The right total rewards system, a blend of monetary and nonmonetary rewards offered to employees, can generate valuable business results.

1. www.humanikaconsulting.com
Total Reward
Management Through
Job Evaluation

2. Seta A. Wicaksana
0811 19 53 43
wicaksana@humanikaconsulting.com
• Managing Director of Humanika Amanah Indonesia – Humanika
Consulting
• Managing Director of Humanika Bisnis Digital – hipotest.com
• Wakil Ketua Asosiasi Psikologi Forensik Indonesia wilayah DKI
• Business Psychologist
• Certified of Human Resources as a Business Partner
• Certified of Risk Professional
• Certified of HR Audit
• Certified of I/O Psychologist
• Dosen Tetap Fakultas Psikologi Universitas Pancasila
• Pembina Yayasan Humanika Edukasi Indonesia
• Penulis Buku : “SOBAT WAY: Mengubah Potensi menjadi kompetensi”
Elexmedia Gramedia 2016, Industri dan Organisasi: Pendekatan
Integratif menghadapi perubahan, DD Publishing, 2020
• Organizational Development Expertise
• Sedang mengikuti tugas belajar Doktoral (S3) di Fakultas Ilmu Ekonomi
dan Bisnis Universitas Pancasila Bidang MSDM
• Fakultas Psikologi S1 dan S2 Universitas Indonesia
• sekolah ikatan dinas Akademi Sandi Negara

4. The right total rewards
system—a blend of
monetary and
nonmonetary rewards
offered to employees— can
generate valuable business
results.
-SHRM

5. Rewarding
Employees
• The purpose of an employee
recognition program is to
recognize and reward work
and behaviors that
support/further the mission,
goals, values and initiatives.
• Major strategic rewards
decisions:
• What to pay employees
• How to pay individual
employees
• What benefits to offer
• How to construct
employee
recognition programs

6. What to pay
• Need to establish a pay structure
• Balance between:
• Internal equity – the value of the job for the organization
• External equity – the external competitiveness of an
organization’s pay relative to a pay elsewhere in its industry
• A strategic decision with trade-offs

7. Definition of
Reward
Management
This management discipline is
concerned with the formulation
and implementation of strategies
and policies, the purposes of
which are to reward employees
fairly, equitably and consistently
in accordance with their value to
the organisation.
It deals with design,
implementation and
maintenance of reward systems
(processes, practices,
procedures) that aim to meet the
needs of both the organisation
and its stakeholders.

8. Philosophy of Reward Management
STRATEGIC SENSE: LONG-
TERM FOCUS & IT MUST BE
DERIVED FROM THE BUSINESS
STRATEGY
TOTAL REWARD APPROACH:
CONSIDERING ALL
APPROACHES OF REWARD
(FINANCIAL OR NOT) AS A
COHERENT WHOLE;
INTEGRATION WITH OTHER
HRM STRATEGIES
DIFFERENTIAL REWARD
ACCORDING TO THE
CONTRIBUTION
FAIRNESS, EQUITY,
CONSISTENCY,
TRANSPARENCY

9. Economic theories (partially)
explaining pay levels
• Supply & Demand: labor market factors
• Efficiency wage theory: attraction of better
employees, motivation, reducing fluctuation
leads to high wages
• Human Capital theory: productivity differences
• Principal – Agent Theory: inequality in the
information leads to „agency costs”
• The effort bargain: collective bargaining

10. Total
Reward
(Armstrong 2009)
Each element is developed,
implemented and treated as
an integrated and coherent
whole.
All types of reward:
Non-financial
as well as
financial,
Indirect as
well as
direct,
Extrinsic as
well as
intrinsic.

11. Transactional
(tangible)
rewards
Relational
(intangible)
rewards
Base pay
Contingent pay
Employee benefits
Learning and development
The work experience
Total
remuneration
Non-financial
rewards
Recognition, achievement, growth
Total reward
Components of Total Reward
(Armstrong 2009)

12. Total Reward Approach

13. Total Rewards
Strategies
“Total rewards” encompasses not
only compensation and benefits but
also personal and professional growth
opportunities and a motivating work
environment.

14. A Total Compensation System
Total compensation
+
Direct
compensation
Indirect
compensation
Pay
systems
Benefit
programs

15. Total
Compensation
Overview
o Legal/legislative considerations
o Direct Compensation (cash, capital accumulation); programs,
methods, rationale, pros and cons, etc.
o Indirect Compensation (health and welfare, retirement, paid
time off, etc)
o Relational Returns (affiliation, coworker relationship,
challenging assignments, training, location, etc)
o Communication (policies, methods, programs)

16. Objectives of a Total
Compensation System
• Compatible with organizational mission, values
and strategy
• Compatible with corporate culture
• Entitlement
• Performance based / contribution oriented
• Appropriate for the workforce
• Attract and retain talent
• Externally equitable
• Internally equitable
• Compliant
• Easy to communicate and understand
• Cost effective

17. Relationship of Compensation to
Organizational Market or Product Life Cycle
Compensation
Element
Introduction Growth Maturity Decline
Base Salary Competitive, low
end
Moderate High, relatively
speaking
High, may need to
reduce
Incentives (Long
and Short Term)
Stock/equity Bonus – based on
objectives,
options/combinatio
n plans
Bonus – retention
based plans and
equity in smaller
portions
Reduced bonuses
basis is cost-
savings most
commonly
Benefits Basic package Moderate package Comprehensive
package
Limit costs; freeze,
change or eliminate
programs

18. The 4Ps of Reward
• Pay
• Salary, bonus, shares,
etc.
• Praise
• Positive feedback,
commendation, staff-
of-the-year award, etc.
• Promotion
• Status, career
elevation,
secondment, etc.
• Punishment
• Disciplinary action,
withholding pay, or
criticism, etc

19. Implement
ing a Total
Rewards
Program:
Four
Phases

20. Business &
HR strategy
Reward
strategy
Total Reward
Total
Remuneration
Job evaluation
Grade &
pay structure
Market rate
analysis
Contingent pay
Employee
benefits
Non-financial
rewards
Allowances
Performance
management
Derivation
of Total
Reward

21. Compensation Design Criteria and Issues
Determine Compensation Philosophy: Match,
lead or lag the market?
⚫Match = median, middle of pack
⚫Lag decision may occur due to ability to
pay/compete; and/or if strong emphasis on
performance and variable pay
⚫Lead decision may presuppose higher
caliber employees; is this true?
⚫Consider union factors, if any
Fairness elements (perception)
• Contributions recognized; no negative
rewards; lingerers as example. Why?
Manager reluctance. May include lack of
differentiation for merit pay. And, employee
reaction to rater inconsistency
• Internal and external equity
• Non-discrimination
• Meet employee needs for fair
wage/adequate benefits (living wage issue)

22. What Should You Say About Pay?

23. How Big a Pay Increase?
• About 11 studies have explored the question of how
big a pay increase must be to improve employee
attitudes and behaviors. The findings range from 4% to
12% of base salary.
• Yet most pay increases fall below this range. In addition
to providing these figures, one group of researchers
(Mitra, Gupta, and Jenkins, 199 7) noted several
methodological flaws with the studies they reviewed.
To minimize these flaws, the authors used an
experimental simulation to assess the magnitude of the
raise in base pay required to positively influence
employee attitudes and behaviors.
• The results showed that an increase in base pay of at
least 7% was needed. This study’s sample consisted of
students; however, they were hired and paid as actual
employees in the study.

24. What Do Employees
Want?
• Some business leaders have argued that
employees want new forms of pay (such as
team-based pay) more than traditional
forms (for example, base salary or merit
pay). A study of college students suggested
that this is not the case (Cable & Judge,
1994 ).
• Another study of the general population of
working employees generated similar
findings (LeBlanc & Mulvey, 1998 ).
According to these two studies, employees
actually prefer:
• Flexible benefits rather than a standard benefits
package
• A small ratio of variable pay to base pay
• Individual rewards (such as merit pay) rather
than group rewards

25. An overview
of Incentives

26. Basic Elements of Compensation
Plan Administration
• Design – plan features, main elements, mix (base
versus variable, etc.)
• Base pay
• Variable pay (individual / team / group /
organization)
• Benefits
• Pay Mix issues
• Funding – how to pay for it, how much it costs.
• Frequency of changes
• Administration – policies, practices, procedures.
• Communication – message emphasis, delivery
method, format, frequency.

27. Strategic
Reward
Management
• Where do we want our
reward practices to be in
a few years time? (vision)
• How do we intend to get
there? (means)

28. Reward
Strategy
• A declaration of intent that defines what the organisation
wants to do in the longer term to develop and implement
reward policies, practices and processes that will further the
achievement of its business goals and meet the needs of the
stakeholders.
• It gives a framework to other elements of reward
management.

29. The structure & content of a
Reward strategy
• Environment analysis:
• Macro-level: social, economical, demographic
• Industrial level
• Micro-level: competitors
• Analysis of the „inner environment”: strategy, job
evaluation, financial conditions…
• Gap-analysis
• Guiding principles
• Broad-brush reward strategy
• Specific reward initiatives

30. Execution
checklist

31. Outcomes
and Data
Sources

32. Job-evaluation
A systematic process
• For defining the relative
worth/ size of jobs/roles
within an organisation
• For establishing internal
relativities
• For designing an
equitable grade
structure and grading
jobs in the structure
• To give an input for
reward considerations

33. Dimensions of
job evaluation
• Relative or measured to an absolute
scale
• Relative: compares jobs to one
another within the company
• Absolute: compares to an
„independent”, external
measure
• Analytical or non-analytical (global)
• Analytical: measures factors or
elements of the jobs
• Non-analytical: measures the
job as a whole

34. Analytical job evaluation (point-factor rating or
analytical matching) – decisions on the relative
value or size of jobs are based on an analysis of the
degree to which various defined elements or factors
are present in the form of demands on the job
holder
Non-analytical job evaluation (job classification or
ranking) – whole jobs are described and compared
to slot them into a defined grade or place them in a
rank order or without analysing them into their
elements
Market pricing – jobs are placed in pay structures
entirely on the basis of external relativities, ie
market rates (a method of pricing jobs but not job
evaluation as usually defined)
Types of Job
Evaluation
(Armstrong
2009)

35. Types of Job Evaluation
Non-analytical
Evaluation
Analytical
Evaluation
• Whole job ranking • Points rating
• Paired comparisons • Proprietary
schemes
• Job classification

36. Factor Level
1
Level
2
Level
3
Level
4
Level
5
Level
6
Expertise 20 40 80 100 120
Decisions 20 40 60 100 120
Autonomy 20 40 80 100 120
Responsibility 20 40 80 100 120
Interpersonal
skills
20 40 60 80 120
60
80
60
60
100
Total score = 360
Job Evaluation: Scoring (Armstrong 2009)

37. Hay proprietary scheme
A group of role analysts, working as a panel assess the role (from
an agreed job description and information) against a number of
factors, which are known as the Hay Guide Chart Profile.
• 1. Know – How
• The level of knowledge, skill and experience required to
perform the job successfully.
• 2. Problem Solving
• The complexity of thinking required, both in the type of
problems come across and the extent to which the
jobholder has precedent and/or assistance in solving them
(applying their Know – How).
• 3. Accountability
• The impact the job has on the organization (i.e. the end
result) and the extent to which the jobholder acts
autonomously in achieving this.

38. Wage gaps
• Wage gaps can occur in companies using
international benchmarking in job evaluation.
The cause is simple:
• The market of top managers is usually
international: they earn international
wages, or they leave the firm
• The market of workers with little or no
qualification is local in (nearly) every case:
they earn local wages.
• In less developed countries this can lead to
enermous wage gaps between the „top”
and „bottom” employees.

39. Components of Total Remuneration
• Base pay: Base pay is the fixed compensation paid to an employee for performing specific
job responsibilities. It is typically paid as a salary, hourly (or in some situations piece rate).
There is a tendency towards market orientation and the increasing role of qualifications.
• Contingent pay: Individual contingent pay relates financial rewards to the
• individual performance, organisation or team performance,
• competence,
• service,
• contribution or
• skill of individual employees.
Consolidated pay: built into the base pay
Variable pay: provided in the form of cash bonuses (increasing role nowadays).
• Employee benefits: Elements of remuneration given in addition to the various forms of
cash pay.

40. Contingent pay
• Individual contingent pay is a good
motivator (but to what extent?)
for those who receive it.
• It attracts and retains better
workers.
• It makes labour related
expenditures more flexible.
• It can demotivate those who don’t
receive it (depends on
performance measurement)
• Can act against quality and
teamwork.

41. Types of individual
contingency pays
• Performance-related:
increases basic pay or
bonuses related to
assessment of performance
• Competence-related: Pay
increases related to the level
of competence
• Contribution-related: pay is
related both to inputs and
outputs
• Skill-based: pay is related to
acquisition of skills
• Service-related: pay is
related to service-time

42. Team based pay
• Pay is related to team performance
• It can encourages teamwork, loyalty and co-
operation
• It can be demotivating on individual level
(encourages social loafing)

43. Organisaton-
wide schemes
• Profit-Sharing Plans – organization-wide programs that
distribute compensation based on an established formula
designed around profitability
• Gain Sharing – compensation based on sharing of gains from
improved productivity
• Employee Stock Ownership Plans (ESOPs) – plans in which
employees acquire stock, often at below-market prices

44. Employee
benefits
• Attractive and competitive
total remuneration
• Provide for the personal
needs
• Increase commitment
toward the organisation
• Tax-efficient

45. Main types of
Employee benefits
• Pension schemes
• Personal (and family) security: different
types of insurances
• Financial assistance: loans, house
purchase schemes, discount on company
services…
• Personal needs: holidays, child care,
recreation facilities, career breaks…
• Company cars and petrol
• Intangible benfits: quality of working life…
• Other benefits: mobile phones,
notebooks…
• Cafeteria systems

46. Definition of
the
psychological
contract
“The perceptions of both parties to the employment relationship,
organization and individual, of the reciprocal promises and
obligations implied in that relationship”
The state of the psychological contract is concerned with whether
the promises and obligations have been met, whether they are
fair and their implications for trust.

47. The Psychological Contract Framework
(David Guest)
The Good
Employer
&
The High
Quality
Workplace
The
Deal
Satisfied
And
Productive
Workers

48. Total Remuneration
In Recession
• It is a good chance to rethink and
renew the remuneration system
• Share of contingency payment
should increase
• Employer benefits, that do not need
short term expenditure will increase:
• Company car
• Saturday-year or sabbatical (free
time)
• Share-options

49. Key Takeaways
• Successfully implementing a revised or entirely new total rewards program will
always be challenging. To boost your chances of success, you and your pilot team
must carefully shepherd the project through the four phases of implementation:
assessment, design, execution, and evaluation. Each of these phases requires careful
thought, patience, and a willingness to solicit input from a wide range of individuals
in your organization.
• But the effort is worthwhile. A well-thought-out and skillfully implemented rewards
program can give your organization a competitive edge. In particular, it can help you
generate the business outcomes that matter most to your strategy—whether those
outcomes take the form of employee retention, productivity, job satisfaction, or
service quality. In an age of stiffening competition and increasing pressure to do
more with less, no organization can afford to ignore the strategic value that a well-
designed total rewards system can provide.

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