Compensation & Rewards: An Overview

Introduction to Compensation & Rewards

• Outlines the core concepts of employee compensation and rewards systems.
• Defines the total rewards framework and the process of compensation administration.
• Discusses legal considerations relevant to compensation.
• Identifies key factors that influence the determination of pay rates.

What is Human Resource Management (HRM)?

• It encompasses activities to attract, manage, and retain employees.
• The goal is to ensure employees perform at a high level, meeting organizational goals.

Total Rewards

• Employee compensation includes all forms of pay or rewards from employment.
• Direct financial payments include wages, salaries, incentives, commission, and bonuses.
• Benefits such as insurance are classified as indirect financial payments.

Compensation Department's Main Goals

• Compensation professionals enhance compensation systems to meet 3 goals.
• Important goals of compensation
• Internal consistency
• Market competitiveness
• Recognition of individual contributions

Internal Consistency

• It involves payment based on the criticality of jobs and employee performance.
• Higher compensation is attached to higher-level roles and higher performing individuals.
• Internal consistency is determined by job evaluation

Market Competitiveness

• It is the compensation an employee receives for their work relative to the market.
• Direct pay includes base salary.
• Indirect pay includes additional benefits.
• Compensation package should be equal to or greater than what the market offers for competitors.
• Competitive compensation aims to attract top talent.

Recognition of Individual Contributions

• It acknowledges and celebrates employee contributions, achievements, and efforts.
• It boosts morale, increases job satisfaction, and reinforces desired behaviors and values.

Egyptian Labor Law: Legal Considerations in Compensation

• Key elements include probationary pay, minimum wages, and annual increments.
• Overtime, shift pay, paid leaves, paid holidays, and permissible deductions are also factors.

Probationary Pay

• An employment contract should specify the probationary period.
• Probationary labor contracts are limited to three months with same employer.
• Probation contract is conditional and can be cancelled if the employee is unsuitable for job.

Minimum Wages and Periodical Annual Increments

• The national council helps set the minimum wages.
• Employees get a periodical annual increment of at least 7% of basic salary.
• This 7% is based on which social insurance subscriptions are calculated.

Overtime Pay, Paid Leaves, and Holidays

• Minimum overtime premiums are 135% of normal pay for daytime work.
• 170% is the rate for overtime worked at night.
• 100% compensation on rest days, plus another rest day.
• 200% compensation is given on official holidays.

Deductions

• Deductions due to disciplinary actions cannot exceed 5 days per month.
• Deductions for worker's debts cannot exceed 10% of total wages.
• Wage deduction for debt settlement is allowed up to 25% of wage with proper conditions and procedures.

Basic Factors in Determining Pay Rates

• Total rewards must align with organizational strategy.
• Important considerations include equity and ways to address equity issues.

Aligning Total Rewards with Strategy

• Organizations must have compensation and benefits support for their strategic direction.
• This includes mission, vision, values, goals, and strategy.
• In organizations with strategic business plans, the compensation and benefits system supports the plan.

Vision and Mission Statements

• A vision statement describes the future form of the organization.
• A mission statement describes the current function of the organization.

Objectives and Strategies

• Objectives should relate to a specific area, indicate what needs to be accomplished, and focus on results.
• They should also be clear, measurable, and have a specific deadline.
• Strategy is the means by which long-term objectives are achieved, or a plan to achieve the Mission and Objectives.

HR's Role in Compensation for Smaller Organizations

• HR professionals can consider company-related indicators.
• Indicators include life cycle, downsizing, expansion and profitability.
• HR designs compensation and benefits in line with strategic direction.
• Goals are to attract right people, retain employees with loyalty programs and benefits ,and motivate performance with incentives.

Equity and its Impact on Pay Rates

• External equity compares the job rates in one company compares to another.
• Internal equity is job rates compared to jobs inside the company.
• Example: Sales manager pay vs Production manager pay

Individual and Procedural Equity

• Individual equity compares an individual's pay with similar coworkers in the company, like men and women.
• Procedural equity determines the perceived fairness when allocating pay.

Addressing Equity Issues

• Salary surveys are used to monitor and maintain external equity.
• Job analysis and job evaluation maintains internal equity.
• Performance appraisal and incentive pay affect individual equity.
• Communication and employee participation maintains procedural equity.

Salary Compression

• This occurs when there's little pay difference regardless of skills, experience, or seniority.
• As lower-level pay rises faster than higher-level pay, salary ranges compress.
• A salary inequity problem occurs when inflation causes longer-term staff earn less than new hires.

Salesforce as an Example

• 2016 equal pay audit revealed a $3 million need to fix employee pay.
• Bold transparent move decreased employee turnover in following year by 27%.
• Equal pay policies can see 50% increase in employee satisfaction.
• This can improve retention of top talent and promote harmonious work environment.

Actions by Starbucks

• Starbucks is a champion for equal pay transparency, reporting their pay equity statistics publicly.
• Transparency can build trust with stakeholders and customers.
• Creating mentorship programs closes gaps, securing a diverse workforce and boosts financial performance.
• Doing this positions companies as industry leaders in employee-centric practices and drops turnover costs.