Compensation management

Question 1

Total compensation is composed of — and —-

Answer 1

Direct(Wage, commission, bonus, gainsharing)
Indirect(Time not worked, insurance plans, security plans, employee services)

Question 2

2 theory for motivating employees through compensation

Answer 2

Equity theory: An employee’s perception that
the compensation received is equal to the value of the
work performed

Expectancy theory: employees should exert
greater work effort if they have reason to expect that it will
result in a reward that they value

Question 3

Three bases for compensation:

Answer 3

• salary - hourly - piece work

Question 4

What are the internal and external factors affecting the wage mix:

Answer 4

Internal: Organization compensation strategy, worth of job, employee relative worth, employers ability to pay

External: Labour market conditions, are wage rate, cost of living, collective bargaining, legal requirements

Question 5

4 jobs evaluation systems (Determine how much you get paid)

+ 1 job evaluation for management positions

Answer 5

Job Ranking System:(Old simple) which jobs are arrayed on the basis of their relative worth

Job Classification System: jobs are classified and grouped
according to a series of predetermined wage grades

Point System:A quantitative job evaluation procedure that determines the relative value of a job by the total points
assigned to it (uses a point manual)

Work Valuation: measure a job’s worth through its
value to the organization
———————————————-
Hay profile method” using three factors–knowledge, mental
activity, and accountability–to evaluate executive and managerialpositions

Question 6

Wage Curve/Pay Grades/Rate Ranges/Red Circle Rates/broadbanding

Answer 6

Wage Curve: A curve in a scattergram representing the relationship between relative worth of jobs and wage rates

Pay Grades: Groups of jobs within a particular class that are paid the same rate

Rate Ranges: A range of rates for each pay grade that may be the same for each grade or proportionately greater for each successive grade

Red Circle Rates: Payment rates above the maximum of the pay range

Broadbanding:Collapses many traditional salary
grades into a few wide salary bands

Question 7

Wage rate compression:

Answer 7

Compression of differentials between job classes,
particularly the differential between hourly workers and
their managers