Compensation Guide for HRers

1. ADVANCE HUMAN RESOURCE
MANAGEMENT TRAINING
COMPENSATION AND
BENEFITS
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2. COURSE OBJECTIVES
• Identify Compensation policies and practices
that are most appropriate for a particular firm.
• Weigh the strategic advantages and
disadvantages of the different compensation
options.
• Establish a job-based compensation scheme
that is internally consistent and linked to the
labour market.
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3. POSER
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4. COMPENSATION AND BENEFITS
Compensation and Benefits (C&B) is a sub
discipline of human resources that is focused on
policy making for employee compensation and
benefits. As part of any employment agreement,
employees are compensated for services rendered
in a predetermined and equitable fashion. C&B is
also known as “Total reward” or “Remuneration”.
Compensation (also known as Total Rewards) can
be defined as all of the rewards earned by
employees in return for their labour.
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5. Types of Compensation
• Direct financial compensation consisting of pay received in the
form of wages, salaries, bonuses and commissions provided at
regular and consistent intervals
• Indirect financial compensation including all financial rewards
that are not included in direct compensation and understood to
form part of the social contract between the employer and
employee such as benefits, leaves, retirement plans, education,
and employee services
• Non-financial compensation referring to topics such as career
development and advancement opportunities, opportunities
for recognition, as well as work environment and conditions
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6. Legal Compliance
When compensating employees the following are areas that you
need to ensure comply with relevant legislation:
• Statutory Obligations
• Statutory Benefits
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7. Statutory Obligation
A statutory obligation is a requirement that employers are
required to provide their employees as determined by the law of
the province or territory where the employer operates.
Employment Standard Legislation sets out the minimum terms
and conditions of employment for those who operate federally
and for each state or local government. Both employers and
employees must follow these minimum obligations unless they
offer terms or conditions more generous that the ones
mandated by legislation.
Some key areas covered by legislation are:
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• Minimum Wage
• Hours of Work
• Public Holiday Entitlement
• Overtime
• Vacations Leave
• Maternity and Paternity Leaves
• Adoption and Parental Leaves
• Emergency/Sick Leave/Compassionate Leave
• Bereavement Leave
• Leave Entitlement
• Grievance procedures
• Termintation of Employment

9. Statutory Benefits
Statutory is defined as something fixed, authorized, or
established by statute, therefore the benefit packages that
employers offer, are designed to enhance the well-being of
their employees, and will contain both statutory and
discretionary benefits. Statutory benefits are some of the
benefits also referred to as employer paid benefits.
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10. Developinga compensation rewards
program
A Compensation and Rewards Program is a tool used by
employers to effectively attract, retain and motivate
employees. The program results in equitable payment
for performance of a service, in exchange for the work
of an employee. The following are elements an
organization considers when developing a
compensation and rewards program.
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• Compensation Philosophy
• Equity
• Compensation Components

12. Develop a compensation philosophy
Developing a compensation philosophy can support an
organization in developing a program that is in line with the
work culture an organization has or wants to create.
A consistent philosophy provides a strong foundation for both
the organization and the employee. Without a philosophy,
leaders often find themselves unsure of what to offer as a
starting salary for a new employee. This can lead to offering
too high a total compensation package for a new employee in
relation to existing employees, or being unable to successfully
hire because the total compensation offer is too low to be
competitive.
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13. Oneofthequestionstoconsiderwhendeveloping
compensationphilosophyis:
Where do you want your organization to sit regarding
compensation as compared with your industry or
market? Your relevant labour market is defined as
those organizations, usually in your geographic area,
with whom you compete for labour. You have three
choices: Lead, lag or match the market. The figures in
the next slide are normally derived from salary survey
data.
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• Lead the market: i.e. positioning at the 75th percentile
where 75% of your comparators pay less. This is for high
paying employers. It is also referred to as P75 or Q3 (third
quartile).
• Lag the market: i.e. positioning at the 30th percentile,
where 70% of your comparators pay better. This is for
employers who cannot afford to pay more for labour.
• Match the market: i.e. positioning at the 50th percentile
(median), where half of your comparators pay less and
half pay more. Most non-profit employers like to be
competitive and will target to pay at this level. It is also
referred to as P50 or Q2 (second quartile).

15. Equity
Using equity or fairness is a key component to creating a
successful compensation and rewards program.
Organizations can support equity by:
• Ensuring that all employees in an organization are being
treated fairly
• Developing salary ranges that are relative to where an
organization wants to be in the market
• Rewarding employees according to the relative value of
their jobs within an organization
• Determining Salary is based on the job requirements and
not on the skills and performance of the employee
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Perceived inequity or unfairness can result in low
morale and loss of organizational effectiveness.
For example, if employees feel they are being
compensated unfairly, they may restrict their
efforts or leave the organization, damaging the
organization overall performance.
Equity in organizations can be in different forms:

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• Internal Equity
• External Equity
• Employee Equity
• Pay Equity

18. Wages and Salaries
When determining what your organization will pay for wages
and salaries, it is important to understand the economic
conditions of the region in which you function, the volume of
potential employees and the legislative requirements in place.
When determining what to pay, first consideration is
placement of the role organizationally which can be
determined through job evaluation/classification. The second
consideration is the job relevant skills and experience the
applicant possesses which may impact their placement in the
salary range upon hire.
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19. Deciding what to pay
They are many situations in which you will be
faced with deciding what to pay an employee.
• A new hire
• An existing employee due for an increase
• An existing employee moving into a new role
• A valuable employee who is considering leaving
because of compensation
• Market conditions
• Scarce skill
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20. Approaches and techniques to
determining base pay
Determining base pay is directly linked to your compensation
philosophy. Having a clear understanding of what role the position
plays in the organization, including the complexity of the required
responsibilities and tasks, is factored into the equation along with
data on market and sector comparatives. Organizations that take
the time to ensure they have factored in all of the following
components will be more effective in managing their
competitiveness externally as well as their consistency and
credibility internally.
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• Create job descriptions
• Conduct a job analysis
• Perform job evaluation
• Review pay structure
• Participate in salary surveys

22. Pay increases, bonus and incentive plans
Pay increases
• A cost of living increase
• Market Adjustment
• A promotional increase
• A merit increase
Bonus Payment
Incentive Plans
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23. Communicating wage and salary
information
Communicating total compensation information through formats such as
statements, booklets, newsletters and memos provides a consistent
message and allows employees to refer to the material later. Presenting
compensation information through meetings, workshops and ongoing
support allows interaction so individual questions and concerns can be
addressed immediately. Overall, it is important to ensure employees have
access to information regarding the compensation plan and that it is
provided in clear and concise language. A compensation plan can also be
used to attract prospective employees and therefore effective external
communication is also important.
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24. Direct Benefits
Direct benefits are optional, non-wage compensation
provided to employees in addition to their normal wages or
salaries. These types of benefits may include group
insurance (health, dental, vision, life etc.), disability income
protection, retirement benefits, daycare, tuition
reimbursement, sick leave, vacation (paid and non-paid), and
funding of education.
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25. Direct Benefits
• Health
• Life and AD&D
• Long term disability
• Employee Assistance Plans (EAPs)
• Retirement benefits
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26. Indirect Benefits
• Professional Development
• Career Opportunities
• Culture
• Workplace Flexibility
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27. Salary Surveys
Surveys collecting information about employee compensation,
including salary and benefits, are commonly called salary surveys.
Salary surveys are conducted with numerous employers to
determine pay levels for specific job categories and are generally
conducted either by region, sector or job classification for the
purposes of comparability. In conjunction with other tools, salary
surveys can provide useful information to attract, support and
retain employees within the context of an overall HR and
organizational plan. When designed and used properly, salary
surveys can provide useful benchmarking information for
comparing salaries and benefits.
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28. TOTAL COMPENSATION
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29. COMPENSATION AND BENEFITS
Compensation and Benefits (C&B) are divided into four basic
categories:
1. Guaranteed pay – a fixed monetary reward paid by an
employer to an employee i.e base salary.
2. Variable pay – a non-fixed monetary reward paid by an
employer to an employee that based on discretion,
performance or other achievement. i.e bonuses and
incentives.
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30. COMPENSATION AND BENEFITS
3. Benefits – Programs an employer uses to supplement
employees’ compensation i.e paid time off, medical insurance,
company car e.t.c
4. Equity-based compensation – stock or pseudo stock
programs an employer uses to provide actual or perceived
ownership in the company which ties an employee’s
compensation to the long-term success of the company, e.g
Stock Option.
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Thank you for
listening