Chapter 8: Total Rewards PDF

Chapter 8: Total Rewards Total Rewards: comprehensive approach to compensating rewarding employees (reflect culture,business, & HR strategy) → Value proposition - considers the total value employees receive for contributing to company Total Compensation: All types of financial rewards & tangible be...

Chapter 8: Total Rewards Total Rewards: comprehensive approach to compensating rewarding employees (reflect culture,business, & HR strategy) → Value proposition - considers the total value employees receive for contributing to company Total Compensation: All types of financial rewards & tangible benefits/services employees receive part of employment Direct Compensation: Financial rewards in exchange for work Indirect Compensation: Benefits/services n exchange work Decision about Base Pay Job Structure: Relative pay for diff jobs within organization - Defines difference in pay between diff positions/levels responsibility Pay Level: avg amount (wages, salaries, incentives) organization pays for particular job → Together, job structure & pay level establish a: Pay Structure: pay policy resulting from job structure & pay level decisions → help achieve goals related to employee motivation, cost control, & attract/retain talent What are the Legal Requirements? Human rights legislation → cant base rewards on prohibited grounds (age, sex, race), must be tied to business Employment/Labour Standards Act → minimum wage, hours of work, overtime, vacation Pay Equity Legislation → address wage gap between female/male (jobs equal value receive similar pay) Pay Transparency → job candidates cannot be asked about past compensation received, all publicly advertised jobs must include salary, discussing compensation cannot be disciplined Economic Influences on Pay: attracts workers but need low cost to be competitive Product and Labour Markets Product Market: all organizations offering competing goods/services to serve same customers Labour Markets: HR: competing with other firms to hire the same skilled people Pay Level: Deciding What to Pay Depends on organizations competitive environment & demand - High competition = board range → employers choose at/above/below market wage - Tight labor markets = more employment choices for workers - Evaluate as an investment: attract,retain,motivate high quality workforce - Limited only by legal req. & economic influences Economic Theory = most profitable level, all things being equal, is at market rate Gathering Information about Market Pay Benchmarking: procedure where organization compares its own practices against those of successful competitors How Do Employees Judge Pay Fairness? Equity Theory: People measure outcomes (pay) in terms of inputs 1. What they think employees in other organization earn for same job 2. What they think employee w diff jobs within organization earn for work at same/diff levels 3. What they think employees within organization earn for same job Employees Perceptions - Equitable pay = attitudes/behaviors unchanged - Advantage pay = rethink situation to see as fair - Under-rewarded pay = reducing inputs (less effort), try to inc outcomes (raise), leave organization Job Structure: Relative Value of Jobs Job Evaluation: Admin procedure for measuring relative internal worth of organizations jobs → Identifies a job's compensable factors: characteristics of a job that organizational values & chooses to pay for (eg. work conditions, responsibility, skill) → Provides basis for decisions about relative internal worth: value of job within the organization, necessary to meet pay equity req. → Key jobs: Jobs w relatively stable content & common among many organization (possible to obtain survey data about what people earn in these jobs) Pay Structure: Putting It All Together Pay Structure should reflect pay level, job structure & market forces,organizational goals, +jobs relative contributions to goals ★ Hourly Wage: Rate of pay/hr worked ★ Piecework Rate: Rate of pay/unit produced ★ Salary: Rate of pay/week, month, year worked Pay Rates - If wanting to match compensation to comparable jobs, base pay on market research of key jobs (pay surveys) - Non-key jobs → draw graph (pay vs. job evaluation points) Pay Policy Line: Graphed line showing relationship between job evaluation points + pay rate If job structure + market data conflict - 2 resolutions: 1. Stick to job evaluations + pay according to employees worth to organization (Drawbacks: might be paying more/less than have to, difficulty competing for customers/employees) 2. Base pay entirely on market forces (Drawbacks: employees may conclude pay is unfair) Pay Grades Pay Grades: Sets of jobs w similar with/content, grouped together to establish rates of pay - Drawbacks: rates of pay for individual jobs might not match levels specified by market + organizational structure (paying more or less than market requires) Pay Ranges Pay Range: Set of possible pay rates (min, max, mid) for a certain job/pay grade - More flexibility to pay employees proper value - Ranges overlap - easier to transfer employees among jobs - Midpoint = typical market rate Alternatives to Job-Based Pay Developing pay structure based on jobs has limitations - flexibility/innovation/quality → if based on job description, some things aren't in “descriptions” - If new set of competencies needed, existing pay may reward wrong behaviors - If pay structure rewards promotions, discourage gaining experience in lateral moves Broadbanding: Consolidates pay grades into a few “broad bands” - Reduces opportunities to promote employees - Encourages + provides flexibility for employees to make lateral career moves Competency Based Pay Systems: Pay set according to employees level of skills/knowledge + capabilities - Makes sense in industries where employees need to keep up w technology - Enrich jobs (encourages employees to add to knowledge) - Organization become flexible + innovative (encourage learning and adaptability) - Rewards employees for acquiring skills but does not provide a way to ensure they are using them Pay Structure and Actual Pay Pay structure represents organization policy, but actual decisions may be diff Compa-ratio: average pay vs. midpoint of pay range ★ X>1 = overpaying, difficulty keeping costs under control ★ X