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Employee Compensation


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Published in: Business

Employee Compensation

  1. 1. <ul><li>Employee Compensation </li></ul><ul><li>Concept </li></ul><ul><li>Employees need to compensated for their effort and performance </li></ul><ul><li>Employees exchange work for reward/compensation </li></ul><ul><li>Part of overall organizational reward system </li></ul><ul><li>Rewards can be: </li></ul><ul><ul><li>Monetary </li></ul></ul><ul><ul><li>Non monetary </li></ul></ul><ul><li>Reward </li></ul><ul><li>Why is reward important? </li></ul><ul><li>What should be the criteria for reward distribution in organizations? </li></ul><ul><li>Compensation </li></ul><ul><li>All forms of pay or rewards going to employees and arising from their employment. </li></ul><ul><li>Pay for their efforts </li></ul><ul><li>Return for their efforts </li></ul><ul><li>Has 2 parts </li></ul><ul><ul><li>Direct </li></ul></ul><ul><ul><li>Indirect </li></ul></ul>
  2. 2. <ul><li>Compensation </li></ul>Total Compensation Direct Indirect Pay Incentives Benefits Status based Privilege based Monetary Non monetary Two basic questions in determining pay Should different employees holding the same job or possessing the same skills be paid the same – or should managers be able to pay them differently? Which factors should be used to recognize differences in employees; that is, should differences in pay be contingent on performance, seniority, or some combination of the two?
  3. 3. <ul><li>Recognizing employee differences with pay </li></ul><ul><li>Many employers do pay different rates to employees in the same job due to: </li></ul><ul><ul><li>External Labor market pressure </li></ul></ul><ul><ul><li>Organization Factors </li></ul></ul><ul><li>Evaluating Results of Pay for Performance System </li></ul><ul><li>Incentives: pay for performance </li></ul><ul><ul><li>Is pay important to employees? </li></ul></ul><ul><ul><li>Should pay increase be based on performance? </li></ul></ul><ul><ul><li>Does tying pay increase to performance affect employee and organization performance? </li></ul></ul><ul><li>Why incentive plans can fail? </li></ul><ul><li>Poor perceived linked between performance and pay </li></ul><ul><li>Too low level of performance-based pay relative to base pay </li></ul><ul><li>Lack of objective, countable results for most jobs </li></ul><ul><li>Faulty performance appraisal systems </li></ul><ul><li>Union resistance to such systems </li></ul><ul><li>Pay not a motivator </li></ul><ul><li>Undesirable effects of rewards </li></ul><ul><li>Linking Compensation to Organizational Strategy </li></ul><ul><li>Reward system does not function in isolation </li></ul><ul><li>Compensation is a major way to implement organizational strategy </li></ul><ul><li>Strategic behaviors should directly contribute to business strategy </li></ul><ul><li>Compensation plan should promote the strategic behavior </li></ul>
  4. 4. Job Analysis Job Evaluation Salary Survey Creation of Job Worth Hierarchy Reconciliation of Internal and External Consideration Analysis of Market Data Development of Pay Structure Approach to Compensation Management <ul><li>Compensation Package Design </li></ul><ul><li>Determinants: / Legal / Union Influences / Corporate Policy </li></ul><ul><ul><li>/ Equity/ Internal and External </li></ul></ul><ul><li>Approach to Compensation Management </li></ul><ul><li>5 steps/phases: Salary Survey / Job Evaluation / Group Similar Jobs in Pay grades / Price Each Pay Grade / Fine-tune </li></ul><ul><li>Approach to Compensation Management </li></ul><ul><li>. </li></ul>
  5. 5. <ul><li>Job Evaluation </li></ul><ul><li>Systematic comparison to determine the worth of one job relative to another </li></ul><ul><li>Basic principle: jobs requiring greater qualifications, more responsibilities, & more complex duties should be paid higher than jobs with lesser requirements. </li></ul><ul><li>Basic procedure: compare jobs in relation to one another </li></ul><ul><li>Approach to Compensation Management </li></ul><ul><li>Preparing for Job Evaluation </li></ul><ul><ul><li>Identifying the need for the job evaluation </li></ul></ul><ul><ul><li>Getting the cooperation of employees </li></ul></ul><ul><ul><li>Choosing an evaluation committee </li></ul></ul><ul><ul><li>Performing the actual evaluation </li></ul></ul>