WEEK 6 Flashcards
total compensation
refers to any remuneration given by an employer
to an employee for the work they do for the organization, i.e., cash compensation
including salary, hourly pay, commission, merit increases, bonuses, stock options,
and other incentives, and benefits including health insurance, paid vacation, and
unemployment compensation
compensation
management
the practice of planning and distributing overall remuneration and
benefits package to employees, plays a crucial role
Relational returns
, on the other hand, are the psychological returns that
people believe they receive in the workplace, i.e., development opportunities, status,
opportunity to belong, challenging work and the like.
Equity Theory
John S. Adams (1963 devised it on the basis that employees’ morale and energy turns out
to be high and full, respectively, when they feel that they are treated in an
advantageous way, pushing and motivating them to work hard and harder.
equity theory
refers to the equity or uniformity in the pay structure of employees’ remuneration
which can be observed from the people’s evaluation of the fairness of their situations
by comparing them with those of other people.
Internal Equity
refers to what other people in similar organizations are being
paid for a similar job
, External Equity
refers to the fair perception in the sense
that what employees are being paid is in line with what other players in the same
industry compensate their employees in the same job
Motivation Theories
Knowing motivation as a drive
for an individual to work in a certain way. This also pertains to the employees’ energy
to work hard just to accomplish the goals in different conditions. Although there are
multiple theories under motivation, two stand out in relation to compensation
management – Expectancy and Reinforcement theory.
Vroom’s Expectancy Theory
proposes that an employee is motivated to do a
particular thing when he/she is sure or expecting, at the very least, that a reward is a
decedent of a performance.
THE PAY MODEL
was developed by G.T. Milkovich and JM
Nemwan back in 2002 where they defined compensation as forms of financial gains,
and tangible services and benefits that employees receive as part of their
employment. The said model consists of three basic building blocks or components including
strategic objectives, policies, and techniques.
strategic objectives
include efficiency, fairness and compliance. Efficiency
refers to the effective remuneration systems to improve performance, provide better
quality, lower the cost and satisfy the customers
system policies
are about the internal alignment, external
competitiveness, contributions, and administrative management. Internal Alignment
refers to aligning salaries of similar types of jobs while rewarding different kinds of
work
Reinforcement Theor
was developed by Edward L.
Thorndike to suggest that the occurrence of high performance in the future may be
vivid or may come into reality if, at present, the same is followed by some reward,
otherwise the opposite happens.
techniques
, connects the objectives with
the policies. As presented in the above figure, skills and work analysis are used to
achieve the internal alignment objective, creations of market definitions and holding
of surveys can be done to meet competition policy, contribution assessment through
performance guidelines, and lastly the communication and change factors can help
manage the remuneration plans.
FACTORS AFFECTING PAY DESIGN
1the demand and supply of labor or the availability of labor influences the
determination of wage rates.
2.organization’s ability to pay.
3.companies are affected by the current market’s prevailing rate.
4. productivity measures the individuals output
per man hour.
5., the cost of living
6. e internal union in the organization’s
bargaining power
7.e job requirements
8. management attitude
9. psychological and social factor.
10.legislative regulations
