CHAPTER 11
Compensation
Compensation
Group Members
Clamor, Matthew
Fortich, Joel
Valencerina, Angelo
Vergara, Christian Joseph
The most obvious reward employees receive from work is Pay.
However, rewards also include promotions, desirable work
assignments, and a host of other less obvious payoffs- a smile,
peer acceptance, work freedom, or a kind word of recognition.
The action or process of awarding someone money as a
recompense for loss, injury, or suffering.
SYNONYMS
Recompense
Repayment
Reimbursement
INTRINSI
C VS
EnXTRISIC
INTRINSIC REWARDS
Intrinsic Meaning
-belonging naturally; essential.
Satisfactions derived from the job itself, such as pride of ones
work, a feeling of accomplishment, or being part of the team.
JOB ENRICHMENT
-Enhancing jobs by giving employees more opportunity to plan and
control their work
EXTRINSIC REWARDS
-Benefits provided by the employer, usually money, promotion, or
benefits.
NON FINANCIAL REWARDS
Present a variety of desirable extras for employees and
organizations. These do not directly increase the employees
financial position; but make life on the job more pleasant
COMPENSATION ADMINISTRATION
The process of managing a companys compensation program.
Job evaluation
The process whereby an organization systematically establishes
its compensation program. In this process, jobs are compared to
determine each job appropriate worth within the organization.
Employees exchange work for rewards
The most important reward, and the most obvious is money.
But not all employees earn the same amount of money. Why?
The search for this answer moves us directly into the topic of
compensation administration
Goal of Compensation Administration
To design a cost effective pay structure that will attract,
motivate, and retain competent employees. The structure
should also appear fair to employees. Fairness is a term that
frequently arises in the administration of an organizations
compensation program
Government Influence on Compensation Administration
FAIR LABOR STANDARD ACT (FLSA)
Passed in 1938, this act established laws outlining minimum wage,
overtime pay, and maximum hour requirements for most U.S
Workers
EXEMPT EMLOYEES
Employees positions that are exempt from most employee
protection outlined in the Fair Labor Standards Act, especially
overtime pay.
Non-exemp Employees
Employees who are covered by the Fair Labor standards Act ,
including overtime pay and minimum wage provisions
Job Evaluation and Pay Structure
Job Evaluation
Job evaluation is determining the value of job in an
organization as well as its importance
Job Evaluation Criteria and Methods
Criteria is not constant in ever type of organization as
well as different jobs in general.
Ordering Method
Ranks jobs by comparing which is more important
than the other to form a hierarchy.
This method is limited because you do not know the
distance between each job. As well as the
manageability will be difficult in a large organization.
And lastly no definite standard or non consistent
standard for job value.
Classification Method
The most popular method; Classifies first what kinds
of jobs are there in an organization for example is HR
jobs, Consulting Jobs, and PR jobs.
The limits are that some jobs can be more complex
and can be difficult to be placed, or may even be
placed in more than one class
Point Method
Creates a criteria on where points are given to weigh
the importance on each criterion.
Once the criteria is placed there will also be included a
degree on how satisfactory can a job be done.
This method can be highly accurate to precisely
determine a jobs proper value. Unfortunately it is
limited to the high costs of money and time.
Pay Structure
Compensation Surveys
Organizations can gather information to determine if their pay rates
are inline with other organizations with similar fields. Such
information can be gather from Compensation Surveys published
from other organizations, or Government Departments of Labor.
Wage Curve
Plots jobs in position to their amount of points
against their hourly rates to determine if the pay
rate fall within acceptable area.
Wage Structure
After the plotting of the wage curve you classify the
pay groups by point amounts. Jobs with similar
points in amount are grouped to create a
hierarchical payout ladder.
External Factors
Geographic Difference
Labor Supply
Competition
Cost of Living
Collective Bargaining
Communicating with Employees
Geographic Difference
Labor supply in the certain area can affect employment and wage
pays.
Example High demand job with low labor supply can give a high wage
while low demand and high labor supply may provide minimum wage.
Other examples are questions such as how far are you to travel for a
job?
Labor Supply
The attractiveness of a payout to the labor supply can either increase
or decrease employment rate.
For example a low demand job with high supply, increase from the
minimum wage may influence people to consider applying.
Competition
Match where the organization
competition's pay wage.
matches
the
Lead where the organization pays higher than most
other organizations.
Lag where the organization pays lower than most
organizations.
Cost of Living
As the economy changes the cost of living wages must also climb or
descend accordingly.
For example if the the economy is experiencing inflation, wages must
rise to accommodate the costs of living.
Communicating with Employees
Communication is key to creating a good pay structure, so that
problems within the employees will less likely arise.
Communicating about the pay plan is also believed to be a great leap
towards compensation goals.
Special Cases of Compensation
As organizations can rapidly change as well as the dynamic
environment, pay rates can also change along but notably that
increasing or decreasing the rate won't do.
Incentive Compensation Plan
Paying for Performance
Team Based Compensation
Incentive Compensation Plan
Incentive compensation plan is not to replace the basic wage but to be
added to the basic wage depending on the performance.
Individual Incentives
Group Incentives
Organization-wide Incentives
Individual Incentives
Individuals are given a piece work to be done
independently with a specific goal.
Merit changes depending if the output meets or
exceeds goals. Wherein exceeding the goal grants
higher merits.
Group Incentives
Same as individual incentives except the piecework
requires cooperation of more than one employee.
Organization-Wide Incentives
The pay comes to every member of the organization
where they exceed the goal.
This is mainly achieved through cooperation between
employee and management.
One problem is that employees can have a difficult
time seeing how their performance can affect the
organizations progress.
Another problem is the recurrence can cause
employees to almost always changes their work
patterns as well as their motivation.
Paying for Performance
Wherein merit is given on performance which is also
similar to Individual incentive.
Paying for performance expands to Competency
Based Compensation wherein an employee is
merited on how competent he/she is.
Team Based Compensation
Compensation is given by group output
performance. Similar to Group Incentives.
or
International Compensation
Probably one of the hardest functions of an international HR.
The balance sheet approach lets you consider four factors; Base Pay,
Differentials, Incentives and Assistance Programs.
Base Pay
Wage for similar jobs can be different per country mostly affected by
the currency value and country's economic status.
Differentials
The cost of living is different in each country.
Incentives
These are compensations to employees who are
given overseas assignments.
This requires detailed planning because it adds in
other factors that surround the personal life of the
employee.
Assistance Programs
Assistance programs are incentives given to families
who are moving along with the employee to his
overseas assignment.
