Compensation Overview

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Questions and Answers

What is a compensation package?

A compensation package is a package of all payments to an employee including salary, wage or hourly wage, commission, rewards or bonuses, profit sharing, and fringe benefits.

What are the four main types of compensation packages?

The four main types of compensation packages are salary, wage or hourly wage, commission, and rewards or bonuses.

What is a fringe benefit?

A fringe benefit is a paid service, such as sick leave, paid vacation time, and health club memberships.

What are the goals of a compensation package?

Attract and retain talent Signup and view all the answers

What are some methods for motivating employees?

Some methods for motivating employees include a good work atmosphere, a reasonable workload to achieve work-life balance, continuous communication, compensation packages, and training and developing your employees. Signup and view all the answers

What are the costs associated with employee turnover?

The costs associated with employee turnover include recruitment costs, advertising costs for a new position, orientation and training of a new employee, severance costs, testing costs, time to interview new replacements, time to recruit and train new hires, lost knowledge, loss of productivity, cost associated with lack of motivation prior to leaving, and cost associated with loss of trade secrets. Signup and view all the answers

What is job evaluation?

Job evaluation is the process of determining the relative worth of jobs or positions in an organization to determine the pay structure. Signup and view all the answers

What are some approaches for job evaluation?

Job ranking system Signup and view all the answers

What is a job ranking system?

In a job ranking system, jobs are listed and ranked according to their importance to the organization. Signup and view all the answers

What is a paired comparison method?

In a paired comparison method, each job is compared to other jobs in a ranking system, based on job importance, and the overall score is computed for each job. Signup and view all the answers

What is pay grading?

After job evaluation, the pay scale or range is to be set in a step, which is called pay grading. Signup and view all the answers

What are some types of pay systems?

Skill-based pay Signup and view all the answers

What is a variable pay system?

A variable pay system combines a base pay with an additional variable pay based on goals attainment. Signup and view all the answers

What are some considerations for pay?

Some pay considerations include the size of the organization (global, regional, or national), and HR managers should always be aware of what others are paying in the industry by performing market surveys. Signup and view all the answers

Compensation packages are only designed to attract new talent.

False Signup and view all the answers

Study Notes

Compensation

Compensation encompasses all payments to employees, including salary, wages, commissions, rewards, bonuses, and profit-sharing.
Salary: A fixed amount paid regularly (monthly or biweekly).
Wage or hourly wage: A fixed amount paid weekly or per worked hour.
Commission: Additional payment based on sales (fixed percentage).
Rewards or bonuses: Extra pay for meeting specific criteria or goals.
Profit-sharing: Annual payment tied to the organization's profits.
Fringe benefits: Paid time off (sick leave, vacation), health club memberships, etc.
Medical benefits: Health, dental, and life insurance are commonly included. Disability insurance may also be included.
Retirement benefits: Plans for employee retirement.

Compensation Package Goals

Attract talent during recruitment.
Boost employee morale.
Increase employee satisfaction.
Enhance employee loyalty to prevent loss of valuable employees (retention).
Support organizational growth and expansion.
Happy and motivated employees indirectly save money for the organization.

Compensation Package Considerations

Turnover avoidance (voluntary/involuntary):
- Recruitment costs.
- Advertising costs for new positions.
- New employee orientation and training.
- Severance costs.
- Costs associated with finding replacements.
- Time spent recruiting and training replacements.
- Loss of knowledge from departing employees.
- Lost productivity while the new employee gains proficiency.
- Cost related to the loss of motivation prior to leaving.
- Cost associated with loss of trade secrets.

Developing a Compensation Package

Job evaluation: The process of establishing relative worth for job positions to create a pay structure.
- Methods: Job ranking system (jobs ranked by importance).
- Paired comparison (comparing job to other jobs to determine an overall score).
Pay grading: After job evaluation, a pay scale or range is set up in steps.
- Different types of pay systems include skill-based pay, broad-banding, variable pay systems (pay basis + variable pay based on goals attainment).
Additional considerations: Company size (global, regional, national), industry pay standards (market surveys).

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Description

This quiz covers the essential elements of employee compensation, including salary, wages, commissions, bonuses, and various benefits. Explore how compensation packages can attract talent, boost morale, and enhance employee satisfaction and loyalty.