Module 8 Flashcards
Compensation
Total Compensation
Includes all financial returns, benefits and tangible services an employee receives from the employment relationship.
Total Rewards
Comprised of total compensation as well as relational returns.
Relational Returns
Non-monetary employment gains, such as recognition and status, employment security, challenging work, learning opportunities.
A Successful Total Rewards System
Attracts suitable talent, retains current talent, controls labour costs, rewards desired behaviour, reduces union pressures, and is legally compliant.
Internal Alignment (IA)
Determines how jobs within an organization relate to each other.
Fundamental Structures
Job-based & Person-based
Job-based
Refers to the content of the work.
Person-based
Refers to the skills, knowledge and abilities of the employee.
What is Internal Pay Structure Determined By?
The number of levels or roles, the pay differential between those levels, the criteria that determine and define those levels and the differentials.
Job Evaluation (JE)
The process of determining the value of a job and its relative worth to the organization.
Ranking
Ranks job descriptions from high to low based on perceived value to the organization.
Classification
Requires the definition of job class descriptions, then compares job descriptions with standard description of the class to which it best fits.
Point-Based Systems
Evaluates a compensable factor for each job, determines the degree of each factor and finally allocates points to each degree.
This process involves conducting job analysis, determining compensable factors, scale the factors, and weighing the factors and assign points.
Person-Based Structures
Skill-based and competency-based plans are conceptually the same, they pay employees for the skills or competencies they possess regardless of whether they use them (all) in their daily work.
Skill-Based Pay Structure
- Skills are specific and validated by means of certification
- Usually applied to blue collar workers
- Can be focused on either depth or breadth of skill set
- Allows flexible deployment of employees based on workflow needs.
Competency-Based Pay Structure
- Competencies are broader and more difficult to objectively validate
- Usually applied to white collar workers
- Focus on a set of competencies assumed to be critical for successful job performance
Purposes of Participating in a Survey
- Adjust pay levels and determine by how much
- Understand trends in the labour market
Market Pay Line
Connects a company’s benchmark jobs with the market rates paid by competitors for such benchmark jobs.
Pay Policy Line
Reflects company’s position in the market.
Pay Grade
Includes various jobs consided substantially equal pay purposes and offer flexibility but are difficult to design.
Pay Range
The range between the upper and lower limit of a pay grade, and provides flexibility when two or more rates are paid to employees doing the same job.
Pay for Performance Plans
Also called variable pay plans, known for having a positive perfomance impact if designed well.
Long-Term Plans
Mixed evidence on the effectiveness of stock ownership in leading to better corporate results:
- Stock Options
- Broad-based options plans (BBOPs)
- Employee stock ownership plan (ESOPs)
Lump Sum Bonus
Not built into base pay and thus no long-term impact on labour costs.
Individual Spot Awards
Usually awarded for exceptional performance on a given project.
Individual Incentive Plans
Promise pay for some objective pre-established performance level, and are less common today.
Sales Plans
Require low supervision and high initiative, standard compensation package or commission only may not work; combine base pay with commissions.
Contingent Workers
Include independent contractors and employees employed by temp agencies.
Group Incentive Plans
Incentive plans where payout depends on team performance compared to a given standard.
3 Types of Group Incentives
- Gain-Sharing Plans
- Earnings-at-Risk Plans
- Profit-Sharing Plans
Gain-Sharing Plans
Typically use operational performance measure.
Earnings-at-Risk Plans
Reduces base pay if company does poorly.
Profit-Sharing Plans
Typically use financial performance measure.
International Pay
- The Localizer
- The Exporter
- The Globalizer
The Localizer
Designs pay systems consistent with local conditions.
The Exporter
HQ-designed pay system exported to the world and only adjusted for mandatory legal local conditions.
The Globalizer
Adjusts to local conditions beyond what is legally required only if it deems to support business strategy/cost control.
