentives, bonuses, and commissions
Indirect
benefits supplied by employers
Non Financial -
employee recognition programs, rewarding jobs, organizational support, work environment, and flexible work hours to accommodate personal needs
Total rewards -
capture all three components, plus all other aspects of organizational rewards. Combination of total compensation (pay/benefits), plus opportunities for personal growth
Strategic compensation
compensation of employees in ways that enhance motivation and growth while at the same time aligning their efforts with the objectives, philosophies, and culture of the organization
Objective key results system
setup an objective for your team and for the individuals within the team, set up a number of key results that are quantifiable. Must clarify expectations, balance aspirational with operational, consider additional performance factors
Equity theory
motivation theory that explains how people respond to situations in which they feel they have received less (or more) than what they deserve
Expectancy theory
predicts that one’s level of motivation depends on the attractiveness of the rewards sought and the probability of obtaining those rewards
- high valence: valued by employees
- high instrumentality: employees believe that the attainment of goals and objectives must result in the promised rewards
- excpectancy - they can do the required task
Hourly work -
work paid on an hourly basis
Piecework
work paid according to the number of units produced
Internal factors
Compensation strategy of an organization, The worth of a job, Employees relative worth, Employers ability to pay
External factors -
Labour market conditions, Area wage rates, Cost of living, CPI
Consumer price index (CPI) -
the measure of the average change in prices over time in a fixed market basket of goods and services
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
Collective bargaining - Real wages
wage increases larger than rises in the consumer price index, that is, the real earning power of wages
Job evaluation
a systematic process of determining the relative worth of jobs to establish which jobs should be paid more than others within an organization
Job ranking system
- the simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth
Job classification system
a system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades
Point system -
a quantitative job evaluation procedure the determines the relative value of a job by the total points assigned to it
The point manual
contains a description of the compensable factors and the degrees to which these factors may exist within the jobs
Job Evaluation for Management Positions: Hay Profile Method
a job evaluation technique using three factors - knowledge, mental activity, and accountability - to evaluate executive and managerial positions
Wage and salary survey -
a survey of the wages paid to employees of other employers in the surveying organizations relevant labour market
Employer initiated surveys
employers wishing to conduct their own wage and salary survey must first select the job to be used in the survey and identify the organizations with which they compete for employees
Wage curve
a curve in a scattergram representing the relationship between the relative worth of jobs and wage rates
Pay Grades
Groups of jobs within a particular class that are paid the same rate
Red circle rates -
payment rates above the maximum of the pay range
Broadbanding
Collapses many traditional salary grades into a few wide salary bands
Competency-Based Pay
Pay based on an employee’s skill level, variety of skills possessed, or increased job knowledge
The Canada Labour Code
Set minimum labour standards for all employees and employers in works or undertakings that fall within federal jurisdiction, including interprovincial highway and rail transportation, pipeline, telecommunications, air transport, fishing, and banking
Employment Standards Legislation
Establishes the minimum standards with a view to protecting both employees and employers in certain employment situations
Pay equity
equal pay for work of equal value
Measuring Comparability
Using one evaluation system
The Issue of Wage-Rate Compression
- Compression of differentials between job classes, particularly the differential between hourly workers and their managers
