Chapter 11(establishing strategic pay plans)
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    Chapter 11(establishing strategic pay plans) Chapter 11(establishing strategic pay plans) Presentation Transcript

    • Human Resource Management TWELFTH EDITION GARY DESSLER BIJU VARKKEY Part 4 | Compensation Chapter 11 Establishing Strategic Pay PlansCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e
    • Basic Factors in Determining Pay Rates Employee Compensation Direct Financial Indirect Financial Payments PaymentsCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–2
    • Corporate Policies, Competitive Strategy, and Compensation • Aligned Reward Strategy  The employer’s basic task:  To create a bundle of rewards—a total reward package— that specifically elicits the employee behaviors that the firm needs to support and achieve its competitive strategy.  The HR or compensation manager along with top management creates pay policies that are consistent with the firm’s strategic aims.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–3
    • Compensation Policy Issues • Pay for performance • Pay for seniority • The pay cycle • Salary increases and promotions • Overtime and shift pay • Probationary pay • Paid and unpaid leaves • Paid holidays • Salary compression • Geographic costs of living differencesCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–4
    • Equity and Its Impact on Pay Rates Forms of Equity External Internal Individual Procedural Equity Equity Equity EquityCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–5
    • Addressing Equity Issues Salary Surveys Job Analysis and Job Evaluation Methods to Address Equity Issues Performance Appraisal and Incentive Pay Communications, Grievance Mechanisms, and Employees’ ParticipationCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–6
    • Establishing Pay Rates Steps in Establishing Pay Rates Conduct a salary survey of what other employers are 1 paying for comparable jobs (to help ensure external equity). 2 Determine the worth of each job in your organization through job evaluation (to ensure internal equity). 3 Group similar jobs into pay grades. 4 Price each pay grade by using wave curves. 5 Fine-tune pay rates.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–7
    • The Salary Survey Step 1. The Wage Survey: Uses for Salary Surveys To price To market- To make benchmark price wages decisions jobs for jobs about benefitsCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–8
    • Sources for Salary Surveys Sources of Wage and Salary Information Employer Self- Consulting Professional Government The Conducted Firms Associations Agencies Internet SurveysCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–9
    • TABLE 11–1 Some Pay Data Web Sites Sponsor Internet Address What It Provides Downside Salary.com Salary.com Salary by job and zip code, Adapts national averages plus job and description, for by applying local cost-of- hundreds of jobs living differences Wageweb www.wageweb.com Average salaries for more Charges $169 for than 150 clerical, professional, breakdowns by industry, and managerial jobs location, etc. Paycheck India www.paycheck.in Input current salary and use Based on gross earnings. and salary checker WageIndicator HT www.shine.com Salary by job, designation Based on gross earnings moving.com moving.com Median salaries for thousands Doesn’t consider factors of jobs, by city like company size or benefits cnnmoney.com cnnmoney.com Input your current salary and Based on national averages city, and this gives you adapted to cost of living comparable salary in differences destination cityCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–10
    • Establishing Pay Rates (continued) Skills Effort Step 2. Job Evaluation: Identifying Compensable Factors Responsibility Working ConditionsCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–11
    • Establishing Pay Rates (continued) Preparing for the Job Evaluation 1 Identifying the need for the job evaluation 2 Getting the cooperation of employees 3 Choosing an evaluation committee 4 Performing the actual evaluationCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–12
    • Establishing Pay Rates (continued) Methods for Evaluating Jobs Job Point Factor Ranking Classification Method ComparisonCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–13
    • Job Evaluation Methods: Ranking • Ranking each job relative to all other jobs, usually based on some overall factor. • Steps in job ranking: 1. Obtain job information. 2. Select and group jobs. 3. Select compensable factors. 4. Rank jobs. 5. Combine ratings.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–14
    • TABLE 11–2 Job Ranking by Olympia Health Care Ranking Order Annual Pay Scale 1. Office manager $43,000 2. Chief nurse 42,500 3. Bookkeeper 34,000 4. Nurse 32,500 5. Cook 31,000 6. Nurse’s aide 28,500 7. Orderly 25,500Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–15
    • Job Evaluation Methods: Job Classification • Raters categorize jobs into groups or classes of jobs that are of roughly the same value for pay purposes.  Classes contain similar jobs.  Administrative assistants  Grades are jobs similar in difficulty but otherwise different.  Mechanics, welders, electricians, and machinists  Jobs are classed by the amount or level of compensable factors they contain.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–16
    • FIGURE 11–3 Example of a Grade Level Definition This is a summary chart of the key grade level criteria for the GS-7 level of clerical and assistance work. Do not use this chart alone for classification purposes; additional grade level criteria are in the Web-based chart.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of Human Source: www.opm.gov/fedclass/gscler.pdf. Accessed May 18, 2007.Resource Management, 12/e 11–17
    • Job Evaluation Methods: Point Method • A quantitative technique that involves:  Identifying the degree to which each compensable factor is present in the job.  Awarding points for each degree of each factor.  Calculating a total point value for the job by adding up the corresponding points for each factor.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–18
    • Establishing Pay Rates (continued) Point Method Step 3. Group Similar Jobs Ranking Method into Pay Grades Classification MethodsCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–19
    • Establishing Pay Rates (continued) • Step 4. Price Each Pay Grade—Wage Curve  Shows the pay rates paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation.  Shows the relationships between the value of the job as determined by one of the job evaluation methods and the current average pay rates for your grades.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–20
    • FIGURE 11–4 Plotting a Wage CurveCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–21
    • Establishing Pay Rates (continued) • Step 5. Fine-Tune Pay Rates  Developing pay ranges  Flexibility in meeting external job market rates.  Easier for employees to move into higher pay grades.  Allows for rewarding performance differences and seniority.  Correcting out-of-line rates  Raising underpaid jobs to the minimum of the rate range for their pay grade.  Freezing rates or cutting pay rates for overpaid (―red circle‖) jobs to maximum in the pay range for their pay grade.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–22
    • FIGURE 11–5 Wage StructureCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–23
    • TABLE 11–3 U.S. Federal Government Pay ScalesCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of Human Source: http://opm.gov/oca/07tables/pdf/DFW.pdf. Accessed May 18, 2007.Resource Management, 12/e 11–24
    • FIGURE 11–6 Compensation Administration Checklist Source: Reprinted from www.HR.BLR.com with permission of the publisher Business and Legal Reports Inc., 141 Mill Rock Road East, Old Saybrook, CT © 2004.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–25
    • Pricing Managerial and Professional Jobs Compensating Executives and Managers Executive Base Short-term Long-Term Benefits and Pay Incentives Incentives PerksCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–26
    • Pricing Managerial and Professional Jobs • What Really Determines Executive Pay?  CEO pay is set by the board of directors taking into account factors such as the business strategy, corporate trends, and where they want to be in the short and long term.  Firms pay CEOs based on the complexity of the jobs they filled.  Boards are reducing the relative importance of base salary while boosting the emphasis on performance- based pay.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–27
    • Compensating Professional Employees • Employers can use job evaluation for professional jobs. • Compensable factors focus on problem solving, creativity, job scope, and technical knowledge and expertise. • Firms use the point method and factor comparison methods, although job classification seems most popular. • Professional jobs are market-priced to establish the values for benchmark jobs.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–28
    • Competency-Based Pay • Competencies  Demonstrable characteristics of a person, including knowledge, skills, and behaviors, that enable performance. • What is Competency-Based Pay?  Paying for the employee’s range, depth, and types of skills and knowledge, rather than for the job title he or she holds.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–29
    • Competency-Based Pay (continued) Why Use Competency- Based Pay? Support High- Support Support Performance Performance Strategic Aims Work Systems ManagementCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–30
    • Competency-Based Pay in Practice • Main elements of skill/competency/knowledge– based pay programs: 1. A system that defines specific skills, and a process for tying the person’s pay to his or her skill. 2. A training system that lets employees seek and acquire skills. 3. A formal competency testing system. 4. A work design that lets employees move among jobs to permit work assignment flexibility.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–31
    • Competency-Based Pay: Pros and Cons • Pros  Higher quality  Lower absenteeism  Fewer accidents • Cons  Pay program implementation problems  Costs of paying for unused knowledge, skills, and behaviors  Complexity of program  Uncertainty that the program improves productivityCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–32
    • Other Compensation Trends • Broadbanding  Consolidating salary grades and ranges into just a few wide levels or ―bands,‖ each of which contains a relatively wide range of jobs and salary levels.  Pro and Cons  More flexibility in assigning workers to different job grades.  Provides support for flatter hierarchies and teams.  Promotes skills learning and mobility.  Lack of permanence in job responsibilities can be unsettling to new employees.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–33
    • FIGURE 11–7 Broadbanded Structure and How It Relates to Traditional Pay Grades and RangesCopyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–34
    • Other Compensation Trends (continued) • Comparable Worth  Refers to the requirement to pay men and women equal wages for dissimilar jobs that are of comparable (rather than strictly equal) value to the employer.  Seeks to address the issue that women have jobs that are dissimilar to those of men and those jobs are often consistently valued less than men’s jobs.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–35
    • The Pay Gap • Factors Lowering the Earnings of Women:  Women’s starting salaries are traditionally lower.  Salary increases for women in professional jobs do not reflect their above-average performance.  In white-collar jobs, men change jobs more frequently, enabling them to be promoted to higher- level jobs over women with more seniority.  In blue-collar jobs, women tend to be placed in departments with lower-paying jobs.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–36
    • Improving Productivity Through HRIS: Automating Compensation Administration • Benefits of Compensation Automation:  Allows for quick updating of compensation programs.  Eliminates costs of formerly manual processes.  Coordinates centralized compensation budgets to prevent overages in compensation and raises.  Can integrate and automatically administer other pay actions.Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of HumanResource Management, 12/e 11–37