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Human Resource Management : Chapter 11 Pay Structure Decision
- 1. Human Resource Management Chapter 11 Pay Structure Decisions 1 Faculty of Economic and Business Universityof Lampung Management 2017/2018
- 2. +First Gusti Ray Kamandanu 1711011012 +Second +Third Ardian Fauzan 1711011106 Arpan Maulana 1711011056 Our Team 2
- 4. Learning Objectives 4 1. List major decision areas & concepts in employee compensation management. 2. Describe major administrative tools used to manage employee compensation. 3. Explain importance of competitive labor-market and product-market forces in compensation decisions. 4. Discuss the significance of process issues such as communication in compensation management. 5. Describe new developments in pay structure designs. 6. Explain where U.S. stands on pay issues from an international perspective. 7. Explain reasons for executive pay controversy. 8. Describe regulatory framework for employee compensation.
- 5. Introduction Employer’s View: Pay is critical in attaining strategic goals. Pay impacts employee attitudes & behaviors. Employee compensation is significant organizational cost. 5 Employee’s View: Policies regarding wages, salaries & other earnings affect their overall income and standard of living. Both level of pay & fairness compared with others’ pay are important
- 6. Pay structure - relative pay of different jobs (job structure) & how much they are paid (pay level). Pay level - average pay, including wages, salaries & bonuses. Job structure - relative pay of jobs (range of pay often expressed by salary grades). Pay policies are attached to jobs, not individuals. Developing Pay Levels 6
- 7. Equity Theory and Fairness Pay Structure Concepts & Consequences 7 Pay Structure Decision Area Administrative Tool Focus of Employee Pay Comparisons Consequences of Equity Perceptions Pay Level Market pay surveys External equity External employee movement, labor costs, employee attitudes Job Structure Job evaluation Internal equity Internal employee movement, cooperation, employee attitudes
- 8. Developing Pay Levels-Market Pressures sell goods and services at a quantity and price that will bring a return on investment. amount an organization must pay to compete against other organizations that hire similar employees. Product 01 Labor 02 2 Competitive Market Challenges in Pay Decisions 8
- 9. 2 Components of Labor Costs 9 Average cost per employee Staffing level Labor Costs
- 10. Employees as a Resource 10 A philosophy that considers employees to be an investment that will yield valuable returns. Controlling costs through noncompetitive pay can result in low employee productivity and quality. Pay policies and programs are important HR tools for encouraging desired employee behaviors and discouraging undesired behaviors.
- 11. Deciding What to Pay Deciding pay levels is discretionary and is based on a broad range. The organization has to decide whether to pay at, below, or above the market average. Efficiency wage theory - wages influence worker productivity. 11
- 12. Market Pay Surveys Benchmarking - procedure by which an organization compares its own practices against the competition. 3 issues to consider before using pay surveys: 1. Which employers should be included in the survey? 2. Which jobs are included in the survey? 3. If multiple surveys are used, how are all rates of pay weighted and combined? . FID MORE 12
- 13. Developing a Job Structure 13 Job structure - relative worth of various jobs in based on internal comparisons. Job evaluation - administrative procedure used to measure internal job worth. The evaluation process is composed of compensable factors, which are characteristics of jobs that an organization values and chooses to pay. Job evaluators often apply a weighting scheme to account for differing importance of compensable factors to the organization.
- 14. Conflicts – Market Pay Surveys & Job Evaluation Internal data drives up labor costs and create product-market problems If external market data are emphasized and a job is paid lower internally, comparisons that employees make internally would result in dissatisfaction. An organization should consider its strategy, what jobs and/or functions will be critical for success and market-competitive pressures. 01 02 03 14
- 15. Participation & Communication 15 Participation Participation should involve those who will manage and be affected by the process. Participation includes recommending, designing and communicating a pay program. Typically, pay-level decisions are only made by top management. Communication The effect of communication impacts employees' perceptions of equity. Managers must be prepared to explain why the pay structure is designed the way it is and to judge whether changes should be made to the structure.
- 16. reinforces top-down decision making as well as status differentials. bureaucracy, time and cost required to generate and update job descriptions can become a barrier to change. job-based structure may not reward desired behaviors, where the knowledge, skills, and abilities needed yesterday may not be helpful today and tomorrow. system encourages promotion- seeking behavior, but discourages lateral movement. Current Challenges Job-based pay structures can create problems 16
- 17. Responses To Problems With Job-Based Pay Structures Delayering and Banding 01 Skills Based Competency Based 02 03 17
- 18. Nonlabor considerations Instability of Country Differences In Labor Costs Productivity Unit Labor Costs & G.D.P. Skill levels . 4 Factors In Deciding Where to Locate Production Can the U.S. Labor Force Compete? 18
- 19. Executives have a disproportionate ability to influence organizational performance. Issues include not only how much executives are paid but how they are paid Executive Pay 19 Executive pay accounts for a small proportion of labor costs
- 20. Thank you 20