This document discusses various aspects of direct financial compensation. It begins by outlining learning objectives related to executive pay, forms of compensation, equity in compensation, and determinants of compensation. It then covers determinants like the organization, labor market, job, legislation, and individual employee factors. Various compensation methods are examined, including job evaluation techniques, pay grades, performance-based plans, and benefits. Executive pay and its regulation are also addressed.
This document discusses performance management and appraisal. It covers topics such as employee engagement, the importance of performance management, defining performance appraisal and its uses. It describes the performance appraisal process and factors like environmental considerations. It also discusses different performance appraisal methods, potential problems, characteristics of an effective system, legal implications and how culture can impact appraisals.
The document summarizes key topics related to indirect financial compensation (benefits) and nonfinancial compensation from Chapter 10 of a human resource management textbook. It defines benefits, legally required benefits like Social Security and workers' compensation, discretionary benefits including health insurance and retirement plans, and nonfinancial compensation factors like flexible work schedules and job content. Major health care legislation impacting benefits is also summarized, such as COBRA, HIPAA, and the Affordable Care Act.
This document discusses training and development in human resource management. It covers topics such as determining training needs, selecting training methods, and evaluating training programs. Specific training methods discussed include instructor-led training, e-learning, case studies, role playing, and on-the-job training. Factors that influence training and development include technological advances, the shortage of skilled workers, and the need for continuous learning. The document also explores trends like mobile learning and different delivery systems for training such as corporate universities, online education, and videoconferencing.
This document discusses factors that determine pay rates, including various legal considerations and legislation. It outlines the main components of employee compensation as direct financial payments and indirect financial payments. The key steps in establishing pay rates are conducting a salary survey, performing job evaluation to group similar jobs into pay grades, pricing each grade, and fine-tuning rates. Job evaluation methods include ranking, classification, point method, and factor comparison. Legislation discussed includes the Minimum Wages Act, Payment of Wages Act, and Equal Remuneration Act in India as well as the Davis-Bacon Act, Walsh-Healey Act, Civil Rights Act, Fair Labor Standards Act, and Equal Pay Act in the US.
This chapter discusses theories of motivation. It begins by defining motivation as the processes that account for an individual's intensity, direction, and persistence of effort toward attaining an organizational goal. Early theories discussed include Maslow's hierarchy of needs, McGregor's Theory X and Y, Herzberg's two-factor theory, and McClelland's three needs theory. Contemporary theories covered are self-determination theory, job engagement, goal-setting theory and management by objectives, self-efficacy theory, equity theory, and expectancy theory.
This document discusses compensation management and wage theories. It covers the different elements that make up total compensation, including base pay, incentives, and benefits. It also discusses objectives of wage policies, wage legislation like the Payment of Wages Act and Minimum Wages Act, compensation issues, wage determination methods, and various theories of wages like subsistence theory, wage fund theory, and marginal productivity theory. Maslow's hierarchy of needs and Herzberg's two-factor theory are also summarized.
Organizational Behavior Chapter 5 Perception and Individual Decision MakingDr. John V. Padua
This document discusses perception and decision making. It defines perception as how individuals organize and interpret sensory impressions to understand their environment. Perception is influenced by factors like the situation, perceiver, and target. Attribution theory holds that people try to explain behaviors as either internal or external to the person. Common shortcuts used in judging others include selective perception, halo effect, contrast effects, and stereotyping. Decision making is linked to perception, which can influence problem identification, information processing, and conclusions. The document also outlines rational decision making, bounded rationality, intuitive decision making, and common decision biases. [/SUMMARY]
This document discusses performance management and appraisal. It covers topics such as employee engagement, the importance of performance management, defining performance appraisal and its uses. It describes the performance appraisal process and factors like environmental considerations. It also discusses different performance appraisal methods, potential problems, characteristics of an effective system, legal implications and how culture can impact appraisals.
The document summarizes key topics related to indirect financial compensation (benefits) and nonfinancial compensation from Chapter 10 of a human resource management textbook. It defines benefits, legally required benefits like Social Security and workers' compensation, discretionary benefits including health insurance and retirement plans, and nonfinancial compensation factors like flexible work schedules and job content. Major health care legislation impacting benefits is also summarized, such as COBRA, HIPAA, and the Affordable Care Act.
This document discusses training and development in human resource management. It covers topics such as determining training needs, selecting training methods, and evaluating training programs. Specific training methods discussed include instructor-led training, e-learning, case studies, role playing, and on-the-job training. Factors that influence training and development include technological advances, the shortage of skilled workers, and the need for continuous learning. The document also explores trends like mobile learning and different delivery systems for training such as corporate universities, online education, and videoconferencing.
This document discusses factors that determine pay rates, including various legal considerations and legislation. It outlines the main components of employee compensation as direct financial payments and indirect financial payments. The key steps in establishing pay rates are conducting a salary survey, performing job evaluation to group similar jobs into pay grades, pricing each grade, and fine-tuning rates. Job evaluation methods include ranking, classification, point method, and factor comparison. Legislation discussed includes the Minimum Wages Act, Payment of Wages Act, and Equal Remuneration Act in India as well as the Davis-Bacon Act, Walsh-Healey Act, Civil Rights Act, Fair Labor Standards Act, and Equal Pay Act in the US.
This chapter discusses theories of motivation. It begins by defining motivation as the processes that account for an individual's intensity, direction, and persistence of effort toward attaining an organizational goal. Early theories discussed include Maslow's hierarchy of needs, McGregor's Theory X and Y, Herzberg's two-factor theory, and McClelland's three needs theory. Contemporary theories covered are self-determination theory, job engagement, goal-setting theory and management by objectives, self-efficacy theory, equity theory, and expectancy theory.
This document discusses compensation management and wage theories. It covers the different elements that make up total compensation, including base pay, incentives, and benefits. It also discusses objectives of wage policies, wage legislation like the Payment of Wages Act and Minimum Wages Act, compensation issues, wage determination methods, and various theories of wages like subsistence theory, wage fund theory, and marginal productivity theory. Maslow's hierarchy of needs and Herzberg's two-factor theory are also summarized.
Organizational Behavior Chapter 5 Perception and Individual Decision MakingDr. John V. Padua
This document discusses perception and decision making. It defines perception as how individuals organize and interpret sensory impressions to understand their environment. Perception is influenced by factors like the situation, perceiver, and target. Attribution theory holds that people try to explain behaviors as either internal or external to the person. Common shortcuts used in judging others include selective perception, halo effect, contrast effects, and stereotyping. Decision making is linked to perception, which can influence problem identification, information processing, and conclusions. The document also outlines rational decision making, bounded rationality, intuitive decision making, and common decision biases. [/SUMMARY]
Internal pay structures should support the organization's strategy, work flow, and motivate behavior toward objectives. They refer to pay relationships among jobs within an organization. An effective structure has the right number of levels, pay differentials between levels, and criteria for determining pay. It should align with strategy, support work processes, and incentivize employees to achieve goals.
This document outlines the key components of a performance management process, including prerequisites, planning, execution, assessment, review, and renewal. It discusses conducting job analyses to understand job requirements and writing descriptions. Performance planning involves setting objectives, standards, and development plans. Execution requires commitment from both employees and managers. Assessment incorporates self and manager evaluations. Reviews cover past performance and future goals. Renewal recaps the cycle and allows for adjustments. The components are interrelated, so weak implementation of any part negatively impacts the overall system.
The document discusses various factors to consider when determining employee pay rates, including compensation plans, legal requirements, and equity. It covers types of wages based on time or performance, exempt vs non-exempt employee classifications, key US labor laws, and how to align compensation with business strategy and maintain pay equity.
This chapter discusses personnel selection and placement methods. It covers five standards for selection methods: reliability, validity, generalizability, utility, and legality. Nine common selection methods are described: interviews, references, physical ability tests, cognitive ability tests, personality inventories, work samples, and honesty/drug tests. The chapter aims to minimize employee selection errors and improve organizational competitiveness by familiarizing students with effective selection methods.
establishing strategic pay plans
equity and its impact on pay rates
job evaluation methods
how to create a market-competitive pay plan
pricing managerial and professional jobs
contemporary topics in compensation
Mba ii hrm u-3.4 compensation administrationRai University
This document discusses compensation administration and human resource management. It covers several key topics:
1) The nature of compensation including base pay, variable pay, and benefits. 2) Objectives of compensation planning including fairness, internal equity, external equity, and individual equity. 3) Components of pay structures in India including basic wages, dearness allowance, and various allowances. 4) Principles of wage and salary administration including flexibility, job evaluation, and consistency with organizational plans. 5) Factors influencing compensation levels such as job needs, ability to pay, cost of living, and productivity.
The document discusses employee benefits, including legally required benefits such as Social Security, unemployment compensation, workers' compensation, and FMLA. It also discusses voluntary benefits like health insurance, retirement plans, paid time off for vacation, holidays and sick leave. Finally, it discusses survivor benefits like life insurance and flexible benefits programs that allow employees to choose the benefits they want.
This document discusses strategic compensation planning and pay-for-performance systems. It explains that strategic compensation planning links pay to an organization's objectives and culture. A pay-for-performance standard ties compensation to employee effort and performance through mechanisms like bonuses and merit-based pay. The document also discusses theories of motivation like pay equity and expectancy theory that explain how compensation influences employee motivation.
This document discusses work teams and their increasing popularity in organizations. It contrasts groups with teams, noting that teams generate synergy through coordinated effort to achieve performance greater than individuals. Four types of teams are described: problem-solving teams, self-managed work teams, cross-functional teams, and virtual teams. The key components of effective teams are identified as context, composition, and process. Context includes leadership, resources, and rewards aligned with team goals. Composition considers member abilities, roles, diversity, and size. Effective processes include shared goals, plans, efficacy, and low conflict.
The memo outlines 6 crucial steps to take before implementing a new performance management system at St. Jessica's Urban Medical Center:
1. Develop a comprehensive communication plan to educate employees on the purpose and goals of the new system, and address any concerns about past failures.
2. Establish a formal appeals process to resolve disputes and gain employee buy-in.
3. Provide rater training to minimize unintentional errors and ensure consistent, accurate evaluations.
4. Pilot test the system with a sample group to identify and address any issues before full implementation.
5. Monitor the system ongoing after launch to evaluate effectiveness and make improvements.
6. Link performance evaluations to strategic goals to
This document discusses pay for performance and compensation systems. It examines how compensation can be used to attract, retain, motivate, and develop employees. It explores different theories of motivation and components of total reward systems. The document analyzes research on whether compensation influences people to join or stay with a firm, develop skills, and improve job performance. While individual merit pay is questioned, evidence suggests group bonuses and profit/gain sharing can be effective forms of performance-based pay.
Organizational Behavior Chapter 7 Motivation - From Concepts to ApplicationDr. John V. Padua
The document discusses various ways to motivate employees through job design and rewards. It describes the job characteristics model which proposes that motivating jobs are autonomous, provide feedback, and have at least one meaningfulness factor. Jobs can be redesigned through methods like job rotation, job enrichment, and alternative work arrangements. Employee involvement measures like participative management and representative participation can also increase motivation. Reward programs include variable pay, flexible benefits, and employee recognition programs which provide intrinsic rewards.
How to Build Pay Grades and Set Salary RangesPayScale, Inc.
In today’s changing workforce, having a clearly defined career path is becoming critical for attracting and retaining top talent. Setting pay ranges and grades can give you a competitive advantage in an ever-changing market by enabling clear job progression as well as competitive pay.
So how can you set your pay ranges just right?
In this webinar we show you how to build ranges from a market-centered midpoint, and how to use market data to update or create market-based pay ranges.
You’ll learn how to:
Build pay structures from the ground up
Choose benchmark positions and slot non-benchmark positions into your pay structure
Adjust and align your structure for special internal considerations
Create a strategy for dealing with “hot” jobs that fall outside of internal ranges
This document discusses recruitment methods and sources. It begins by outlining learning objectives related to recruitment, including internal and external recruitment methods. It then discusses alternatives to recruitment like outsourcing. The recruitment process is described as attracting qualified candidates in a timely manner. Internal sources include job posting and referrals. External sources range from colleges to job boards. A variety of traditional methods are also outlined like advertising, agencies, and job fairs. The document stresses tailoring recruitment methods to the specific position and source. It concludes by discussing the trend of reshoring jobs back to the US.
This chapter discusses key concepts in developing an organization's pay structure, including setting pay levels, conducting market pay surveys, developing internal job structures, and ensuring pay equity and fairness. It also covers regulatory considerations around minimum wage, comparable worth, and discrimination laws. Maintaining competitive pay aligned with the market is important for attracting and retaining qualified employees.
Chapter 13 Variable Pay and Executive CompensationRayman Soe
This document discusses variable pay and executive compensation. It covers topics like developing successful pay-for-performance plans, individual and group incentives, sales compensation plans, profit sharing, employee stock ownership plans, and executive compensation packages and issues. The key elements discussed include linking compensation to performance, using clear and understandable incentive plans, developing appropriate performance metrics, and ensuring plans are fair and motivate improved results.
Dessler ch 06-employee testing and selectionShamsil Arefin
This PowerPoint presentation summarizes key points from Chapter 6 of the 11th edition of the textbook "Human Resource Management" by Gary Dessler regarding employee testing and selection. The presentation covers the importance of reliable and valid testing, different types of tests including cognitive, personality and work sample tests, legal and ethical considerations of testing, and conducting background investigations and reference checks. The overall goal of the chapter is to explain how to properly utilize testing and other tools to select the right employees for jobs.
Internal alignment, also called internal equity, refers to the pay relationships among different jobs, skills, and competencies within an organization. A compensation strategy for internal alignment should support the organization's strategy, workflow, and motivate desired employee behaviors. Organizations can design internal pay structures that are tailored closely to job content and levels of work, or more loosely coupled. Structures also vary in whether they distribute pay evenly across levels, taking an egalitarian approach, or emphasize differences in pay between levels in a hierarchical structure. The design choices around internal pay structures impact organizational efficiency, perceptions of fairness, and compliance.
The document discusses theories and models of personality including:
- Personality is shaped by both heredity and environment factors and can be measured through self-report surveys.
- The popular Myers-Briggs Type Indicator (MBTI) classifies people into 16 personality types based on preferences for extraversion/introversion, sensing/intuition, thinking/feeling, and judging/perceiving.
- The Big Five model describes five broad dimensions of personality: extraversion, agreeableness, conscientiousness, emotional stability, and openness. Different levels of these traits predict behaviors in work contexts.
This document provides an overview of Chapter 12 from a human resource management textbook on labor unions and collective bargaining. It covers key topics such as project labor agreements, reasons why employees join unions, union growth strategies, laws affecting collective bargaining, the collective bargaining process, preparing for and conducting negotiations, potential issues that can arise, and administering collective bargaining agreements. The chapter objectives are to describe these various concepts and processes related to unions and collective bargaining.
This document provides an overview of strategic human resource management. It begins by listing learning objectives related to defining HRM, identifying HRM functions and factors that influence HRM. It then discusses employer branding, corporate culture, and the utilization of individuals to achieve organizational objectives. The major HRM functions are identified as staffing, human resource development, compensation, and employee and labor relations. External environmental factors like the legal system, labor market and economy are described as influencing HRM. The roles of various individuals and departments in performing HRM tasks are also outlined.
Internal pay structures should support the organization's strategy, work flow, and motivate behavior toward objectives. They refer to pay relationships among jobs within an organization. An effective structure has the right number of levels, pay differentials between levels, and criteria for determining pay. It should align with strategy, support work processes, and incentivize employees to achieve goals.
This document outlines the key components of a performance management process, including prerequisites, planning, execution, assessment, review, and renewal. It discusses conducting job analyses to understand job requirements and writing descriptions. Performance planning involves setting objectives, standards, and development plans. Execution requires commitment from both employees and managers. Assessment incorporates self and manager evaluations. Reviews cover past performance and future goals. Renewal recaps the cycle and allows for adjustments. The components are interrelated, so weak implementation of any part negatively impacts the overall system.
The document discusses various factors to consider when determining employee pay rates, including compensation plans, legal requirements, and equity. It covers types of wages based on time or performance, exempt vs non-exempt employee classifications, key US labor laws, and how to align compensation with business strategy and maintain pay equity.
This chapter discusses personnel selection and placement methods. It covers five standards for selection methods: reliability, validity, generalizability, utility, and legality. Nine common selection methods are described: interviews, references, physical ability tests, cognitive ability tests, personality inventories, work samples, and honesty/drug tests. The chapter aims to minimize employee selection errors and improve organizational competitiveness by familiarizing students with effective selection methods.
establishing strategic pay plans
equity and its impact on pay rates
job evaluation methods
how to create a market-competitive pay plan
pricing managerial and professional jobs
contemporary topics in compensation
Mba ii hrm u-3.4 compensation administrationRai University
This document discusses compensation administration and human resource management. It covers several key topics:
1) The nature of compensation including base pay, variable pay, and benefits. 2) Objectives of compensation planning including fairness, internal equity, external equity, and individual equity. 3) Components of pay structures in India including basic wages, dearness allowance, and various allowances. 4) Principles of wage and salary administration including flexibility, job evaluation, and consistency with organizational plans. 5) Factors influencing compensation levels such as job needs, ability to pay, cost of living, and productivity.
The document discusses employee benefits, including legally required benefits such as Social Security, unemployment compensation, workers' compensation, and FMLA. It also discusses voluntary benefits like health insurance, retirement plans, paid time off for vacation, holidays and sick leave. Finally, it discusses survivor benefits like life insurance and flexible benefits programs that allow employees to choose the benefits they want.
This document discusses strategic compensation planning and pay-for-performance systems. It explains that strategic compensation planning links pay to an organization's objectives and culture. A pay-for-performance standard ties compensation to employee effort and performance through mechanisms like bonuses and merit-based pay. The document also discusses theories of motivation like pay equity and expectancy theory that explain how compensation influences employee motivation.
This document discusses work teams and their increasing popularity in organizations. It contrasts groups with teams, noting that teams generate synergy through coordinated effort to achieve performance greater than individuals. Four types of teams are described: problem-solving teams, self-managed work teams, cross-functional teams, and virtual teams. The key components of effective teams are identified as context, composition, and process. Context includes leadership, resources, and rewards aligned with team goals. Composition considers member abilities, roles, diversity, and size. Effective processes include shared goals, plans, efficacy, and low conflict.
The memo outlines 6 crucial steps to take before implementing a new performance management system at St. Jessica's Urban Medical Center:
1. Develop a comprehensive communication plan to educate employees on the purpose and goals of the new system, and address any concerns about past failures.
2. Establish a formal appeals process to resolve disputes and gain employee buy-in.
3. Provide rater training to minimize unintentional errors and ensure consistent, accurate evaluations.
4. Pilot test the system with a sample group to identify and address any issues before full implementation.
5. Monitor the system ongoing after launch to evaluate effectiveness and make improvements.
6. Link performance evaluations to strategic goals to
This document discusses pay for performance and compensation systems. It examines how compensation can be used to attract, retain, motivate, and develop employees. It explores different theories of motivation and components of total reward systems. The document analyzes research on whether compensation influences people to join or stay with a firm, develop skills, and improve job performance. While individual merit pay is questioned, evidence suggests group bonuses and profit/gain sharing can be effective forms of performance-based pay.
Organizational Behavior Chapter 7 Motivation - From Concepts to ApplicationDr. John V. Padua
The document discusses various ways to motivate employees through job design and rewards. It describes the job characteristics model which proposes that motivating jobs are autonomous, provide feedback, and have at least one meaningfulness factor. Jobs can be redesigned through methods like job rotation, job enrichment, and alternative work arrangements. Employee involvement measures like participative management and representative participation can also increase motivation. Reward programs include variable pay, flexible benefits, and employee recognition programs which provide intrinsic rewards.
How to Build Pay Grades and Set Salary RangesPayScale, Inc.
In today’s changing workforce, having a clearly defined career path is becoming critical for attracting and retaining top talent. Setting pay ranges and grades can give you a competitive advantage in an ever-changing market by enabling clear job progression as well as competitive pay.
So how can you set your pay ranges just right?
In this webinar we show you how to build ranges from a market-centered midpoint, and how to use market data to update or create market-based pay ranges.
You’ll learn how to:
Build pay structures from the ground up
Choose benchmark positions and slot non-benchmark positions into your pay structure
Adjust and align your structure for special internal considerations
Create a strategy for dealing with “hot” jobs that fall outside of internal ranges
This document discusses recruitment methods and sources. It begins by outlining learning objectives related to recruitment, including internal and external recruitment methods. It then discusses alternatives to recruitment like outsourcing. The recruitment process is described as attracting qualified candidates in a timely manner. Internal sources include job posting and referrals. External sources range from colleges to job boards. A variety of traditional methods are also outlined like advertising, agencies, and job fairs. The document stresses tailoring recruitment methods to the specific position and source. It concludes by discussing the trend of reshoring jobs back to the US.
This chapter discusses key concepts in developing an organization's pay structure, including setting pay levels, conducting market pay surveys, developing internal job structures, and ensuring pay equity and fairness. It also covers regulatory considerations around minimum wage, comparable worth, and discrimination laws. Maintaining competitive pay aligned with the market is important for attracting and retaining qualified employees.
Chapter 13 Variable Pay and Executive CompensationRayman Soe
This document discusses variable pay and executive compensation. It covers topics like developing successful pay-for-performance plans, individual and group incentives, sales compensation plans, profit sharing, employee stock ownership plans, and executive compensation packages and issues. The key elements discussed include linking compensation to performance, using clear and understandable incentive plans, developing appropriate performance metrics, and ensuring plans are fair and motivate improved results.
Dessler ch 06-employee testing and selectionShamsil Arefin
This PowerPoint presentation summarizes key points from Chapter 6 of the 11th edition of the textbook "Human Resource Management" by Gary Dessler regarding employee testing and selection. The presentation covers the importance of reliable and valid testing, different types of tests including cognitive, personality and work sample tests, legal and ethical considerations of testing, and conducting background investigations and reference checks. The overall goal of the chapter is to explain how to properly utilize testing and other tools to select the right employees for jobs.
Internal alignment, also called internal equity, refers to the pay relationships among different jobs, skills, and competencies within an organization. A compensation strategy for internal alignment should support the organization's strategy, workflow, and motivate desired employee behaviors. Organizations can design internal pay structures that are tailored closely to job content and levels of work, or more loosely coupled. Structures also vary in whether they distribute pay evenly across levels, taking an egalitarian approach, or emphasize differences in pay between levels in a hierarchical structure. The design choices around internal pay structures impact organizational efficiency, perceptions of fairness, and compliance.
The document discusses theories and models of personality including:
- Personality is shaped by both heredity and environment factors and can be measured through self-report surveys.
- The popular Myers-Briggs Type Indicator (MBTI) classifies people into 16 personality types based on preferences for extraversion/introversion, sensing/intuition, thinking/feeling, and judging/perceiving.
- The Big Five model describes five broad dimensions of personality: extraversion, agreeableness, conscientiousness, emotional stability, and openness. Different levels of these traits predict behaviors in work contexts.
This document provides an overview of Chapter 12 from a human resource management textbook on labor unions and collective bargaining. It covers key topics such as project labor agreements, reasons why employees join unions, union growth strategies, laws affecting collective bargaining, the collective bargaining process, preparing for and conducting negotiations, potential issues that can arise, and administering collective bargaining agreements. The chapter objectives are to describe these various concepts and processes related to unions and collective bargaining.
This document provides an overview of strategic human resource management. It begins by listing learning objectives related to defining HRM, identifying HRM functions and factors that influence HRM. It then discusses employer branding, corporate culture, and the utilization of individuals to achieve organizational objectives. The major HRM functions are identified as staffing, human resource development, compensation, and employee and labor relations. External environmental factors like the legal system, labor market and economy are described as influencing HRM. The roles of various individuals and departments in performing HRM tasks are also outlined.
This document provides an overview of global human resource management. It discusses topics such as the evolution of global business, global staffing approaches, compensation for expatriates and host country nationals, global human resource development, safety and health, and legal/political factors. The objectives are to describe the impact of globalization on HR and explain considerations related to areas like staffing, development, compensation and labor relations from a worldwide perspective.
This document discusses topics related to maintaining a safe and healthy work environment. It covers resilience training, the role of the Occupational Safety and Health Administration (OSHA) in ensuring workplace safety, common workplace injuries and how to prevent them through ergonomics programs. Other topics include workplace violence, domestic violence, workplace bullying, and stress management through wellness programs. The overall goal is to educate about maintaining workplace safety and health.
This chapter discusses internal employee relations and managing employee movement within an organization. It covers topics like discipline, termination, downsizing, transfers, promotions, resignations, and retirement. It describes the importance of retention and defines internal employee relations as HR activities associated with employee movement after joining. It explains the concept of employment-at-will and exceptions to it. It also discusses approaches to disciplinary action, the disciplinary process, terminations, demotions, downsizing, alternative dispute resolution, and the challenges of administering discipline globally.
This document provides an overview of chapter 3 from a human resource management textbook. It discusses several topics related to workplace diversity, equal employment opportunity, and affirmative action. Specifically, it defines key terms like diversity and discusses components of a diverse workforce such as different generations, minorities, immigrants, and persons with disabilities. It also outlines many important laws that promote equal employment like the Civil Rights Act, Americans with Disabilities Act, and Age Discrimination in Employment Act. Finally, it summarizes some landmark Supreme Court cases that have impacted equal opportunity and affirmative action.
The document discusses concepts related to job analysis, strategic planning, and human resource planning. It begins by outlining learning objectives covering topics like the importance of job analysis and disaster planning. It then provides details on conducting job analysis, including determining job requirements and developing job descriptions. The document also discusses using job analysis for legal compliance and strategic human resource planning. Finally, it covers strategic planning processes and challenges like managing worker surpluses or shortages through forecasting.
This document discusses the employee selection process. It covers the importance of selection and matching the right candidates to jobs. The selection process involves preliminary screening, reviewing applications and resumes, interviews, tests, and background checks. Interviews are a primary selection method but require structure and legal compliance to avoid biases. The goal is to select candidates most qualified for the job through valid and reliable screening methods.
This document summarizes the key topics and learning objectives covered in Chapter 2 of the 13th edition of the textbook "Human Resource Management". The chapter discusses business ethics and corporate social responsibility. It covers defining ethics and sources of ethical guidance, legislating ethics through various acts, creating an ethical culture and code of ethics, the importance of ethics training, and defining and approaches to corporate social responsibility including sustainability and social audits. It also notes challenges to corporate social responsibility succeeding globally.
The document discusses various topics related to compensation management including job evaluation, incentive plans, and strategic benefit planning. It covers job evaluation methods like Hay Profile Method and factors. It defines incentives and different types of individual, team, and enterprise incentive plans. It also discusses the importance of strategic benefit planning and providing a balanced bouquet of benefits to employees.
Joe Brown's presentation from the June 2010 Nonprofit Human Resources Symposium at the University of San Diego outlines the steps nonprofit organizations can follow to develop an implement an effective, performance-based base salary compensation program.
The document discusses various methods for creating internal job structures through job evaluation. It describes analyzing jobs based on factors like skills, effort, responsibility, working conditions to determine each job's value. A point factor method assigns numerical values to job components and factors to quantitatively assess a job's worth. Key decisions include which evaluation method, compensable factors, factor weights to use. Benchmark jobs help define the system. Involving stakeholders is important for acceptance. The end product is a job hierarchy showing each role's relative value.
This document outlines objectives and concepts related to global human resource management. It discusses the evolution of global business and global HR, including the development of international corporations, multinational corporations, and global corporations. It describes the global HR functions of staffing, development, compensation, safety and health, and employee relations. It also addresses national cultural differences, global staffing approaches, managing expatriates, and maintaining a consistent corporate culture across borders. The document provides frameworks for understanding national culture differences and keys to effective global HR management.
libro: R Wayne Mondy, Robert M. Noe: "Administración de Recursos Humanos", Pearson- Prentice Hall. México 2011.
Capitulo 11: un ambiente laboral seguro y saludable.
This document provides a 50 question multiple choice exam on chapters 5 and 6 of an Introduction to Psychology course. It covers topics related to classical and operant conditioning, as well as memory. Students are instructed to come to class the next day to turn in their scantron or take the exam in class between 10:40am and 12:00pm using their notes and book. They must print their own exam.
This document discusses key aspects of international human resource management. It covers four major tasks of HRM: staffing policy, training and development, performance appraisal, and compensation policy. It then describes different types of staffing policies companies use internationally. It also discusses challenges with expatriates, training approaches, performance evaluations, and developing a global compensation strategy.
Global human resource management ppt @ bec dosmBabasab Patil
Global Human Resource Management Case: Molex World's second largest manufacturer of electronic components with 50 manufacturing plants across 21 countries. HRM is viewed as most localized but it hires experienced foreign nationals for overseas postings and moves people around the world through in-house development programs. International HRM must balance strategic goals with cultural and legal differences between countries to ensure the right people are in the right place at the right time. Staffing policies range from ethnocentric to polycentric to geocentric approaches to find and develop the best talent globally.
Recruitment And Selection Hiring The Right PersonMariaVyalkova
The document discusses recruitment and selection methods used by organizations to hire employees. It covers internal and external recruitment strategies, screening tools like interviews and tests, legal issues around discrimination and negligence, and evaluating the effectiveness of the recruitment process. The goal is to attract and hire qualified candidates while following applicable laws.
The document discusses various components of employee compensation including direct financial payments like wages and salaries as well as indirect financial payments like benefits. It describes different types of equity considerations in compensation including external, internal, individual, and procedural equity. The document also outlines competency-based pay, incentives, and various classifications of benefits that companies provide to employees like insurance benefits, retirement benefits, and family-friendly benefits.
The document summarizes key concepts from Chapter 11 of a human resource management textbook on establishing strategic pay plans. It discusses factors for determining pay rates, methods for conducting job evaluations, how to establish market-competitive pay plans, pricing managerial and professional jobs, differences between competency-based and traditional pay plans, and the importance of total rewards for improving employee engagement. The chapter covers legal considerations, different pay plan methods, and contemporary topics in compensation.
The document discusses strategic pay plans, including the three stages of establishing pay rates: job evaluation, conducting a wage/salary survey, and combining the results. It covers topics like total rewards, competency-based and skill-based pay, compensating executives and professionals, broadbanding pay ranges, and ensuring pay equity. The overall aim is to align an organization's compensation strategy with its business goals.
This PowerPoint presentation discusses establishing strategic pay plans. It covers topics such as determining pay rates based on factors like internal equity, conducting salary surveys, job evaluation methods, grouping jobs into pay grades, using wage curves to price grades, and fine-tuning pay rates. It also addresses issues like compensation for managers and professionals, competency-based pay, broadbanding, the gender pay gap, and automating compensation administration. The overall presentation provides an overview of developing compensation systems aligned with business strategy.
This document discusses different perspectives on compensation and defines key compensation concepts. It outlines that compensation refers to all financial returns and benefits employees receive through employment. It also discusses compensation objectives like efficiency, fairness, compliance, internal alignment, external competitiveness, employee contributions, and management. Compensation aims to improve performance, control costs, ensure fair treatment, conform to laws, align internal pay, be competitive externally, emphasize employee performance, and get the right pay for achieving objectives.
The document discusses compensation administration and outlines various concepts related to compensation structures and policies. It covers topics such as the objectives of compensation planning, ensuring equity in pay rates through job evaluation and salary surveys, components of pay structures in India, wage and salary administration principles and objectives, factors influencing compensation levels, and guidelines for performance-based pay systems. It also compares compensation in the private and public sectors in India and discusses choices in designing compensation systems.
This document discusses pay-for-performance and financial incentive plans. It covers different types of incentive plans for various employee groups including operations employees, salespeople, managers, executives and organization-wide plans. Piecework, team, commission and profit-sharing plans are examined in detail. The document also addresses considerations for developing effective incentive plans and emphasizes the importance of employee recognition programs.
This document discusses compensation, incentives, and benefits in human resource management. It covers establishing pay rates through job evaluation methods like ranking, classification, and point systems. Key steps include determining job worth, conducting salary surveys, grouping jobs into pay grades, establishing wage curves to price grades, and fine-tuning rates. The goal is to ensure internal equity, match external market rates, and address compensation policy issues to attract and retain employees.
This presentation discusses establishing strategic pay plans and discusses four key aspects of compensation: what to pay, how to pay, what benefits to offer, and how to recognize employees. It provides an overview of different pay structures and programs companies use internationally and in India. Key methods for determining internal pay equity like job evaluation and external pay equity like salary surveys are summarized. The presentation outlines the typical steps companies take to establish pay rates including job evaluation, surveying, grouping jobs into pay grades, establishing wage curves, and fine-tuning rates. It also discusses topics like broadbanding, comparable worth, and executive compensation.
This document provides an overview of compensation strategies and practices, including the objectives of an effective compensation system and the nature of compensation in terms of intrinsic and extrinsic rewards.
It describes the key components of a compensation program, including direct compensation elements like base pay, wages, salary and variable pay as well as benefits. It also discusses compensation administration processes, approaches to determining compensation levels, and laws affecting compensation like the Fair Labor Standards Act.
Compensation includes base pay, variable pay, and benefits that employees receive in exchange for their contributions. The objectives of compensation planning are to attract, retain, and ensure fairness or equity for employees. Equity can be achieved through job evaluation, salary surveys, grouping similar jobs into pay grades, pricing each grade, and fine-tuning pay rates. Components of a pay structure include basic wages, dearness allowance, and statutory benefits. Wage administration aims to establish fair pay while attracting staff and controlling costs through flexible, job-based plans that are responsive to changing conditions. Key factors that influence compensation are jobs needs, ability to pay, cost of living, market rates, productivity, and regulations. India's wage policy focuses on
The document discusses various aspects of compensation administration including objectives, components, structures, and policies related to compensation. It covers key topics such as equity and fairness in compensation, factors that influence compensation levels, wage policies in India, performance-based pay guidelines, and choices in designing compensation systems for organizations.
1. There are intrinsic rewards like pride in work and extrinsic rewards like pay from management. Pay plans can be performance-based or membership-based.
2. Job evaluation determines each job's worth by analyzing factors like skills and working conditions. Pay structures establish wage ranges grouped by job classifications.
3. Incentive plans reward performance through individual, group, or organization-wide bonuses based on goals. Executive pay aims to attract talent through high salaries, stock options, and perks. International pay balances base pay with cost of living differentials and incentives.
This chapter discusses establishing reward and pay plans. It covers intrinsic and extrinsic rewards, financial and non-financial rewards, and performance-based and membership-based rewards. It also discusses job evaluation methods, incentive compensation plans like individual, group, and organizational incentives. Executive compensation programs including salaries, bonuses, stock options, and perquisites are also examined.
Compensation and Wage & Salary Administration.Priyanka Saluja
Employees receive compensation in exchange for their contributions to an organization. Compensation generally consists of three components: pay or guaranteed pay, incentives or variable pay, and benefits. The objectives of any pay system include attracting and retaining talent, ensuring equity, controlling costs, and complying with legal rules. Equity in compensation refers to internal equity, external equity, and individual equity. The goals of wage and salary administration are to design a cost-effective pay structure that will attract, motivate, and retain competent employees.
Compensating the workforce is a day to day operation essential for keeping the workforce. explore the slides to understand the structure, essentials and fundamentals of compensation.
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The document outlines key aspects of human resources management, including:
1. Contemporary staffing challenges such as aligning the workforce, fostering employee loyalty, and managing work-life balance.
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The document discusses various components of compensation and benefits packages including base salary, incentives, and retirement plans. It describes different types of wages and salaries as well as individual, group, and plant-wide incentive plans. The compensation administration process involves job analysis, evaluation, surveys to develop pay structures. Effective compensation management considers compensation policies, market factors, and communicating packages to employees.
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For some time now, executive pay for the nation’s highest-paid chief executives, including salary, bonuses, perks and the value of exercised stock options, has been a lightning rod for criticism and debate.
According to one site, CEO’s of the top 299s companies in the Standard & Poor’s 500 Index received, on average, $11.4 million in total compensation in 2011. That is 343 times the average worker’s median pay of $33,190It is difficult for workers who make $12 to $18 an hour to appreciate why these executives merit such large salaries. This obvious disparity has caused considerable discussion regarding the proper ratio of CEO compensation to that of the average worker.
Peter Drucker, the famous management author, once said, “I have often advised managers that a 20-to-1 salary ratio between senior executives and rank-and-file white-collar workers is the limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies.”
Compensation is the total of all rewards provided to employees in return for their services. The overall purposes of providing compensation are to attract, retain, and motivate employees. We will review the three major types of compensation in this chapter.
Direct financial compensation consists of the pay that an employee receives in the form of wages, salaries, commissions, and bonuses.
Indirect financial compensation (or benefits) consists of all financial rewards that are not included in direct financial compensation, such as health care insurance.
Nonfinancial compensation consists of the satisfaction that an employee receives from the job itself or from environment in which he or she works.
This figure shows the components of a total compensation program.
Equity theory states that a person’s motivation is in proportion to the perceived fairness of the rewards he or she receives for the amount of effort he or she exerts, and that this is also compared with what others receive. According to the theory, individuals are motivated to reduce any perceived inequity and will strive to make the ratios of outcomes to inputs equal. As such, equity is a very important factor in compensation.
Financial equity is the perception that there is fair pay for employees. Firms and individuals view fairness from several perspectives. Ideally, compensation will be evenhanded to all parties concerned and employees will perceive it as such. However, this is a very elusive goal.
External equity exists when a firm’s employees receive pay comparable to workers who perform similar jobs in other firms. Compensation surveys help organizations determine the extent to which external equity is present.
Internal equity exists when employees receive pay according to the relative value of their jobs within a single organization.
Employee equity exists when individuals performing similar jobs for the same firm receive pay according to factors unique to the employee, such as performance level or seniority.
Team equity is achieved when teams are rewarded based on their productivity. However, achieving equity may be a problem because not all team members contribute equally to the outcomes.
Compensation theory alone has never been able to provide a completely satisfactory answer as to what an individual’s job is worth. Therefore, organizations typically use a number of factors entailing the organization, the labor market, the job, and the employee to determine any given individual’s financial compensation.
Managers tend to view financial compensation as both an expense and an asset. It is an expense in the sense that it reflects the cost of labor. However, financial compensation is clearly an asset when it helps recruit good people and encourages them to put forth their best efforts and to remain in their jobs.
A compensation policy provides general guidelines for making compensation decisions. An organization often establishes compensation policies that determine whether it will be a pay leader, a pay follower, or strive for an average position in the labor market.
The organizational level in which compensation decisions are made can also have an impact on pay. Upper management often makes these decisions to ensure consistency. However, organizations are increasingly pushing these decisions to lower levels in an effort to retain top performers.
An organization’s assessment of its ability to pay is also an important factor in determining pay levels. Financially successful firms tend to provide higher-than-average compensation.
Potential employees located within the geographic area from which employees are recruited comprise the labor market. Labor markets for some jobs extend far beyond the location of a firm’s operations. An aerospace firm in St. Louis, for example, may be concerned about the labor market for engineers in Fort Worth or Orlando, where competitors are located. As global economics increasingly sets the cost of labor, the global labor market grows in importance as a determinant of financial compensation for individuals.
A compensation survey is a means of obtaining data regarding what other firms are paying for specific jobs or job classes within a given labor market. Virtually all compensation professionals use compensation surveys that are purchased, outsourced to a consulting firm, or conducted by the organization itself. Of all the wage criteria, market rates remain the most important standard for determining pay. In a competitive environment, the marketplace determines economic worth, and this is the critical factor. During the recent recession, pay raises were nonexistent in many organizations. As the country has moved out of the recession, firms were racing to conduct compensation surveys to determine what the competition was doing with regard to salary increases.
Although standard compensation surveys are generally useful, managers in highly technical and specialized areas occasionally need to use nontraditional means to determine what constitutes competitive compensation for scarce talent and niche positions. They need real-time information and must rely on recruiters and hiring managers on the front lines to let them know what is happening in the job market.
The logic for using cost of living as a pay determinant is both simple and sound: When prices rise over time and pay does not, real pay is actually lowered. A pay increase must be roughly equivalent to the increased cost of living if a person is to maintain his or her previous level of real wages.
The National Labor Relations Act (Wagner Act) declared legislative support, on a broad scale, for the right of employees to organize and engage in collective bargaining. Unions normally prefer to determine compensation through the process of collective bargaining. An excerpt from the Wagner Act prescribes the areas of mandatory collective bargaining between management and unions as “wages, hours, and other terms and conditions of employment.” These broad bargaining areas obviously have great potential to impact compensation decisions. When a union uses comparable pay as a standard in making compensation demands, the employer needs accurate labor market data. When a union emphasizes cost of living, it may try to pressure management into including a cost-of-living allowance. Recently, cost-of-living allowances in union contracts have been disappearing.
The economy definitely affects financial compensation decisions. For example, a depressed economy generally increases the labor supply, and this serves to lower the market rate. A booming economy, on the other hand, results in greater competition for workers and the price of labor is driven upward. In addition, the cost of living typically rises as the economy expands.
Federal and state laws can also affect the amount of compensation a person receives. Our focus here is on the federal legislation that provides broad coverage and specifically deals with compensation issues.
The Davis-Bacon Act of 1931 was the first national law to deal with minimum wages. It mandates a prevailing wage for all federally financed or assisted construction projects exceeding $2,000. The Secretary of Labor sets the prevailing wage at the union wage, regardless of what the average wage is in the local market.
The Walsh–Healy Act of 1936 requires companies with federal supply contracts exceeding $10,000 to pay prevailing wages. This legislation also requires one-and-a-half times the regular pay rate for hours over 8 per day or 40 per week.
The most significant law affecting compensation is the Fair Labor Standards Act of 1938. The purpose of the Act was to establish minimum national labor standards, eliminate low wages, and reduce long working hours. To accomplish these goals, the Act sets a minimum wage, requires record keeping, establishes regulations for overtime pay, and provides standards for child labor.
Exempt employees are categorized as executive, administrative, professional, or outside salespersons.
Executives are basically any managers with broad authority over subordinates.
An administrative employee, although not a manager, occupies an important staff position in an organization, such as account executive or market researcher.
A professional employee performs work requiring advanced knowledge in a field, normally acquired through a prolonged course of specialized instruction, such as company physician or corporate attorney. These employees are considered “exempt” from the Fair Labor Standards Act overtime rules, whereas nonexempt employees are eligible for overtime pay.
The Dodd-Frank Act was signed into law in 2010 and has provisions relating to executive compensation and corporate governance that impact the executives, directors, and shareholders of publicly traded companies. Specific provisions of the Act will be covered later under topics on “Say on Pay,” “Golden Parachutes,” and the “Claw back Provision.”
The individual employee and market forces are the most prominent wage criteria. However, the job itself continues to be a factor, as organizations pay for the value they attach to certain duties, responsibilities, and working conditions. Management techniques used for determining a job’s relative worth include job analysis, job descriptions, and job evaluation.
Before an organization can determine the relative value of its jobs, it must first define their content. This is done through job analysis, which is the systematic process of determining the skills and knowledge required for performing jobs. The primary by-product of job analysis is the job description, a written document that describes job duties and responsibilities.
Job evaluation is a process that determines the value of one job in relation to another and to the company. The primary purpose of job evaluation is to eliminate internal pay inequities. The four traditional job evaluation methods are the ranking, classification, factor comparison, and point methods. Another option is to purchase a proprietary method such as the Hay Plan. The ranking and classification methods are not quantitative approaches, whereas the factor comparison and point methods are quantitative approaches.
The ranking method is the simplest approach. Raters examine the description of each job being evaluated and arrange the jobs in order according to their value to the company.
The classification method involves defining a number of classes or grades to describe a group of jobs. In evaluating jobs by this method, the raters compare the job description with the class description, and the closest match determines the classification for that job.
The factor comparison method assumes that there are five universal job factors: mental requirements, skills, physical requirements, responsibilities, and working conditions. The evaluator makes decisions on these factors independently. An evaluation committee creates a monetary scale, containing each of the five universal factors, and ranks jobs according to their assessed value for each factor.
In the point method, raters assign numerical values to specific job factors, such as knowledge required, and the sum of these values provides a quantitative assessment of a job’s relative worth. Only when job factors change, or when for some reason the weights assigned become inappropriate, does the plan become obsolete. Historically, some variation of the point plan has been the most popular option.
The Hay Group Guide Chart-Profile Method is a widely used refined version of the point method used by public and private-sector organizations worldwide to evaluate clerical, trade, technical, professional, managerial, and/or executive-level jobs. It uses the factors of know-how, problem solving, accountability, and other job-related elements. It uses the compensable factors of know-how, problem solving, accountability, and additional compensable elements. Point values are assigned to these factors to determine the final point profile for any job.
Job pricing results in placing a dollar value on a job. It takes place after a job has been evaluated and the relative value of each job in the organization has been determined. Firms often use pay grades and pay ranges in the job-pricing process.
This illustration depicts the concepts to be covered in forthcoming slides.
Looking at the figure, notice that each dot on the scatter diagram represents one job. The location of the dot reflects the job’s relationship to pay and evaluated points, which reflect its worth. When this procedure is used, a certain point spread determines the width of the pay grade (which is 100 points in this illustration). Although each dot represents one job, it may involve dozens of individuals who have positions in that one job. The large dot at the lower left represents the job of receptionist, evaluated at 75 points. The receptionist’s hourly rate of $12.90 represents either the average wage currently paid for the job or its market rate.
A pay grade is the grouping of similar jobs to simplify pricing jobs. For example, it is much more convenient for organizations to price 15 pay grades than 200 separate jobs.
A wage curve is the fitting of plotted points to create a smooth progression between pay grades. The line drawn minimizes the distance between all dots and the line. Although the line of best fit may be straight or curved, a straight line is often the result when the point system is used.
A pay range includes a minimum and maximum pay rate with enough variance between the two to allow for a significant pay difference. Pay ranges are generally preferred over single pay rates because they allow a firm to compensate employees according to performance and length of service. Pay then serves as a positive incentive for individuals to advance through the range.
Broadbanding is a technique that collapses many pay or salary grades into a few wide bands to improve organizational effectiveness. Organizational downsizing and restructuring of jobs have created broader job descriptions, with the result that employees perform more diverse tasks than they previously did. Broadbanding creates the basis for a simpler compensation system that de-emphasizes structure and places greater importance on flexible decision making. Bands may also promote lateral development of employees and reduce demand for scarce vertical promotions.
The decreased emphasis on job levels should encourage employees to make cross-functional moves to jobs that are on the same or an even lower level because their pay rate would remain unchanged. Broadbanding allows for more flexibility within ranges, allows more movement of employees within the ranges, and can reduce the need for promotions. The use of broadbanding has declined in recent years because each band consists of a broad range of jobs and the market value of these jobs may vary considerably. Unless carefully monitored, employees in jobs at the lower end of the band could progress to the top of the range and become overpaid.
Pay ranges are not appropriate for some workplace conditions, such as assembly-line operations. For instance, when all jobs within a unit are routine, with little opportunity for employees to vary their productivity, a single-rate system may be more appropriate. When single rates are used, everyone in the same job receives the same base pay, regardless of productivity.
Good management practice is to correct pay inequities for underpaid employees as rapidly as possible. Overpaid jobs present a different problem. Promotion is a possibility if the employee is qualified for a higher-rated job and a job opening is available. Another possibility is to freeze the rate until across-the-board pay increases bring the job into line.
Finally, the employee’s pay could be cut, but this is generally not a good idea because it punishes the employee for a situation he or she did not create.
In addition to the organization, the labor market, and the job itself, factors related to the employee are also essential in determining an individual’s compensation. These factors include job performance, skills, competencies, seniority, experience, potential, political influence, and luck.
The goal of performance-based pay is to link pay and performance. It recognizes that some workers are just better than other workers at performing the same job.
Merit pay is a pay increase added to employees’ base pay based on their level of performance. In practice, however, it has historically been merely a cost-of-living increase in disguise. The recent recession may have created a compensation revolution with regard to merit pay. Pay increases where everyone is treated essentially the same, with only small differences between the best performers and mediocre ones, are a thing of the past. Although many companies continue with traditional merit pay plans, some companies are starting to quietly freeze or cut pay for some so as to be able to reward others.
Companies are increasingly placing a higher percentage of their compensation budget in bonuses, a one-time annual financial award, based on productivity that is not added to base pay, as more and more companies embrace the concept of pay for performance. The use of bonuses helped employers manage their cash outlay in a tough business environment while laying the foundation to share success with top producers. Managers commonly contend that the use of bonuses is a win–win situation because it boosts production and efficiency and gives employees some control over their earning power. A positive side effect of using bonuses to reward high performance is that it may encourage coworkers to increase their productivity so that they can also receive the bonuses.
Spot bonuses are relatively small monetary gifts provided to employees for outstanding work or effort during a reasonably short period of time. If an employee’s performance has been exceptional, the employer may reward the worker with a one-time bonus ranging from $100 or $500 to perhaps as much as $5,000.
Piecework is an incentive pay plan in which employees are paid for each unit they produce. For example, if a worker is paid $8 a unit and produces 10 units a day, the worker earns $80. Sometimes a guaranteed base is included in a piece-rate plan, meaning that a worker would receive this base amount no matter what the output. Piecework is especially prevalent in the production/operations area. Piecework pay plans have declined in use somewhat because the plan requires constant monitoring. For instance, if on day one the worker produced 8 units and on day two the worker produced 12 units, each day must be counted separately. Also professionals such as industrial engineers are needed to maintain the system.
Skill-based pay is a system that compensates employees for their job-related skills and knowledge, rather than the present job. Essentially, job descriptions, job evaluation plans, and job-based salary surveys are replaced by skill profiles, skill evaluation plans, and skill-based salary surveys. The system assumes that employees who know more are more valuable to the firm and, therefore, they deserve a reward for their efforts to acquire new skills. This presents some challenges for management because the firm must provide adequate training opportunities or else the system can become demotivating.
Competency-based pay is a compensation plan that rewards employees for the capabilities they attain. It is a type of skill-based pay plan for professional and managerial employees. Today, there are many alternatives from which to choose—core, organizational, behavioral, and technical competencies. This approach requires that considerable time be spent determining the specific competencies needed for the different jobs. Blocks of competencies are then priced, and management must invest considerable time in developing, implementing, and continuing such a system.
Seniority is the length of time an employee has been associated with the company, division, department, or job. Although management generally prefers performance as the primary basis for compensation changes, unions tend to favor seniority. They believe the use of seniority provides an objective and fair basis for pay increases. Many union leaders consider performance evaluation systems to be too subjective, permitting management to reward favorite employees arbitrarily.
Regardless of the nature of the task, experience has the potential for enhancing a person’s ability to perform. However, this possibility materializes only if the experience acquired is positive. Knowledge of the basics is usually a prerequisite for effective use of a person’s experience. This is true for a person starting to play golf, learn a foreign language, or manage people in organizations. People who express pride in their many years of managerial experience may be justified in their sentiments, but only if their experience has been beneficial. Today, it is possible that experience is becoming somewhat irrelevant. In fact technology may have rendered experience useless unless the person with the experience has kept up with the technology available.
Employees receive some compensation components without regard to the particular job they perform or their level of productivity. They receive them because they are members of the organization. For example, an average performer occupying a job in pay grade 1 may receive the same number of vacation days, the same amount of group life insurance, and the same reimbursement for educational expenses as a superior employee working in a job classified in pay grade 10. In fact, the worker in pay grade 1 may get more vacation time if he or she has been with the firm longer. The purpose of rewards based on organizational membership is to maintain a high degree of stability in the workforce and to recognize loyalty.
Potential is useless if it is never realized. However, organizations do pay some individuals based on their potential. In order to attract talented young people to the firm, for example, the overall compensation program must appeal to those with no experience or any immediate ability to perform difficult tasks. Many young employees are paid well, perhaps not because of their ability to make an immediate contribution, but because they have the potential to add future value to the firm as a professional, first-line supervisor, manager of compensation, vice president of marketing, or possibly even chief executive officer.
Firms should obviously try not to permit political influence to be a factor in determining financial compensation. However, to deny its existence would be unrealistic. There is an unfortunate element of truth in the statement, “It’s not what you know, it’s who you know.” To varying degrees in business, government, and not-for-profit organizations, a person’s pull or political influence may sway pay and promotion decisions. It may be natural for a manager to favor a friend or relative in granting a pay increase or promotion. Nevertheless, if the person receiving the reward is not deserving of it, the work group will soon know about it. The result will probably be devastating to employee morale.
You have undoubtedly heard the expression, “It helps to be in the right place at the right time.” There is more than a little truth in this statement as it relates to compensation. Opportunities are continually presenting themselves in firms. Realistically, there is no way for managers to foresee many of the changes that occur. Experiences lend support to the idea that luck works primarily for the efficient
Salary compression typically occurs when there is only a minimum pay differential with various skills and responsibility levels. Salary compression can cause people in jobs of less responsibility to make more than workers in jobs that have more responsible. Salary compression continues to be a major challenge for compensation managers even in a recession when pay cuts and freezes were the focus of the daily news. As workers discover inequities in their pay, resentment and lower productivity may follow with the employees ultimately leaving the company when the economy improves.
Changing a firm’s compensation structure from an individual-based system to one that involves team-based pay can improve efficiency, productivity, and profitability.
Team incentives have both advantages and disadvantages. On the positive side, firms find it easier to develop performance standards for groups than for individuals. A potential disadvantage for team incentives is that exemplary performers may feel unrecognized and under-rewarded.
In sports, you do not judge the team based on one player, but on its overall win–loss record. In business, company-wide pay plans based on the firm’s productivity, cost savings, or profitability offer a possible alternative to the incentive plans previously discussed.
Profit sharing is a compensation plan that results in the distribution of a predetermined percentage of the firm’s profits to employees. The three basic kinds of plans used today are as follows:
Current plans provide payment to employees in cash or stock as soon as profits have been determined.
Deferred plans involve placing company contributions in a trust that is available to the employee (or his or her survivors) at retirement, termination, or death.
Combination plans permit employees to receive a partial share of profits on a current basis, while deferring payment of the rest.
Normally, most full-time employees are included in a company’s profit-sharing plan after a specified waiting period. Vesting determines the amount of profit an employee owns in his or her account.
Gainsharing plans are designed to bind employees to the firm’s productivity and to provide an incentive payment based on improved company performance. The goal of gainsharing is improving efficiency, reducing costs, and improving profitability. Gainsharing helps align employees with the organization’s strategy.
The Scanlon plan provides a financial reward to employees for savings in labor costs resulting from their suggestions. Employee-management committees evaluate these suggestions. If the company is able to reduce payroll costs through increased operating efficiency, it shares the savings with its employees. Scanlon plans are not only financial incentive systems, but also systems for participative management that encourage cooperation between management and employees.
Professional employees perform work requiring advanced knowledge in a field, normally acquired through a prolonged course of specialized instruction. Their pay, initially, is for the knowledge they bring to the organization. Gradually, however, some of this knowledge becomes obsolete. Maturity curves are used to reflect the relationship between professional compensation and years of experience. These curves are used primarily to establish rates of pay for scientists and engineers involved in technical work. Such maturity curves reveal a rapid increase in pay for roughly five to seven years, and then a more gradual rise as technical obsolescence erodes the value of these jobs.
The straight salary approach is one extreme in sales compensation. In this method, salespersons receive a fixed salary regardless of their sales levels. At the other extreme is straight commission, in which the salesperson’s pay is entirely determined as a percentage of sales. If the salesperson working on straight commission makes no sales, this salesperson receives no pay. Between these extremes are endless varieties of part-salary, part-commission combinations.
Contingent workers are employed through an employment agency or on an on-call basis and often earn less than traditional, permanent employees. Flexibility and lower costs for the employer are key reasons for the increased use of contingent workers. In most cases, contingents earn less pay and are far less likely to receive health or retirement benefits than their permanent counterparts.
The say on pay provision gives shareholders in all but the smallest companies an advisory vote on executive pay, something governance advocates have long wanted. Those who support the concept of say-on-pay believe the vote will cause greater accountability on executive pay decisions.
The Dodd-Frank Act requires 5,000 companies to hold nonbinding shareholder “say on pay” votes at least every three years. Companies must also hold shareholders votes on the frequency of say-on-pay with the option of one, two, or three years, or to abstain. Frequency votes are required to be held every six years.
A golden parachute contract is a perquisite that protects executives in the event that another company acquires their firm or if the executive is forced to leave the firm for other reasons. To hire and retain talented individuals, some corporations negotiate employment agreements that include golden parachutes. At times golden parachute contracts have been abused. As an extreme example, CEO Robert Nardelli left Home Depot with a golden parachute worth $210 million even though Home Depot’s stock performed poorly.
The Dodd-Frank Act has disclosure requirements for golden parachute arrangements between the companies and their executive officers. It requires a shareholder advisory vote on certain parachute arrangements where shareholder approval of the business combination itself is sought. Legally, a “no” vote has little effect because the vote is advisory, and the vote cannot bind a company or its board, to overrule any company or board decision or change or add to the company’s or Board’s duties. But from a shareholder relations viewpoint, the answer is more problematic. A “no” vote may indicate future shareholder involvement.
A Clawback policy allows the company to recover compensation if a later review indicates that payments were not calculated accurately or performance goals were not met. The Dodd-Frank Act requires companies to develop Clawback policies to recover compensation later deemed excessive. The Clawback is a procedure included in an executive’s employment contract that allows the company to recover payments made through performance-based incentives under certain circumstances. It requires executives to return incentive pay if the results on which it was granted are later adjusted downward for any reason.
The pay gap between the most affluent executives and the average worker has become enormous. It is difficult for workers who make $12 to $18 an hour to appreciate why these executives are making such outrageous salaries. On the other hand, the skills possessed by executives largely determine whether a firm will survive or fail. Thus, a company’s program for compensating executives is a critical factor in attracting and retaining the best available talent. Organizations typically tie salary growth for executives to market rates and overall corporate performance, including the firm’s market value.
We will now review the basic elements of executive compensation.
Although it may not represent the largest portion of the executive’s compensation package, the base salary provided is obviously important. It is a factor in determining the executive’s standard of living and may also determine the amount of bonuses and certain benefits. U.S. tax law does not allow companies to deduct more than $1 million of an executive’s salary; therefore, most firms keep it below that amount. It is because of the million dollar deduction maximum that bonuses and performance-based pay have become so popular.
As shareholders become increasingly disenchanted with the high levels of executive compensation for less-than-stellar accomplishments, performance-based pay is gaining in popularity. While the Dodd–Frank Act has influenced executive pay, it appears that the greater influence has been the initiative to link pay to performance. If pay for performance is appropriate for lower-level employees, should top executives be exempt from the same practice? The true superstars can still have huge earnings if their targets are met.
Stock option plans give executives the option to buy a specified amount of stock in the future at or below the current market price. The stock option is a long-term incentive designed to integrate the interests of management with those of the organization. Stock options have lost some of their appeal because of accounting rule changes that require companies to expense these options as they are granted.
Perquisites (perks) are any special benefits provided by a firm to a small group of key executives and designed to give the executives “something extra.” Possible executive’s perks might include a company-provided car, limousine service, and the use of company plane and yacht. The Securities and Exchange Commission has lowered the threshold for disclosure of executive perks from $50,000 to $10,000. Once-hidden information regarding perks must now be disclosed. Compensation committees are now focusing more on core incentives such as salaries, bonuses and long-term incentives, and cutting perks and severance pay. Perks such as having a corporate jet or yacht are things that upset the public and legislators.
What most people may not understand is that massive severance payments are not set up by a board of directors after a CEO has quit or been fired. These payments were negotiated prior to being hired. Not only should CEO pay be considered but CEO pay contracts should also be examined. But hopefully the environment is changing.
The Securities and Exchange Commission has adopted far-reaching executive compensation disclosure rules that apply to publicly traded companies. The new rules require companies to list all the agreements for each executive, to disclose the payment triggers, and, most importantly, to give an estimated dollar value of potential payments and benefits and the specific factors used to determine them. For the first time, investors will see the estimated total dollar value of the exit packages. No longer will these agreements become exposed only at the time of a merger and acquisition deal or when the board removes a CEO.
The pay gap between the most affluent executives and the average worker in the U.S. remains wide. Earlier it was reported that the ratio between CEO and the average worker was 343 to 1. In yet another survey conducted by the Economic Policy Institute, Deloitte, Census Bureau, an American CEO’s paycheck is 475 times as large as that of the average worker’s. By contrast, the ratio is 50 in Venezuela, 22 in Britain, 20 in Canada, and 11 in Japan. Whereas people in the United States derive great status from high pay, nations in large parts of Europe and Asia shun conspicuous wealth.