Chapter 11: Strategic Pay Plans

Strategic Pay Plans | 11-1

Copyright © 2014 Pearson Canada Inc. All rights reserved.

De...
Learning Outcomes

• EXPLAIN in detail each of the three
stages in establishing pay rates.
• DISCUSS competency-based pay....
Learning Outcomes

• DEFINE pay equity and EXPLAIN its
importance today.

Strategic Pay Plans | 11-3

Copyright © 2014 Pea...
Strategic Importance of
Total Rewards
• monetary (extrinsic)
• compensation: cash payments and benefits
• personal growth ...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Employment Rewards

Strategic Pay Plans | 11-5
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Total Rewards

Strategic Pay Plans | 11-6
Five Components of Total Rewards
1. Compensation

2. Benefits
4. Performance and recognition

5. Development and career op...
Basic Considerations in
Determining Pay Rates
•
•
•
•
•

Employment/Labour Standards Act
Pay Equity Acts
Human Rights Acts...
Establishing Pay Rates

Stage 2: Conduct wage/salary survey

Stage 1: Job evaluation

Strategic Pay Plans | 11-9

reserved...
Stage 1: Job Evaluation

• Benchmark job
• critical to operations or commonly found in other
organizations

• Compensable ...
Job Evaluation Methods
• Classification/grading method
categorizes jobs into groups
grade/group description: outlines leve...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Grade/Group Description
Sample

Strategic Pay Plans | ...
Point Method Steps

Step 3: Assign points for each degree of
each sub-factor
Step 2: Determine factor weights and degrees
...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Sub-Factor Sample

Strategic Pay Plans | 11-14
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Point Method
Job Evaluation Plan Sample

Strategic Pay...
Stage 2: Conduct a Wage/
Salary Survey
• aimed at determining prevailing wage rates

• avoid upward bias
• informal survey...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Earnings Data Sample

Strategic Pay Plans | 11-17
Stage 3: Combine Job Evaluation
and Salary Survey Information
• a graphic description of the relationship
between the valu...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Wage Curve

Strategic Pay Plans | 11-19
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Pay Ranges Sample

Strategic Pay Plans | 11-20
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Pay Ranges Sample

Strategic Pay Plans | 11-21
Reducing the number of salary grades and
ranges into just a few wide levels or
“bands”, each of which then contains a
rela...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Broadbanding

Strategic Pay Plans | 11-23
Pay for Knowledge
• competency-based pay
(managers, professionals)

• pay-for-knowledge program should
include:
• competen...
Compensating Executives
and Managers
1.
2.
3.
4.
5.

Salary
Benefits
Short-term incentives
Long-term incentives
Perquisite...
Compensating Professional
Employees
• engineers, scientists, accountants, lawyers
, etc.

• difficult to measure economic ...
Pay Equity
• wage gap has narrowed but remains at 30%

• aim is to provide equal pay to male and
female-dominated job clas...
reserved.
Copyright © 2014 Pearson Canada Inc. All rights reserved

Male-Female Wage Gap

Strategic Pay Plans | 11-28
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Chapter 11 dessler 12-ce_ppt_ch11

  1. 1. Chapter 11: Strategic Pay Plans Strategic Pay Plans | 11-1 Copyright © 2014 Pearson Canada Inc. All rights reserved. Dessler, Chhinzer, Cole Human Resources Management in Canada Canadian Twelfth Edition
  2. 2. Learning Outcomes • EXPLAIN in detail each of the three stages in establishing pay rates. • DISCUSS competency-based pay. Strategic Pay Plans | 11-2 Copyright © 2014 Pearson Canada Inc. All rights reserved. • EXPLAIN the strategic importance of total rewards.
  3. 3. Learning Outcomes • DEFINE pay equity and EXPLAIN its importance today. Strategic Pay Plans | 11-3 Copyright © 2014 Pearson Canada Inc. All rights reserved. • DESCRIBE the five basic elements of compensation for managers.
  4. 4. Strategic Importance of Total Rewards • monetary (extrinsic) • compensation: cash payments and benefits • personal growth and interpersonal rewards • total awards approach • rewards are part of integrated whole • aligns rewards with business strategies Strategic Pay Plans | 11-4 Copyright © 2014 Pearson Canada Inc. All rights reserved. • non-monetary (intrinsic)
  5. 5. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Employment Rewards Strategic Pay Plans | 11-5
  6. 6. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Total Rewards Strategic Pay Plans | 11-6
  7. 7. Five Components of Total Rewards 1. Compensation 2. Benefits 4. Performance and recognition 5. Development and career opportunities Strategic Pay Plans | 11-7 Copyright © 2014 Pearson Canada Inc. All rights reserved. 3. Work-life programs
  8. 8. Basic Considerations in Determining Pay Rates • • • • • Employment/Labour Standards Act Pay Equity Acts Human Rights Acts Canada/Quebec Pension Plan other legislation (worker’s comp., EI) • union influences • compensation policies • equity and its impact on pay rates Strategic Pay Plans | 11-8 Copyright © 2014 Pearson Canada Inc. All rights reserved. • legal considerations in compensation
  9. 9. Establishing Pay Rates Stage 2: Conduct wage/salary survey Stage 1: Job evaluation Strategic Pay Plans | 11-9 reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Stage 3: Combine job evaluation and salary survey to determine pay
  10. 10. Stage 1: Job Evaluation • Benchmark job • critical to operations or commonly found in other organizations • Compensable factors • fundamental, compensable element of a job Strategic Pay Plans | 11-10 Copyright © 2014 Pearson Canada Inc. All rights reserved. A systematic comparison to determine relative worth of jobs within a firm.
  11. 11. Job Evaluation Methods • Classification/grading method categorizes jobs into groups grade/group description: outlines level of compensable factors required by each job • Point method • identify compensable factors • determine the degree to which each factor is present in each job Strategic Pay Plans | 11-11 Copyright © 2014 Pearson Canada Inc. All rights reserved. • •
  12. 12. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Grade/Group Description Sample Strategic Pay Plans | 11-12
  13. 13. Point Method Steps Step 3: Assign points for each degree of each sub-factor Step 2: Determine factor weights and degrees Step 1: Preliminary steps Strategic Pay Plans | 11-13 reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Step 4: Evaluate the jobs
  14. 14. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Sub-Factor Sample Strategic Pay Plans | 11-14
  15. 15. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Point Method Job Evaluation Plan Sample Strategic Pay Plans | 11-15
  16. 16. Stage 2: Conduct a Wage/ Salary Survey • aimed at determining prevailing wage rates • avoid upward bias • informal surveys good for easily recognized jobs • formal surveys are most comprehensive Strategic Pay Plans | 11-16 Copyright © 2014 Pearson Canada Inc. All rights reserved. • determine rates for benchmark jobs • determine market rates for jobs • collect data on benefits, recognition programs, etc.
  17. 17. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Earnings Data Sample Strategic Pay Plans | 11-17
  18. 18. Stage 3: Combine Job Evaluation and Salary Survey Information • a graphic description of the relationship between the value of the job and the average wage paid for this job Pay ranges • a series of steps or levels within a pay grade, usually based on years of service Strategic Pay Plans | 11-18 Copyright © 2014 Pearson Canada Inc. All rights reserved. Wage curve
  19. 19. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Wage Curve Strategic Pay Plans | 11-19
  20. 20. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Pay Ranges Sample Strategic Pay Plans | 11-20
  21. 21. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Pay Ranges Sample Strategic Pay Plans | 11-21
  22. 22. Reducing the number of salary grades and ranges into just a few wide levels or “bands”, each of which then contains a relatively wide range of jobs and salary levels. advantage • greater flexibility in employee compensation Strategic Pay Plans | 11-22 Copyright © 2014 Pearson Canada Inc. All rights reserved. Broadbanding
  23. 23. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Broadbanding Strategic Pay Plans | 11-23
  24. 24. Pay for Knowledge • competency-based pay (managers, professionals) • pay-for-knowledge program should include: • competencies/skills directly important to job performance • new competencies that replace competencies that are no longer important • on-the-job training, not “in the classroom.” Strategic Pay Plans | 11-24 Copyright © 2014 Pearson Canada Inc. All rights reserved. • skill-based pay (manufacturing employees)
  25. 25. Compensating Executives and Managers 1. 2. 3. 4. 5. Salary Benefits Short-term incentives Long-term incentives Perquisites Strategic Pay Plans | 11-25 Copyright © 2014 Pearson Canada Inc. All rights reserved. Five elements:
  26. 26. Compensating Professional Employees • engineers, scientists, accountants, lawyers , etc. • difficult to measure economic impact to organization • market pricing approach commonly used Strategic Pay Plans | 11-26 Copyright © 2014 Pearson Canada Inc. All rights reserved. • compensable factors not easily measured: creativity, problem solving
  27. 27. Pay Equity • wage gap has narrowed but remains at 30% • aim is to provide equal pay to male and female-dominated job classes of equal value • must ensure no gender bias in job evaluation • long-term solution is to eliminate male and female- dominated jobs Strategic Pay Plans | 11-27 Copyright © 2014 Pearson Canada Inc. All rights reserved. • gap attributed to systemic discrimination
  28. 28. reserved. Copyright © 2014 Pearson Canada Inc. All rights reserved Male-Female Wage Gap Strategic Pay Plans | 11-28
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