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Human Resource Management Chapter 7: Compensat i on

Human Resource Management Chapter 7: Compensat i on. Ass. Prof. Ipek Kalemci TUZUN. COMPESATION. Compensation is the total rate of pay or award given to employees for performing job.

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Human Resource Management Chapter 7: Compensat i on

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  1. Human Resource ManagementChapter 7: Compensation Ass. Prof. Ipek Kalemci TUZUN

  2. COMPESATION • Compensation is the total rate of pay or award given to employees for performing job

  3. Wages; refers to pay based on a hourly rate, while salary is based on a specific period of time such as weekly or annually. • Incentives; include one time payments and other motivational tools used to encourage special work effort • Benefits; include legally required ones such as Social security, health and life insurance, pensions, payment for time not worked, employee services, free meals and others.

  4. Determining Pay Rates Definition • Employee compensation refers to all forms of pay or rewards going to employees and arising from their employment. It consists of 2 parts: • Direct financial payments • Indirect financial payments

  5. Employee Compensation • Direct or Indirect compensation is given based on: • Increments of time • Hourly (Wages) • Salaried (specific period of time) • Performance • Piecework • Commission

  6. ? Factors Influencing Pay • The local pay level, what is currency being paid in the area • The labor market: educational level, unemployment rate • Worth of job • The minimum wage (governmental requirements)

  7. Employer ability to pay • The Collective Bargaining Agreement • COLA ( Cost of Living Adjustment)

  8. The Salary Survey Definition • The salary survey is a survey aimed at determining prevailing wage rates which include: Formal, Informal Uses of Salary Surveys • Benchmark jobs • Surveys collect data on benefits

  9. Job Evaluation • Job evaluation is the formal and systematic comparison of jobs in order to determine the worth of one job relative to another • Compensable factors are fundamental elements of a job evaluation

  10. Compensable Factors • Compensable factors- are the factors such as skills, responsibility, effort and working conditions that establish how the jobs compare to one another, and that set the pay for each job Skill Know-how Effort Problem solving Responsibility Accountability Work conditions

  11. Preparing for the Job Evaluation • Its mostly a judgmental process which requires cooperation among managers • Choose an evaluation committee who will do the evaluation • Selects some compensable factors • Evaluate the worth of each job via one of the methods on the following slides

  12. Job Evaluation Method 1:Ranking The simplest method of job evaluation that involves ranking each job relative to all other jobs usually based on some overall factor like “job difficulty”. • Obtain job information (Job analysis) • Select jobs (rank jobs by departments) • Select compensable factor (usually select one factors) • Rank jobs

  13. Method 2: Job Classification Job classification is widely used method in which the raters categorize the jobs into groups. The groups are called as classes if they contain similar jobs or grades ,if they contain jobs that are similar in difficulty Way to categorize • draw up class description • Draw up set of rules for each class

  14. Method 3: Point Method The job evaluation method in which a number of compensable factors are identified and then the degree to which each of these factors is present on the job is determined Assume there are five degrees of “responsibility” (compensable factors) a job could contain Calculate a total points

  15. Example to point method

  16. Method 4: Factor Comparison Definition • Factor comparison is a widely used method to rank jobs by a variety of skills and difficulties, then adding these to obtain a numerical rating for each job • With this method you rank each job several times—once for each of several compensable factors

  17. Example to factor comparison

  18. Computerized Job Evaluations • Other methods can be time consuming • CAJE or computer automated job evaluation streamlines things • Simplifies job analysis • Increases objectivity • Manages data

  19. Pricing Managerial and Professional Jobs • Goal is to attract and keep • Harder to quantify evaluation • Paid on basis of ability • More complex and stress incentives over evaluation

  20. Compensating Managers Top executives compensated by: • Base pay + guaranteed bonus • Short term incentives • Long term incentives

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