Total Rewards Strategy Flashcards
Term for compensation and benefits
Remuneration
Goods or services provided on an individual basis
Perquisites
What is the starting point to a total rewards strategy?
the Compensation Philosophy
4 Steps to developing a total rewards strategy
- Assessment
- Design
- Implementation
- Evaluation
Culture that puts more emphasis on the success of the org as a whole
Entitlement-oriented
Culture that is individual performance-driven
Contribution-oriented
Employees feel they are being fairly rewarded according to the relative value of their job
Internal Equity
Employees feel they are rewarded fairly in relation to those who perform similar jobs in other orgs
External equity
How to communicate a total rewards strategy
- educate employees about the total rewards practices
- achieve employees buy-in and make aware of the overall value
- support the org’s strategic objectives
- support the org’s goals for performance management
2 Effective total rewards practices in global orgs
- research local laws versus org practices
- involve experts to validate complex local requirements
Return on Investment (ROI)
How much you paid for an investment vs. how much you earned (evaluates efficiency)
4 Steps to compensation system design
- Job analysis
- Job documentation
- Job evaluation
- Pay structure
Identifies job tasks and qualifications of employees
Job analysis
Creation of job descriptions, job specification (qualifications) and job competencies
Job documentation
Establishes the value of jobs within the org
Job evaluation
Methods that establish a relative order of jobs in an org
Nonquantitative
Methods that use a scaling system to determine how much more important one job is to others
Quantitative
Hierarchy of jobs from lowest to highest, evaluating the whole job and its overall value to the org
Job Ranking
Descriptions for each class of jobs, individual jobs are then put into grade that matches their class description
Job Classification
Identifies factors relevant to the nature of jobs (skills, responsibilities, effort/physical demands), and assigns points to each factor, adds to determine overall point value for the job
Point-Factor System
Relative worth and pay structure of jobs based on their market value
Market-based job evaluations
Collect information on prevailing market compensation and benefits practices
Remuneration Surveys
Movement in market rates is used to adjust outdated data
Aged salary data
informal or through formal consulting, can improve an org’s ability to attract, retain, engage, and reward talent
Benchmarking data
Group jobs with approximately the same relative worth in the org, all jobs within the group are paid the same rate or range
Pay grades
Set the upper and lower limits of compensation for employees whose jobs fit within that particular grade
Pay ranges
Compa-Ratio calculation
pay rate / midpoint
Combines 2 or more salary grades to create larger ranges and give people wide latitude to move within a job, supports de-layering efforts
Broadbanding
Each incumbent of a job has the same rate of pay, regardless of performance/seniority
single-rate or flat-rate system
Employee’s pay rate is based on longevity in the job, increases are on a pre-determined schedule
Time-based step-rate system
Employee’s performance on the job is basis for amount and timing of pay increases
Merit-based or performance-based system
Pay determined by employee output
Productivity-based system
Receive a base rate and awarded additional compensation for amount produced
straight piece-rate system
Receive one piece rate up to the standard, then higher rate per piece when standard is exceeded
differential piece-rate system
Employee characteristics determine pay
Person-based system
Pay based on level of knowledge an employee has
Knowledge-based
Pay based on number of different skills employee is qualified to perform
Skill-based
Pay at the level an employee can operate in defined competencies
Competency-based
Depends on performance, not added to base pay
Differential pay
Shift pay, emergency-shift pay, premium pay, on-call pay, travel pay, overtime pay
Time-based differential pay
Tailor compensation to different local markets for labor costs, to attract workers in certain locations, or for foreign countries
Geographic differential pay
Most critical factor in designing executive compensation plans
Incentivizing executives to meet business objectives
Employee pay rates above the range maximum
Red circle rates
Employee pay rate is below the range minimum
Green circle rates
What it means for an org if red circle rates become common
their ranges may lag the market and need to be re-examined
When there is only a small difference in pay between employees regardless of experience, skills, level, or seniority
Pay compression
Benefits needs assessment purpose
help HR develop a benefits package that is affordable for the org and valued by employees, and allow to build the business case
Retirement plan that promises a specific benefit amount, vesting schedule, based on service/salary, amount decided by formula, and employer bears the investment risk
Defined Benefit
Retirement plan where amount of money regularly contributed is specified, employer portion is vested, individual accounts for each employee, and employee bears the investment risk
Defined Contribution
Metric to identify the proportion of benefits costs
total benefits costs / total payroll costs
Metric to calculate the participation rate
number of employees enrolled / total number of employees
Establishes the salary range for jobs within a certain grade
Pay banding
