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Compensation

Compensation . Key Questions and Issues. How do differing perspectives affect our views of compensation? What can a pay system do for an organization? For an employee? How does the pay model help organize one’s thinking about compensation?

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Compensation

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  1. Compensation

  2. Key Questions and Issues • How do differing perspectives affect our views of compensation? • What can a pay system do for an organization? For an employee? • How does the pay model help organize one’s thinking about compensation? • Under what circumstances would one of the four basic pay policies be emphasized relative to the others?

  3. Society’s Views Stockholders’ Views Managers’ Views Employees’ Views Contrasting Perspectives of Compensation

  4. Society View: Pay as a measure of Justice. • Stockholders: Executive pay is of Special interest.

  5. Managers: Compensation influences their Success in two ways 1.It is major expense. 2.Uses to influence employee behaviors and improving organization behavior. • Employees: It is return for work they perform and major source of their financial security.

  6. What Is Compensation? Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

  7. Exhibit 1.3: Total Returns for Work

  8. Direct Pay Forms Cash Compensation: Base Cash Compensation: Merit Pay / Cost-of-Living Adjustments Cash Compensation: Incentives Long-Term Incentives Indirect Pay Forms Benefits: Income Protection Benefits: Work/Life Focus Benefits: Allowances Forms of Pay

  9. Total Returns are • 1.Total Compensation: They include pay received directly as cash. base, merit, incentives, cost-of-living adjustments., etc 2.Relational Returns: Learning opportunities, status, challenging work are psychological.

  10. Base: base wage is the cash compensation that an employer pays for the work performed. Base wage differs based on experience, skills and value of work • Wage is fixed regular payment for the work onhourly basis • Salary to pay for employees who are do not receive overtime payment. Calculation monthly or annually.

  11. Merit Pay/Cost-of-Living Adjustments: Merit increases are given as increments to the base pay in recognition of past work behavior. Cost –of-living adjustments give the same percent across the board to everyone, regardless of performance.

  12. Incentives: Incentives paid directly to performance. • Incentives are different with merit payment 1.incentives do not increase the base wage and must be re-earned each pay period. 2.Incentives payment will generally known beforehand 3.Incentives are one-time payments they do not have a permanent effect on labour cost. 4.Performance and incentives are proportionate. 5.Incentives are frequently referred to as variable pay.

  13. Long term incentives: Long term incentives are intended to focus employees efforts on multi year results. Ex stock options or ownership.

  14. Benefits: • Income Protection: The benefits including income protection, work/life balance services, and allowances. • Medial insurance, retirement programms,life insurance and savings plans are common benefits.

  15. Work/Life Focus: Integrate work and life responsibilities include time away from the work. • Allowances: Often grow out of whatever is in short supply.

  16. Relational Returns from Work Recognition& Status EmploymentSecurity ChallengingWork LearningOpportunities

  17. What Is an ImplicitEmployment Contract? An unwritten understanding between employers and employees over their reciprocal obligations and returns; employees contribute toward achieving the goals of the employer in exchange for returns given by the employer and valued by the employee.

  18. POLICIES TECHNIQUES OBJECTIVES Work Descriptions Evaluation/analysis certification INTERNALSTRUCTURE ALIGNMENT Market Surveys Policy PAY definitions lines STRUCTURE COMPETITIVENESS Seniority Performance Merit INCENTIVE based based guidelines PROGRAMS CONTRIBUTORS Costs Communication Change EVALUATION MANAGEMENT Exhibit 1.5: THE PAY MODEL • EFFICIENCY • Performance • Quality • Customers • Stockholders • Costs • FAIRNESS • COMPLIANCE

  19. Compensation Objectives Efficiency Fairness Compliance

  20. Pay System Policies • Internal alignment • Focus - Comparisons among jobs or skill levels inside a single organization • External competitiveness • Focus - Compensation relationships external to the organization: comparison with competitors • Employee contributions • Focus - Relation emphasis placed on employee performance • Management • Focus - Policies related to managing the pay system

  21. Thank you

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