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Internal equity
Individual equity
How fair an individual’s pay as compared with what his or her coworkers are earning for the same or very similar jobs within the company. The perceived fairness of the process and procedures to make decisions regarding the allocation of pay.
Effective Compensation Practices Cost Efficiency
Achieve Legal Compliance Improve Recruitment And Morale Reduce Turnover
Competitive Advantage
Goals of Compensation Policies
Wage survey
2.Retain good employees
Job evaluation system
3.Motivate employees
Reward good Performance
4.Comply with the law
Documentation of HR records
Equity Theory of motivation
Collective Bargaining Legal Requirements
Establishing Pay Rates
Step 1. The salary survey
Aimed at determining prevailing wage rates.
A good salary survey provides specific wage rates for specific jobs.
Establishing Pay Rates
Step 2. Job evaluation
A systematic comparison done in order to determine the worth of one job relative to another.
A fundamental, compensable element of a job, such as skills, effort, responsibility, and working conditions.
Establishing Pay Rates
Step 3. Group Similar Jobs into Pay Grades
A pay grade is comprised of jobs of approximately equal difficulty or importance as established by job evaluation.
Procedural equity
Methods to Address Equity Issues
Salary surveys
To monitor and maintain external equity. To maintain internal equity. To maintain individual equity.
Components of the Wage Mix
Labor Market Conditions Compensation Strategy of the Organization
Area Wage Rates Cost of Living
Worth of the Job
WAGE MIX
Employee’s Relative Worth Employer’s Ability to Pay
Chapter 8
Compensation Management
Learning Objectives
Explain how effective compensation systems enhance competitive advantage. Understand how people form perceptions about a pay system’s equity. Describe how organizations can build an equitable pay system. Discuss the various incentive plans. Understand the various benefit options and their administration.
Pay Grades
4 3 2 1
Point Range 100-200 201-300 301-400 401-500 Grade Min Max $ $ 15 18 21 24 20 23 26 29
$
1 2 3 4
Points
Establishing Pay Rates
Step 4. Price Each Pay Grade— Wage Curve
Point method: the pay grade consists of jobs falling within a range of points.
Ranking method: the grade consists of all jobs that fall within two or three ranks. Classification method: automatically categorizes jobs into classes or grades.
Pay, benefits, opportunities, etc.
OUTCOME INPUTS
effort, ability, experience etc.
the same, more or less
<=>
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OUTCOME INPUTS
A person evaluates fairness by comparing their ratio with others.
compensation
Employee compensation: All forms of pay or rewards going to employees and arising from their employment.
The Structure of Compensation
Financial Compensation(经济性薪酬)：
Shows the pay rates currently paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation.
1.Attract Good Applicants 2.Retain Good Employees 3.Motivate Employees 4.Comply with the Law
Compensation Objective
1.Attract good applicants
Obtained by
Forms of Equity
External equity
How a job’s pay rate in one company compares to the job’s pay rate in other companies. How fair the job’s pay rate is, when compared to other jobs within the same company
Leabharlann Baidu
Non-financial Compensation(非经济性薪酬)： Satisfaction that a person receives from the job itself or from the work environment.
Linking Compensation Practices to Competitive Advantage Improve
Compensable factor
Job Evaluation Systems
Job Ranking
Job Classification
Common Methods of Job Comparison
Point System
Factor Comparison
Job Evaluation for Management Positions
Hay Profile Method
Job evaluation technique using three factors— knowledge, mental activity, and accountability—to evaluate executive and managerial positions.
Opening Case: Gaining Competitive Advantage at Old Country Buffet
Problem: A turnover problem among frontline service employees Solution: Implementing an incentive program for managers How the incentive plan enhanced competitive advantage
Job analysis and job evaluation
Performance appraisal and incentive pay
Communications, grievance mechanisms, and employees’ participation
To help ensure that employees view the pay process as transparent and fair.
Formal written questionnaire surveys are the most comprehensive, but telephone surveys and newspaper ads are also sources of information.
Benchmark job: A job that is used to anchor the employer’s pay scale and around which other jobs are arranged in order of relative worth.
Direct Financial Compensation(直接经济薪酬)： Pay that a person receives in the form of wages, salaries, bonuses, and commissions 包括工资、薪水、佣金、奖金等。 Indirect Financial Compensation(间接经济薪酬)：All financial rewards that are not included in direct compensation /Pay in the form of financial benefits such as insurance 包括各种福利、保险等。
Within the three years, manager turnover rate dropped from 40 to 14 percent, with 272 managers eligible for the Founder’s Club. Sales increased by 7 percent, and guest counts by 4 percent, which resulted in a increase of $43 million dollars in total profits.
