Human Resource Management Presentation Session 6


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Human Resource Management Presentation Session 6

  1. 1. HR Management Session 6: Compensation and Different Types of Payment Systems
  2. 2. Payment Systems <ul><li>Time Rates </li></ul><ul><li>Individual Payment by Results (piecework)‏ </li></ul><ul><li>Group Incentives </li></ul><ul><li>Profit Sharing </li></ul><ul><li>Performance-Related Pay </li></ul><ul><li>Non-monetary awards </li></ul><ul><li>Cafeteria-Style Payments or Flexible Pay </li></ul><ul><li>Total Reward </li></ul>
  3. 3. Payment Systems <ul><li>Time Rates </li></ul><ul><li>This is the simplest of all payment systems. Basically, people are paid according to the time they spend at work. This may be based on an hourly rate, a weekly rate or an annual salary. </li></ul><ul><li>Despite the interest in incentive schemes and a general movement towards an HRM approach with performance-related pay systems, this is still an extremely popular way for many organisations to pay people. </li></ul>
  4. 4. Payment Systems <ul><li>Individual Payment by Results (piecework)‏ </li></ul><ul><li>This approach, based on individualism, reflects the view that since some people work harder than others they should be paid different amounts to reflect the differences in effort that they have made. This system is most common in manufacturing environments where it is easy to identify the products that each individual has made, or to identify clearly an individual’s contribution to a manufactured product. </li></ul>
  5. 5. Payment Systems <ul><li>Group Incentives </li></ul><ul><li>These are based on the same principles as the individual payment by results system, but are used when the individualistic approach is not wanted by the organisation. For example, in order to try to encourage teamworking. The size of the group may vary from small teams or work units to the whole plant or enterprise. </li></ul>
  6. 6. Payment Systems <ul><li>Profit Sharing </li></ul><ul><li>This is a form of payment scheme where the focus is on the group rather than the individual. Employees all receive a bonus, and its size depends on the profits made by the organisation that year. There is little direct incentive for individuals to work harder, as it is difficult to see how their contribution actually relates to the profit made, but many profit-sharing schemes encourage employees to get involved with how the scheme is run. </li></ul>
  7. 7. Payment Systems <ul><li>Performance-Related Pay </li></ul><ul><li>Performance–related pay, is also a way of linking an individual’s pay progression to his or her level of performance or to a rating of competence. It is once again an individualistic approach which favours rewarding people differently according to their level of performance or competence and it aims to motivate all employees and give clear indications of what the organisation expects from employees. Performance-related pay differs from payment by results as it does not relate just to the quantity of a product that is produced and may apply to workers even where there is no end product to measure. </li></ul><ul><li>Initially, performance-related pay was used as a motivational tool primarily for non-manual workers but in recent years it has been extended to shop floor workers. </li></ul>
  8. 8. Payment Systems <ul><li>Non-Monetary Awards </li></ul><ul><li>Many organisations now seek to provide both monetary and non-monetary awards as employees may be motivated by a range of different factors apart from simply being paid more money. </li></ul><ul><li>Saying ’thank you’ is a much overlooked form of non-monetary award in many organisations! The most commonly used non-financial rewards are: Commendation, overseas travel, gifts, gift vouchers and increasingly green/environmental rewards. </li></ul>
  9. 9. Payment Systems <ul><li>Cafeteria-Style or Flexible Pay </li></ul><ul><li>An even more flexible approach to pay is sometimes referred to as the ’cafeteria approach’ or ’flex pay’, because employees can choose their own preferred reward or combination of rewards. It gives an opportunity for employees to find a pay package that will suit a diverse range of staff, whether male or female, full time or part time, and who come from a wide age range. This can prove very attractive for recruiting and retaining labour. In the cafeteria approach the workforce are told what rewards or benefits they can choose from each year. </li></ul>
  10. 10. Payment Systems <ul><li>Total Reward </li></ul><ul><li>Total Reward, like that of flexible pay, recognises that pay is not the only motivating force for people but it goes even further to include other aspects of employment in the total reward package. Total reward is a newer concept than flexible pay. Total reward schemes normally do offer flexible benefits but also include aspects of work such as career and personal development, flexitime, a challenging job at work, opportunities for individual growth and development and recognition for achievements. Sometime they even allow for individual preferences for type of office layout, space and equipment as well as for administrative support. </li></ul><ul><li>Total reward schemes aim to align employers’ HR and business strategies with employees needs in order to ultimately achieve improved performance. </li></ul>