Compensation Chapter 1 Flashcards
Refers to all forms of financial returns and tangible services and benefits that employees receive
Compensation
Are the psychological returns people believe they receive in the workplace such as recognition and status, employment security, and learning opportunities
Relational Returns
Pay received directly as cash such as base pay, merit increases, cola, incentives, stock, and indirectly benefits (vacation, pensions, and health insurance)
Total compensation
Include cash compensation, benefits, and relational returns
Total rewards
Tie pay increase directly to performance
Incentives (or variable pay)
Other term for incentives
Variable pay
Intended to focus employee efforts on multiyear results
Long-term incentives
Cash compensation an employee receives for the work performed
Base Pay (Wage or Salary)
Gives the same percentage increase to everyone else regardless of performance levels relative to increase in cost of living
Cost of Living Adjustment (COLA)
Types of Benefits
- Insurance and Pensions
- Work/Life Programs
- Allowances
True or False
Some people see pay (and benefits) as a measure of justice
True
True or False
Job losses (or gains) in a country is partly a function of labour costs (and productivity).
True
True or False
Stockholders have a particular interest in executive pay.
True
True or False
Linking executive pay to company performance increases stockholders’ returns
True
True or False
Compensation is a major expense that must be managed
True
Usually a major source of financial security
Pay
Increments to base pay based on performance
Merit Increases
Paid in a lump sum rather than becoming a part of base pay, based on performance. Can be long term or short term.
Incentives (bonuses)
3 Building Blocks of Pay Model
- Compensation objectives
- Policies that form the foundation of compensation system
- Techniques that make up compensation model
Guide the design of the pay system and are standards for judging success
Pay objectives
3 Strategic Objectives of Compensation
Efficiency
Fairness
Compliance
4 Strategic Policies
Internal Alignment
External Competitiveness
Employee Contributions
Management
Different Perspectives on Compensation
- Society
- Stockholders
- Managers
- Emlpoyees
Refers to comparisons among jobs or skill levels inside a single organization
Internal Alignment
Pertains to pay rates both for employees doing equal work and for those doing dissimilar work
Internal Alignment
Refers to pay comparisons with competitors external to the organization.
External Competitiveness
Refers to how employees are rewarded
Employee Contributions
Making sure that the right people get the right pay for achieving the right objectives in the right way
Management
Refer to the tools and mechanisms that are used to achieve the strategic objectives
Pay techniques
