Unit 7

Question 1

1. What different approaches can organizations take to compensate workers?

Answer 1

a. Compensation also plays a role in the wage-effort bargain. Many of the approaches to compensation outlined in the textbook are designed to alter worker behaviour through a system of rewards and penalties. The underlying purpose of these systems is to increase organizational profitability by a combination of higher productivity and lower labour costs.
b. It also includes benefits (both those required by statute and those voluntarily offered by the employer), access to training, job design and enrichment, and performance management. Workers may (or may not) consider all of these factors in assessing whether compensation is fair.
c. Incentive-based compensation is intended to maximize the return that employers yield from money spent on compensation.

Question 2

2. How do employees judge whether compensation is fair?

Answer 2

a. Workers may (or may not) consider all of these factors in assessing whether compensation is fair. Unfair compensation can engender organizationally undesirable behaviour, as outlined in Unit 6.

Question 3

3. Is it fair to say that compensation structures disadvantage women? Explain.

Answer 3

a. This latter requirement is fostered by stagnation and/or reduction in real household wages as well as changes in family structures. That is, one of the reasons workers have more stress is because employers have reduced the real-dollar value of the compensation they pay, and as a result, families can no longer make ends meet on one income.
b. Returning to the issue of gender, the traditional expectations placed on women surrounding social reproduction put them at a significant labour market disadvantage. This is partially driven by employer concerns about minimizing costs, including the wage bill. The choices employers make about job design (Unit 3) are driven in part by their choices about the level and structure of compensation they desire.
c. The move to precarious employment disproportionately disadvantages women, who often take these jobs to manage the tasks of social reproduction (Unit 2). Women who do manage to obtain or sustain standard employment relations must then face the male norm in performance assessment

Question 4

base pay

Answer 4

• A base salary is the minimum amount you can expect to earn in exchange for your time or services. This is the amount earned before benefits, bonuses, or compensation is added. Base salaries are set at either an hourly rate or as weekly, monthly, or annual income.

Question 5

Benchmarking

Answer 5

• evaluate or check (something) by comparison with a standard.

Question 6

Benefits

Answer 6

• an advantage or profit gained from something.

Question 7

competency-based pay

Answer 7

• Competency-based pay is a pay structure that compensates employees based on their skill set, knowledge, and experience rather than their job title or position.

Question 8

defined benefit pension

Answer 8

• A defined-benefit plan is an employer-sponsored retirement plan … benefits ahead of time, and they use it to define and set the benefit paid out.

Question 9

defined contribution pension

Answer 9

• Defined-contribution plans are funded primarily by the employee. But many employers make matching contributions to a certain amount.

Question 10

direct compensation (or financial payments)

Answer 10

• Direct financial compensation is most widely known and recognized form of compensation. Most sought after by workers, direct compensation is the money which is paid directly to employees in exchange for their labor.

Question 11

flexible benefits plans

Answer 11

• Flexible benefits enable employers to manage their costs while providing health coverage relevant to their employee’s needs.

Question 12

incentive-based pay

Answer 12

• Incentive Pay definition. Compensation awarded for results rather than for time worked. Incentive pay, also known as pay-for-performance, is so-called because the prospect of financial compensation is supposed to be an incentive for an employee to remain motivated, work hard and strive for the best possible results.

Question 13

indirect compensation (or financial payments)

Answer 13

• Indirect financial compensation includes all monies paid out to an employee that are not included in direct compensation. This form of compensation is often understood as the portion of an employee’s contract that covers items such as temporary leaves of absence, benefits and retirement plans.

Question 14

job evaluation

Answer 14

• Job evaluation is the process of analyzing and assessing various jobs systematically to ascertain their relative worth in an organization.

Question 15

pay grades

Answer 15

• a grade or level on a pay scale.

Question 16

pay range

Answer 16

• A pay range is defined as a set boundary for compensation which identifies the minimum and maximum amount of a specific pay grade. Pay range classifications are typically assigned by the Director of the Office of State Employment Relations, but some classifications are influenced by collective bargaining as well.

Question 17

pay structure

Answer 17

• A pay structure is a system that defines what each individual and job role is paid based upon their value to the business and effectiveness in their role.

Question 18

piece-rate pay

Answer 18

• Piece-rate, or piecemeal pay, means that employees are paid by the unit when completing a particular task, for instance, bushels harvested, trees pruned, or acres mowed. In this case, a worker is compensated by individual output and not by an hourly rate.

Question 19

profit sharing

Answer 19

• a system in which the people who work for a company receive a direct share of the profits.

Question 20

registered retirement savings plan

Answer 20

• A Registered Retirement Savings Plan (RRSP) is a retirement savings and investing vehicle for employees and the self-employed in Canada. Pre-tax money is placed into an RRSP and grows tax-free until withdrawal, at which time it is taxed at the marginal rate.

Question 21

team pay

Answer 21

• In its simplest form,Team-Based Pay is an Hourly Rate + Team Bonus compensation method. It is pay based on an employee’s overall performance that extends far beyond “individual revenue” to include skill level, behaviors and strengths.

Question 22

total rewards (or total compensation)

Answer 22

• Total rewards consist of everything that total compensation covers (base pay, bonuses, and equity), as well as much more. Your total rewards program can encompass medical, dental, vision, and other health-related benefits, as well as any other employee perks you may offer.

Question 23

value proposition

Answer 23

• (in marketing) an innovation, service, or feature intended to make a company or product attractive to customers.

Question 24

1. What is the key purpose(s) of compensation from the perspective of employers? How is this related to the profit motive?

Answer 24

a. What is strategic compensation? Simply stated, it is the compensation of employees in ways that enhance motivation and growth while at the same time aligning their efforts with the objectives, philosophies, and culture of the organization. Strategic compensation planning goes beyond determining what market rates to pay employees—although market rates are one element of compensation planning—to purposefully linking compensation to the organization’s mission and general business objectives.
b. Additionally, compensation has been revolutionized by heightened domestic competition, globalization, increased employee skill requirements, and new technology. Therefore, an outcome of today’s dynamic business environment is that managers have had to change their pay philosophies from paying for a specific position or job title to also rewarding employees on the basis of their individual competencies or work contributions to organizational success.

Question 25

2. What are the components of a total rewards (or compensation) model? Which component is most important to you as a worker and why?

Answer 25

a. Direct compensation encompasses employee wages and salaries, incentives, bonuses, and commissions
b. Indirect compensation comprises the many benefits supplied by employers. Nonfinancial compensation includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible work hours to accommodate personal needs.
c. Total rewards capture all three components, plus other aspects of organizational rewards, including career advancement/developmental opportunities, recognition, work–life balance and job security.

Question 26

3. What issues must an employer consider when developing a pay structure? Which issues do you think are most and least important and why?

Answer 26

a. At a minimum, both large and small employers should set pay policies reflecting
i. (1) the internal wage relationship among jobs and skill levels,
ii. (2) the external competition or an employer’s pay position relative to what competitors are paying,
iii. (3) a policy of rewarding employee performance, and
iv. (4) administrative decisions concerning elements of the pay system, such as overtime premiums, payment periods, and short- or long-term incentives