People - Total Rewards Flashcards
I-P-O model
Inputs - Process - Outputs
Ex: total rewards strategy
- Inputs - HR goals (recruitment, engagement, retention)
- Process - Alignment with strategy, culture, market, employment laws
- Outputs - Total rewards strategy (compensation & benefits, rewards, incentives)
“Total Rewards” synonyms
Total Rewards
Remuneration
Compensation & Benefits
**All these mean the same thing
Total Rewards categories
- Compensation
- Incentives
- Benefits
- Perquisites
Compensation - salary and allowances
Incentives - payments in return for achievement of certain objectives
Benefits - tangible payments or services provided to broad groups of employees (ex: health insurance, retirement plan, paid time off, training/development opportunities)
Perquisites - goods or services provided to individual employees (ex: cell phone, company car) (sometimes counted in the “benefits” category)
Compensation philosophy
Statement documenting the organization’s values and guiding principles regarding employee compensation
Creates a framework for consistency and transparency
Entitlement-oriented vs. Contribution-oriented compensation strategies
Entitlement-oriented - assumes all employees are entitled to benefits as a condition of employment; benefits increase equally as the company does better; usually found in companies with family-like culture
Contribution-oriented - emphasizes individual achievement with benefits such as performance-based pay, incentives, and shared responsibility for benefits (such as copays for medical insurance)
Pay strategies
- Lag market
- Match market
- Lead market
- Lead-lag market
Lag - controls labor costs by setting pay rates below competitors; might still be able to attract talent by smart use of other rewards
Match - most common approach; considered to be externally competitive
Lead - assumes that higher wages will attract the best, most productive talent
Lead-lag - leads market during first half of fiscal year, then lags during 2nd half
ESS applications
Employee Self-Service - provides employees with quick and easy access to their compensation & benefits info online
Steps in designing a compensation system
Job analysis
Job documentation (creating job descriptions)
Job evaluation (determining relative value of jobs to the organization)
Pay structure (establishing pay grades/ranges)
Non-quantitative job evaluation
- job ranking
- job classification
Job ranking - establishes a hierarchy of jobs from lowest to highest importance; sometimes uses paired-comparison (comparing each job to every other, and then the job with the most “greater-than” ratings is the highest in the heirarchy)
Job classification - writes job descriptions for each class of job, and then sorts each job into the most suitable class
Job classification -
Quantitative job evaluation
- point factor system
Point factor system - most common method of job evaluation; starts with identifying compensable factors, and then a committee (usually) assigns a point value for each factor for each job
Compensable factors
Factors that determine the value of a job, such as skills, responsibility, work conditions and hazards, effort and physical demands, and supervision of others
Remuneration surveys
Collect info on current market compensation and benefits practices
Aging salary data
Assume that pay increases 3% each year
Pay grades / pay ranges
Pay grades - used to group jobs that have similar value in an organization
Each pay grade has its own pay range
Pay range recommendations
- overlap?
- degree of spread?
Overlap - yes, it’s suggested for an experienced employee at a low pay grade to make more than a new employee at the next higher grade
Spread depends on pay grade - usually less spread for entry-level positions (employees don’t stay there as long), and broader spread for higher-level positions where you want people to stay in their position long-term
- 40% for hourly positions
- 50% for salaried positions
- 60% for executive positions
