Job Compensation and Benefits Quiz

Rewards: Compensations and Benefits Services

• Compensations are all forms of pay or rewards given to employees for their employment.
• Rewards are given in return for labor.
• Employee rewards are important for attracting qualified staff, reducing turnover, and improving employee loyalty.
• Monetary rewards include wages, salaries, commissions, and bonuses.
• Non-monetary rewards are programs or benefits offered to improve employee satisfaction.

Importance of Compensation

• Attract qualified personnel to the company
• Reduce unnecessary staff turnover
• Improve staff loyalty
• Motivate current employees to enhance job satisfaction
• Ensure the compensation system complies with legal necessities
• Reward desired employee behaviors to encourage a positive attitude towards the organization
• Reward employees for their past performance
• Foster competitiveness in the labor market
• Maintain consistent salary levels among employees.
• Match employee performance goals with organizational goals
• Implement control over the compensation budget

Types of Compensation

• Financial compensation refers to monetary remuneration such as wages, salaries, bonuses, and various benefits.
• Non-financial compensation are programs created to satisfy employee job content and context (job design) to create a stronger relationship with employees, e.g., Job enrichment, job enlargement, job empowerment, flexibility and autonomy, recognition, advancement, and awards

Compensation Components

• Direct components include wages, salaries, incentives, bonuses, and commissions.
• Indirect benefits include recognition programs, rewarding work environment, organizational support, work environment, flexibility.

Compensation Alignment

• Compensation strategy links compensation to organization objectives.
• Pay-for-performance standards and bases for compensation are a crucial part of strategy.
• Compensation mix includes internal and external factors, and job evaluation systems.
• Compensation implementation involves tools including salary surveys, wage curves, pay grades, rate ranges, and competence-based pay.

Compensation Strategy

• Analyzing organizational objectives for effective compensation strategy and identifying market trends for appropriate employee compensation.

Linking Compensation to Organizational Objectives

• Rewards employees for past performance.
• Maintaining competitiveness in the labor market.
• Maintaining salary fairness among employees.
• Attracting new employees.
• Reducing turnover
• Setting pay rates above, below, or equal to prevailing market rates.
• Providing competitive compensation levels to improve employee acceptance and motivation.

The Pay for Performance Standard

• Compensation is linked to employee's relative performance.
• Compensation motivates employees through rewards for their contributions.
• Pay systems aim for equity to avoid feelings of inequity among employees.

Bases of Compensation

• Hourly work (time sheets).
• Piecework (based on number of units produced).
• Salary work (weekly, bi-weekly, or monthly).

Compensation Strategy - Pay Mix

• Goals are to attract, motivate, and retain employees.
• Difficult methods like placing sticky paper at entrances to the building may be counterproductive in attracting and retaining talent.

Factors Affecting the Pay Mix

• Internal factors (compensation strategy, worth of job, employee's relative worth, employer's ability and willingness to pay)
• External factors (labor market conditions, area pay rates, cost of living, collective bargaining, legal requirements)

Compensation Structure

• Salary structures ensure consistent pay levels for groups of employees, maintain internal equity, and control overall salary costs while also balancing market competitiveness.

Wage and Salary Survey

• The rationale behind conducting salary surveys is to ensure pay equity and distributive justice.
• Collect data on wages paid to employees in the relevant labor market (local, regional, and national).

Job Evaluation

• Job evaluation is a systematic approach to comparing jobs based on responsibilities, complexity, skill requirements to find their relative worth.
• Compensable factors such as skills, effort, responsibilities, and working conditions are taken into account during the evaluation.
• Methods like job ranking (job relative to other jobs) and point method (quantitative scoring system of job points) are often used in job evaluations.

The Wage Curve

• An outcome of job evaluation, the wage curve visually represents the relationship between job worth and wage rate.
• The plotted points show how wages are distributed for different levels of job worth in an organization.

Pay Grades

• A specific pay grade system is usually based on a given job's level or complexity.
• Descriptions of grades and the pay that comes with them are used in compensation structures to maintain internal equity and fairness for companies regarding the amount given to employees.

Rate Ranges

• Rate ranges set minimum and maximum salary amounts for specific job titles/categories.
• The information in table format, with the different jobs, job codes, titles, salary bands, and various ranges.

Compensation Management and Other HRM Functions

• Compensation management affects recruitment, selection, training and development, and compensation management practices.
• Compensation positively influences employee motivation, training, development, and morale.
• Low compensation may lead to employee dissatisfaction and unionization.
• Labor relations play a role in determining pay rates through negotiations.

Benefits and Services

• Employee benefits improve the quality of work life and general personal lives of employees.
• Indirect financial payments, including heath, life, and pension insurance, education plans, and discounts are common types or components of benefits.
• There are two types of benefits: mandatory benefits that are required by law or policy, and non-mandatory benefits which are optional.

Objectives of Benefits Programs

• Improve employee job satisfaction
• Meet employee health & security requirements
• Attract & motivate employees
• Reduce employee turnover, retain current employees
• Maintain a good competitive market position
• Improve staff morale
• Encourage loyalty and discourage unionization.

Factors to Be Considered in Developing Benefits and Services Plans

• Firm size (larger organizations typically provide more benefits)
• Cost control (organizations typically set a maximum limit on benefit costs to protect budget)
• Degree of unionization (organizations may offer more benefits to manage union influence)
• Profitability (high profit typically correlates with the provision of more benefits)

Requirements for a Sound Benefit Program

• Employee Involvement
• Diverse Workforce Considerations
• Flexibility in benefit offerings

Providing for Flexibility

• Flexible benefit plans empower employees to choose benefits based on individual needs.
• Companies may offer additional contributions to employee allowance accounts.
• Cafeteria-style benefit plans are often chosen for their customizable structure and ability to meet diverse needs.

Types of Employees' Benefits

• Mandatory benefits (i.e., Employment Act, EA 1955), are legally required, such as pension, EPF, and SOCSO contributions.
• Non-mandatory benefits (i.e. Allowances, Compassionate leave, insurance plans, educational facilities, etc.), are optional and are discretionary based on employee and company needs.

Employment Act 1955

• Specific stipulations regarding employee benefits (e.g., annual leave, sick leave, and payment for national public holidays.
• Legislation (Amendment 2022) implemented changes to the scope and provisions regarding employee's benefits/compensation.

Employment Act 1955 (Previous Section)

• Provisions relating to special payment conditions for those earning less than RM 2000.
• Provisions regarding maternity protection and the weekly day off from work standards.

Employment Act 1955

• Specifies annual leave standards based on years of service.
• Sick leave is also defined dependent on years of service and if hospitalization is involved.

Pension Act 1980

• Non-contributory/ partial contribution schemes are offered to certain government/public sector employees
• Employees in the public sector are entitled to several benefits (retirement, survivors', and disability pensions).

Employees Provident Fund Act 1991

• Compulsory savings scheme for employees to reduce poverty in old age.
• Employers & employees contribute to the fund (11%/12% of wages).
• Restructuring of EPF accounts to meet current employee needs is also a key component.

Employees Social Security Act 1969

• Covers benefits in the event of accidents, occupational diseases, and incapacity

Non-Mandatory benefits

• Voluntary/discretionary benefits provided by companies
• Examples: allowances (travel, meals, housing), housing loans, health care plans, additional time off, etc.

Employee Services

• Services provided by the company to improve employee well-being and support their work-life balance.
• Employee Assistance Programs(EAPs), child/elder care, recreational facilities, social clubs/unions, food services, etc.

HRIS and Employee Benefits

• HRIS systems can streamline and simplify employee benefits administration
• Interactive online portals are valuable tools for employee benefits management.

Other Benefits and Services (Overview)

• Comprehensive overview of supplementary benefits and employee services.

Test your knowledge on job ranking methods, salary bands, and compensation strategies in the workplace. This quiz covers various aspects of financial compensation and employee benefits programs, including their significance and components. Assess your understanding of how organizations structure their pay and benefits systems.