Compensation Flashcards
Direct compensation
Encompasses wages and salaries, incentives, bonuses, and commissions
Indirect compensation
Comprises the many benefits supplied by employers
Nonfinancial compensation
Includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible working hours to accommodate personal needs (Intrinsic rewards)
Equity Theory
States that individuals form a ratio of their inputs (abilities, skills, experiences) in a situation to their outcomes (salary, benefits) in the situation); they then compare the value of the ratio to value of the input/output ratio for other individuals in a similar class of jobs either internal or external. For employees, equity is achieved when their perceived input/output ratio equals the input/output ratio of the referent others.
Expectancy Theory
Predicts that one’s level of motivation depends on the attractiveness of the rewards sought and the probability of achieving those rewards.
Three Conditions for Rewards to Motivate (Expectancy)
1) It must have high valance (aka. it must be valued). 2) Must have instrumentality (must be a connection between goals and rewards). 3) There must be an expectancy that the tasks can be achieved (must be attainable)
Hourly work
Work paid on an hourly basis
Piece work
Work paid according to the number of units produced
Consumer Price Index (CPI)
A 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 quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index
Real wages
Wage increases larger than rises in the CPI, 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; not very precise and doesn’t show value differences between jobs; it can also only really work for organizations with less than 15 jobs
Job classification system
A system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades. Successive grades require increasing amounts of responsibility, skill, knowledge, ability or other factors selected to compare jobs. (E.g GS-1 in the US Federal Government); it is less precise than the point system because jobs are evaluated as a whole
Point system
A quantitative job evaluation procedure that determines a job’s relative value by calculating the total points assigned to it; points are assigned based on compensable factors e.g. skills, efforts, responsibilities, and working conditions
Point manual
A handbook that contains a description of the compensable factors and the degrees to which these factors may exist within the jobs
Work valuation
A job evaluation system that seeks to measure a job’s worth through its value to the business goals of the organization. This is a relatively new approach championed to meet the demands of a dynamic business environment.
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 (e.g. local, regional, or national)
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 (This can occur as part of the job evaluation process)
Red Circle Rates
Payment rates above the maximum of the pay range
