Chapter 9 & 10: Direct & Indirect Financial Compensation PDF

Chapter 9 DIRECT FINANCIALCOMPEN SATION (CORE COMPENSATION) Judy Ann C. Cerillo, RPm, MSP, CHRA  CHAPTER OBJECTIVES 01 02 03 Describe direct financial Identify and discuss the Describe contextual...

Chapter 9 DIRECT FINANCIALCOMPEN SATION (CORE COMPENSATION) Judy Ann C. Cerillo, RPm, MSP, CHRA  CHAPTER OBJECTIVES 01 02 03 Describe direct financial Identify and discuss the Describe contextual compensation (core components of direct influences on direct financial compensation), indirect financial financial compensation an compensation and discuss compensation (employee review the determinants of how to use job evaluation to benefits), and nonfinancial direct financial build job structures. compensation. compensation. 04 05 06 Describe various competitive Discuss compensation for discuss compensation for compensation policies and sales representative. contingent workers. explain the use of compensation surveys for job pricing and determining market competitive pay structures Compensatio Total of all rewards provided employees n in return for their services.  Direct financial compensation Core compensation Pay that a person receives in the form of wages, salary, commissions, and bonuses. Indirect financial compensation Employee benefits All financial rewards that are not included in direct financial Non financial compensation. compensation Satisfaction that a person receives from the job itself or from the psychological and/or physical environment in which the person works.  COMPONENTS OF DIRECT FINANCIAL COMPENSATION BASE PAY COST-OF-LIVING ADJUSTMENT (COLA) The monetary compensation An additional payment given employees earn on a regular to employees to help them basis for performing their offset the impact of inflation jobs. Hourly pay and salary on their essential living are the main forms of base expenses such as food, pay. housing, clothing, and HOURLY PAY transportation. One type of base pay. SENORITY PAY Employees earn hourly pay Pay program in which pay for each hour worked increases are based on length of service Performance- Based Pay Is governed by how well one performs the job. To maximize company objectives of the firm, it is important to link employee compensation to performance. MERIT PAY Pay increase added to employees’ base pay based on their level of performance. MERIT BONUS One-time annual financial award, based on productivity that is not added to base pay. Performance- Based Pay SPOT BONUS Relatively small monetary gifts provided to employees for outstanding work or effort during a reasonably short period of time INCENTIVE PAY Compensation, other than base wages or salaries, that fluctuates according to employees’ attainment of some standard Performance- Based Pay PIECEWORK Incentive pay plan in which employees are paid for each unit they produce. MANAGEMENT INCENTIVE PLANS Bonuses to managers who meet or exceed objectives based on sales, profit, production, or other measures for their division, department, or unit. REFERRAL PLANS Individual incentive pay plans for rewarding the referral of new customers or recruiting successful job applicants.  COMPANYWIDE INCENTIVE PLANS PROFIT SHARING VESTING Compensation plans that An employee’s acquired result in the distribution of a nonforfeitable rights to predetermined percentage of pension benefits the firm’s profits to employees. Current Plans Deferred Plans Combination Plans  PERSON-FOCUSED PAY Compensation for developing the flexibility, knowledge, and skills to perform a number of jobs effectively. SKILL-BASED PAY COMPETENCY-BASED PAY Compensation plan that rewards System that compensates employees for their job-related employees for the capabilities skills and knowledge, not for they attain. their job titles.  CONTEXTUAL INFLUENCES ON DIRECT FINANCIAL COMPENSATION Labor Market Labor Unions Economy Interindustry Wage Differentials  BUILD JOB STRUCTURES USING JOB EVALUATION Job structure An ordered set of similar jobs based on worth. Job evaluation Process that determines the relative value of one job in relation to another  BUILD JOB STRUCTURES USING JOB EVALUATION RANKING METHOD The ranking method is the simplest of the four job evaluation methods. In the job evaluation ranking method, the raters examine the description of each job being evaluated and arrange the jobs in order according to their value to the company CLASSIFICATION METHOD Job evaluation method in which classes or grades are defined to describe a group of jobs.  BUILD JOB STRUCTURES USING JOB EVALUATION FACTOR COMPARISON METHOD Job evaluation method that assumes there are five universal factors consisting of mental requirements, skills, physical requirements, responsibilities, and working conditions; the evaluator makes decisions on these factors independently. POINT METHOD Job evaluation method in which the raters assign numerical values to specific job factors, such as knowledge required, and the sum of these values provides a quantitative assessment of a job’s relative worth. Chapter 9 DIRECT FINANCIALCOMPEN SATION (CORE COMPENSATION) Judy Ann C. Cerillo, RPm, MSP, CHRA Chapter 10 INDIRECT FINANCIALCOMPEN SATION (EMPLOYEE BENEFITS) udy Ann C. Cerillo, RPm, MSP, CHRA  CHAPTER OBJECTIVES 01 02 03 Define indirect financial Define discretionary benefits Explain the various kinds of compensation (employee and explain the various retirement plans and types of discretionary summarize life insurance benefits) and describe legally benefits and discuss the and disability insurance. required benefits alternative types of health care plans. 04 05 06 Describe alternative Describe the premium paid time off policies pay benefit practice Explain the various and identify employee and discuss voluntary employee benefit laws service benefits. benefits. and describe customized benefit plans. Indirect Financial Compensation (Employee benefits) All financial rewards that are not included in direct financial compensation. Discretionary benefits - are benefit payments made as a result of unilateral management decisions in nonunion firms and from labor–management negotiations in unionized firms Voluntary benefits - are usually100 percent paid by the employee, but the employer typically pays the administrative cost. Legally Required Benefits are protection programs that attempt to promote worker safety and health, maintain family income streams, and assist families in crisis.  Service Incentive Leave (SIL)  Employee’s Compensation Program  Maternity Leave  Philhealth  Paternity Leave  Social Security Benefits  Parental Leave for Solo Parents  Pag-IBIG Benefits  Leave for Victims of VAWC  Special Leave for Women Discretionary Benefits are benefit payments made as a result of unilateral management decisions in nonunion firms and from labor– management negotiations in unionized firms  Health Care  Paid Time Off  Dental Care  Sabbatical Leave  Shuttle  Insurance  Retirement Plans Employee Services  Child Care  Educational Assistance  Subsidized Cafeterias  Scholarship for Dependents  Relocation  HAZARD PAY Additional pay provided to employees who work under extremely dangerous conditions. SHIFT DIFFERENTIAL Additional money paid to employees for the inconvenience of working less-desirable hours. WORK-LIFE BALANCE For employers, creating a balanced work–life environment can be a key strategic factor in attracting and retaining the most talented employees FLEXTIME COMPRESSED WORKWEEK Practice of Any arrangement permitting of work hours that employees to permits employees choose their to fulfill their work own working obligation in fewer hours, within days than the certain typical five-day limitations. workweek.  JOB SHARING TELECOMMUTIN G Work arrangement Two part-time whereby employees, people split the called “teleworkers” or duties of one job in “telecommuters,” are able to remain at home (or some agreed-on otherwise away from the manner and are office) and perform their paid according to work using computers and their contributions. other electronic devices that connect them with their offices. Chapter 10 INDIRECT FINANCIALCOMPEN SATION (EMPLOYEE BENEFITS) udy Ann C. Cerillo, RPm, MSP, CHRA THANK YOU!