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Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
Total rewords 7 h
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  • 1. Private property do not duplicate with out authorization Total Rewards Prepared & Presented By Dr. Hesham Hemaya
  • 2. Objectives By the end of this course delegates will be able to: •Understand the objectives of Total Rewards •Corporate culture and compensation structure •Organization strategy affecting pay policy •Job evaluation methods •How to measure the Central Tendency •How to develop pay structure2 Human Resources Management
  • 3. What is Total Rewards ? Total rewards refers to all forms of financial and nonfinancial returns that employee receive from their employers. Types of compensation Direct Indirect •Legally required benefits •Base pay (salary) •Income replacement •Differential pay (over time) programs •Short-term incentive pay •Disability insurance •Long-term incentive pay •Medical benefits •Pay programs for selected •Pay for time not worked employees •Unpaid leave (vacations) •Recognition and achievement •Recognition and achievement awards (cash) awards (noncash)3 Human Resources Management
  • 4. Note that the total rewards system an organization offers goes beyond financial issues and incorporates all aspects of work environments. Reward Examples Compensations (direct) Wages, commissions, bonuses Benefits (indirect) Life insurance, disability coverage, health insurance, vacations, noncash rewards Location City. Nearness to transportation, restaurants Flexibility Work attire, work at home, scheduled times Stability Rewards packages do not change dramatically Work variety Opportunities to experience more skills Advancement Opportunity to get ahead Work conditions Hazard-free work place4 Human Resources Management
  • 5. 5 Human Resources Management
  • 6. Objectives of Total Rewards system Org. income must be spread over a variety of needs, such as R&D, taxes, raw materials, marketing, and compensation. HR professional must realize that there is no much money available for pay systems, benefits, recognition programs. So assuming that the total rewards system is legal and affordable then its basic objectives is to provide both employer and employees with a system that is: -Compatible with Org. mission and strategy -Compatible with Corporate culture -Appropriate with the Work force -Internally equity -Externally equity -Effective in Recruiting and Retaining employees6 Human Resources Management
  • 7. Org. strategy drive the balance for these elements as followed : Organization mission and strategy The developing of Total Rewards system must support the Org. business plan which designed on the behalf of org. mission and strategy. HR must consider other indicators such as where is the org. in its life cycle is it down sizing or expanding, acquiring, or being acquired, profitable or not. A total reward system should attract the right people to the right jobs. An employee must generate sufficient revenue to cover expenses, generally if the demand exceeds supply, this puts upward pressure on pay levels.7 Human Resources Management
  • 8. Corporate culture Compensation system must fit the org. culture about employees which approach two basic ways: Entitlement-Oriented Some org. caring, paternalistic feeling and want employees to feel that they are a “part of family” then employees a entitled to benefits such as: •Health care •Disability insurance •Employee assistance (development) • ………… Contribution-Oriented Other org. see employees as contributors. Their compensation program are more performance-driven such as: •Performance-based pay •Incentives •Profit share • …………8 Human Resources Management
  • 9. Contribution margin ratio Contribution Margin Ratio = (Contribution Margin / Sales) × 100 The CM ratio is extremely useful since it shows how the contribution margin will be affected by a change in total sales. Total Per Unit Percent of Sales Sales $100,000 $250 100% Variable expenses 60,000 150 60% ------------ ------------ ----------- Contribution margin $40,000 $100 40% - ------------ ----------- Less fixed expenses 35,000 ------------ Net operating income $5,0009 Human Resources Management
  • 10. Sales Volume Percent Percent Expected Increase of Sales Sales $100,000 $130,000 $30,000 10% Less variable expenses 60,000 78,000 18,000 60% --------- -------- -------- ------ Contribution margin 40,000 52,000 12,000 40% Less fixed expenses 35,000 35,000 0 ====== --------- -------- -------- Net operating income 5,000 17,000* 12,000 Profit= (Sales × CM ratio) – Fixed Cost10 Human Resources Management
  • 11. Work Force The rewards program must also fit the work force. An org. with entry level or unskilled workers should have a different rewards package than a company with experienced highly education workers. One way to keep in touch with the employees needs is by conducting surveys to assess their attitude and current and long-term needs.11 Human Resources Management
  • 12. External Equity Another consideration when developing a total rewards program is to maintain external equity to attract and retain employees. Companies compete for employees with others who shares -Industry “have similar product or service” -Occupation “ same experience or skills” -Location “same geographical; area” The correct pay strategy will depends on how critical employees to the org. success and the degree to which the org. can afford to fund to that strategy.12 Human Resources Management
  • 13. Internal Equity Internal equity means that unique jobs are fairly compensated which helps the employer to: •Meet employees needs for fair wage and adequate benefits •Recognize employees contributions to the org. •Reward equal work with equal pay •Not discriminate against protected classes An org. cannot effectively recruit or retain employees “without internal equity”13 Human Resources Management
  • 14. Recruitment and Retention If org. finds that its turn-over ratio is above normal or unable to attract suitable talents then the org. total rewards program must be reviewed, taking into consideration there is also some factors affecting this issue such managerial stuff, physical location, ………14 Human Resources Management
  • 15. Develop a Pay Policy (Lead the market) Increases ability to attract & retain employees Can be more selective in hiring (Match the market) Reduces ability to select Reduces labor expenses (Lagging behind the market) Reduces ability to select Reduces labor expenses Increase turnover ratio Note: “Some org. uses mixed pay policies according to positions”15 Human Resources Management
  • 16. Compensation structure Job Evaluation Job evaluation is a determination of the relative worth and its value to the org. which done after job analyses. Job Evaluation Methods 1- Non-quantitative “establish a relative order of jobs” 2- Quantitative “establish how much job is worth compared to another job by using scaling system” In both methods jobs are compared to each other or to an outside standards. Non-Quantitative Quantitative Job-to-Job comparison Job ranking Factor comparison Job-to-predetermined Job classification Point-factor method standard comparison Comparison of Job evaluation methods16 Human Resources Management
  • 17. Non-Quantitative methods It is evaluate the entire jobs and place them in order without a numeric value, so one can tell Job A is more important than Job B but not how much important. Job ranking method It is refer to establishing a hierarchy of jobs from lowest to highest based on job overall importance to the org. In this method a paired-comparison method may be used in which each job is compared with every other job being evaluated, then the job with largest number of “greater than” ranking is the highest-ranked job, and so on. To make the comparison you would: 1- Select the jobs to be rated 2- Compare each job with the other jobs 3- Total favorable comparisons 4- Rank jobs 5- Compare ranking Job ranking is an easily fairly quick, inexpensive method for small org.17 Human Resources Management
  • 18. Job classification method Job classification involves in grouping jobs into predetermined number of grades or classifications, each have a class description to use for job comparisons. (SHRM) It is also a system for defining and evaluating the duties, responsibilities, tasks, and authority level of a job. without regard to the knowledge, skills, experience, and education of the job holder. Classes may be described by naming benchmark jobs that jobs fall into each class and are defined as reference points. The benchmark jobs must have the following characteristics: 1- The contents are well known, relatively stable 2- They represent the entire range of jobs to be evaluated 3- a sizable portion of the work force is employed in these jobs 4- External pay rates for these jobs are acceptable basis for setting wages Job classification is good for large no. of jobs i.e. Large organizations18 Human Resources Management
  • 19. Quantitative methods Quantitative job evaluation methods evaluate specific factors, use a scale and provide a score indicates that how valuable one job when compared to another. Point-factor method It is the most common used job evaluation method which involving using compensable factors to evaluate relative job worth Compensable factors reflects which jobs are add value to the org. and aligned to the strategic direction and culture of the business. The Hay plan compensable factors The Hay system assigns three factors to determine the relative value of a particular job to other jobs. The knowledge required (Know how) Problem solving required Level of accountability19 Human Resources Management
  • 20. The Factor Evaluation System (FES) Developed by US. Government and it includes factor such as: The knowledge required (Skills) Supervisory control (Responsibility) Complexity Scope and effect Personal contacts Physical demand (Effort req.) Work environment (working conditions) The compensable factors should: •Reflect the actual work being done. •Supported by documents (job description) •Reinforce the org. strategy and culture •Be valued by all affected parties (stakeholders) •Being reviewed annually “Compensable evaluation factors selected may vary among org.”20 Human Resources Management
  • 21. FACTOR POINTS % TOTAL LEVELS Knowledge 50-1850 41.3 9 Supervisory Control 25-650 14.5 5 Guidelines 25-650 14.5 5 Complexity 25-450 10.0 6 Scope/effect 25-450 10.0 6 Personal Contact 10-110 2.5 4 Purpose Of Contact 20-220 4.9 4 Phys Demand 5-50 1.1 3 Work Environment 5-50 1.1 3 ______ Total Points 448021 Human Resources Management
  • 22. As an example for just one compensable factor “skill” it may have many degrees which is reflected by the assigned points. Degree Levels points 1 Knowledge of simple, routine tasks. Skills to operate simple 60 equipment req. no previous training or experience 2 Knowledge of basic procedures . Skills to operate equipment 120 req. moderate degree of experience or previous training 3 Knowledge of standardized, moderately complex. Skill to 180 operate varied equipment req. training and experience 4 Knowledge of technical or special procedures to perform 240 assignments req. considerable training and experience 5 Knowledge of an extensive body of procedures which req. 300 special skills based on extensive training and experience22 Human Resources Management
  • 23. Example for Job, C Factor Degree/Points for Job C 1 2 3 4 5 Factor Totals Skill 60 120 180 240 300 120 Responsibility 60 120 180 240 300 240 Effort 50 100 150 200 -- 150 Working Conditions 30 60 100 -- -- 60 Supervision 20 40 60 80 100 40 Total 0 220 150 240 0 61023 Human Resources Management
  • 24. Based on the assigned points Job C relative worth can be compared to the other jobs in the range which is the goal of point-factor analysis. Job A Job B Job C Job B Job E 220 300 400 500 600 700 800 900 1000 The total points also assign the pay grade for example if an org. define that grade 4 jobs is located between 520 to 619 points, then job C (610 points) would be a grade 4 which determine the pay range.24 Human Resources Management
  • 25. Factor comparison method This method is more complex and rarely used, it involves the ranking of each job by each selected compensable factor and then identify dollar value for each level of each factor to develop pay rate for a job. Skill Responsibility Effort Working Supervision condition 5.40 $/h A A A 4.80 $/h A A 4.20 $/h B B B B 3.90 $/h B From this example Job A = 5.40+4.80+5.40+4.80+5.40 = 25.80 $/h Job B = 4.20+4.20+4.20+4.20+3.90 = 20.70 $/h This method is best use when wages are not frequently changed and the org. uses a flat rate for each job.25 Human Resources Management
  • 26. Market-Based Evaluation Evaluating the jobs on their market values is not true evaluation system, market rates can be used to developed a Job-worth hierarchy around benchmark rates. The key points of comparison when matching jobs with compotators are duties, scope, reporting relationship – not titles the mach must be •Focused on industry or specific job •With in markets of same size, profitability, sales, geographical area •Local, regional, or national Advantages Disadvantages •Considering external •Needs available data for a competition leading to significant no. of org. Jobs internal equity •Do not recognize internal •Suited to org. where its vital job importance to maintain competitive •Less defensible than job market position content approach26 Human Resources Management
  • 27. Pay surveys It collect a valuable information on market rates which includes: -Incentive plans -Overtime pay -Stating wage rates -Base pay -Pay ranges -Shift differentials -Vacations system27 Human Resources Management
  • 28. Internal Vs. External Surveys Once the org. decided that a pay survey is needed a decision must be made as to how the survey should be conducted. Internal survey When org. have the resources and expertise and want to maximize the control over the survey they may choose to develop their own internal survey (in- house) The advantage of in-house survey is the ability to control the design, data analysis and reporting specifically as needed. Org. may contract w out side consultant while the org. still maintain control. External survey If org. choose to use external survey it must be certain about how the data was generated and when it was collected. Tow sources of data are available 1- Published compensation survey 2- Professional out source such SHRM, Hay, ……..28 Human Resources Management
  • 29. Choosing between Internal & External surveys Choosing can be determined by several factors such as: •The internal time and expertise req. •The relevance/match of external survey to the org. jobs •The availability of the data survey •The expense associated with the survey type Data Analysis Survey data analysis must based on the circumstances of their market, products, and employees. First survey data must be verified and may need to be aged/or leveled. Aged data Assume that market rates movement is 3% per year so if we used a data aged by one year we have to increase the rate by same percentage. Non identical jobs If the data survey is similar but not identical the job can be waited or leveled to better mach29 Human Resources Management
  • 30. Measure of Central Tendency “CT” Measures of CT are another way for analyzing pay survey data, there are three measures of CT mean, median, mode, weighted average along with quartiles and percentiles. Mean/Average Un weighted average Gives equal weight to every companys salary in the survey with no regards for other factors (such as the No. of incumbents) so it provides only the average salary data for a particular job rather than the actual. Weighted average Gives another picture of the data taken into account the number of incumbents who receive that salary.30 Human Resources Management
  • 31. Salary data for weighted and un-weighted average Company Incumbents Salary Total salary A 2 55,000 $ 110,000 $ B 1 60,000 $ 60,000 $ C 2 65,000 $ 130,000 $ D 5 70,000 $ 350,000 $ E 1 75,000 $ 75,000 $ Total 11 325,000 $ 725,000 $ Un-weighted average is 65,000 $ (325.000 / 5) Weighted average is 65.909 $ (725,000 / 11)31 Human Resources Management
  • 32. Median Median is the middle number in the salary range. Salaries Salaries Mode 55.000 55.000 Mode is the most 55,000 55,000 frequently occurring wage 60,000 60,000 65,000 60,000 65,000 65,000 Median is 65,000 Median is 70,000 70,000 $ 67,500 $ 70,000 70,000 Mode is 70,000 70,000 70,000 $ 70,000 70,000 70,000 70,000 75,000 70,000 75,00032 Human Resources Management
  • 33. Quartiles and Percentiles Q2 0% Q1 50% Q3 Q4 First quartile Second quartile Third quartile Fourth quartile $ 55,000 $ 60,000 $ 65,000 $ 70,000 $ 75,000 Entry wage Midpoint Max wage Job grade Quartiles33 Human Resources Management
  • 34. Pay Structure Once survey data are collected and relative internal job values are established, the pay structure can be developed involving pay grades and ranges. Pay Grades It is used for grouping all jobs that have same relative internal worth and paid with in the same pay range. The number of pay grades varies with -Size of the organization -Vertical distance between lowest and highest level jobs (Span of Control) -Pay increases and promotion policy -The slope of pay policy line -Administrative efficiency concerns Pay Ranges It sets the upper and lower limits of possible compensation for individuals whose jobs fall in the same pay grade, the data survey is used to establish the maximum, minimum and midpoint of the pay range.34 Human Resources Management
  • 35. Pay range spread Max - Min Range spread = X 100 Min Ex: 65,000 – 45,000 Range spread = X 100 = 44% 45,000 Typical range spreads are: -Nonexempt position ----- 40% -Exempted position ----- 50% -Executive position ----- 60%35 Human Resources Management
  • 36. To be noticed, lower-level jobs have a narrow pay range while the salary range for higher-level jobs will be wider. This is because employees in entry-level jobs have more promotion possibilities there for they tend to stay at entry-level shorter time than higher- level , also the learning time to achieve the “job rate” competencies (midpoint) is less for lower-level. There should be an overlap between pay ranges, which makes it possible for an experienced person in lower-level grade to be paid more than an inexperienced person in the next higher grade. Grade Minimum Midpoint Maximum Range Midpoint Spread Difference 34 3,519 $ 4.398 $ 5,278 $ 50% 14% 33 3,087 $ 3,858 $ 4,630 $ 50% 14% 32 2,708 $ 3,384 $ 4,061 $ 50% 14% 31 2,375 $ 2,969 $ 3,563 $ 50% 14% 30 2.083 $ 2,604 $ 3,125 $ 50% 14%36 Human Resources Management Typical Exempt Pay Structure
  • 37. Compa-ratio It is an indicator as to how actual wages match, lead or lag behind the market. Pay level Compa-ratio = X 100 Midpoint Market rate A compa-ratio is below 100% A compa-ratio is above 100% may occur when: may occur when an employee is: •New employee to the job or org. •Employees are long-tenured/high performed •A poor performer •Managers are not following salary increase pol •Org. that adapt a lag pay strategy •Org. that adapt a lead pay strategy37 Human Resources Management
  • 38. Broad banding It is a way to combine several salary grades or job classifications with narrow pay ranges into one band with wider salary spread. It is suitable for large hierarchical org. that try to flatten their org. and remove levels of management Ex: org. w 8 managing levels could eliminate 4 levels, widen the salary ranges of the remaining 4 levels and simply slot each manager into one of those ranges. Management 50,000$ 105,000$ Technical Supervisory 22,000$ 68,000$ Service Experts Broad banding 17,000$ 38,000$38 Human Resources Management
  • 39. Do you have any questions ?39 Human Resources Management
  • 40. The End40 Human Resources Management

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