Week 9 Flashcards
Establishing Pay Rates 4 Stages
- Job Evaluation
- Conduct wage/salary survey
- Use 1 and 2 to determine pay
- Pay for knowledge
Employee Compensation
forms of pay to employee
Direct financial payments
wage, salary, bonus, commission
Indirect financial payments
insurance, vacation,
Compensation Policy Components (5)
Basis for salary increase
promotion/demotion
overtime/regular pay
probation pay
leave/time off
4 basic purpose of rewards
attract, retain, motivate, engage employees
Employee Engagement
work hard for company, clear understanding of strategic significance of job
Aligning Total Rewards with Strategy
compensation package produces employee behaviours firm needs to achieve competitive strategy
Stage 1: Job Evaluation
comparison to determine relative worth of job in firm
Job Evaluation Committee
diverse group to ensure fair representation of requirements of job
Compensable Factors
Skill, effort, responsibility and working conditions -> sub factors
Job Evaluation Method: Classification/Grading
categorize jobs in groups
outline compensable factor levels required and develop class/grade
use job description
Job Evaluation Method: Point Method - identify (2)
identify compensable factors and weights, determine degree of factor
Too many jobs to evaluate: Benchmarks
jobs critical to operations, commonly found in other organizations
<- reference point to evaluate other jobs
Pay Grade (3)
Consists of equal value/importance jobs
class/grading: already categorized into class or grade
point: pay grade consists of jobs fall within range of points
Stage 2: Conduct Wage/Salary Survey - 3 ways to use
- determine wage rates for comparable jobs
- market rates for benchmark jobs
- collect data on benefits, recognition programs
Types of wage/salary survey (5)
formal/informal
commercial, professional, government
Interpretation and use of surveys (3)
avoid upward wage bias
compare job description, not title
identify appropriate labour market
Stage 3: Combine Job Evaluation and Salary Survey Information
Assign pay rates to each pay grade
Wage Curve
relationship between value of job and wage paid for job
Pay Ranges and based on (4)
steps/levels within pay grade,years of service, performance, labour market
Broadbanding
reduce number of salary grades/ranges into few wide level (bands)
Correcting Out-of-line rates: too low
raise to minimum pay grade
Correcting out-of-line rates: too high (3)
freeze pay till general salary increase
Transfer/promote employees involved to jobs for which they can legitimately be paid current pay rate
cut pay to maximum pay grade
Pay for Knowledge (vs)
Competency-based pay (manager, professional) vs skill based pay (manufacturing/engineer employee)
Competencies
knowledge skills, behaviours to successful performance based on relation to organizations value and strategy
Pay for Knowledge Programs include (3)
advantage (1)
disadvantage (1)
competencies/skills important to job
cycle of competencies
on-the-job training & assessment
focus on people, not task
measurement of competencies is a challenge
Pay Equity Theory
perceives an inequity, tension or drive will develop to motivate them to reduce tension and perceived inequity
4 types of equity
internal, external, individual, procedural
Internal Equity
how fair jobs pay rate is compared to other jobs within same company
External Equity
jobs pay rate in one company vs another company
Individual equity
individuals pay vs co-workers for same/similar job in company, based on performance
Procedural equity
processes and procedures used to make pay allocation decisions
Pay Equity and Gender (3)
gap has narrowed but at 30%
systemic discrimination
evaluation should be gender neutral
Theories of motivation for incentive plans (2)
Frederick Herzberg’s Two-Factor Theory
Victor Vroom’s Expectancy Theory
Frederick Herzberg’s Two-Factor Theory
Motivate through…….(2) and ____ ______ needs
motivate through challenge and recognition (higher level needs)
Job Dissatisfaction: Hygiene Factors
outside job etc working conditions, salary, policies and rules
Job Satisfaction: satisfier/motivators arrw
achievement, recognition, responsibilities, work itself
Victor Vroom’s Expectancy Theory
People won’t go after rewards they find unattractive or too low of odds
Victor Vroom’s Expectancy Theory: effort equation
Expectancy x Instrumentality x Valence
Expectancy
probability effort lead to success
Instrumentality
connection between performance and rewards
Valence
reward
Money and motivation : compensation plans to motivate employees - [Fixed pay]
compensation independent of performance, base pay and income stability
Money and motivation : compensation plans to motivate employees - [Variable Pay]
pay is tied to productivity an profitability
Merit Pay/ Raise
salary increase awarded based on performance, increase to base pay, not a one time bonus
Piecework Plan for Pay raise
oldest and most common, pay based on number of items, hours etc
Straight piecework plans
set payment for each piece
Guaranteed Piecework
minimum hourly wage + incentive for each produce beyond minimum
Differential Piecework
basic hourly wage + percentage of pay beyond minimum
Short term incentive
bonus, vacation pay
Long-term incentive
stock options
Commission plan
advantage
disadvantage
pay directly proportional to sales
adv: incentive to perform high, based on your success
disadv: competition, not in best interest of customer, variance in pay
Profit-Sharing Plans? To achieve
employees share in company profits, achieve financial goals
Gainsharing Plans
employees achieve productivity goals and share gains, small and large work groups
Read about Lincoln Electric
slide 69-73
Total Rewards Include (2)
Total Compensation and Relational Return
Total Compensation is (2)
Cash and Benefits
