Part IV Compensation of Human Resources Standard Slide Sample Chapter 11 Pay Structure Decisions Chapter 12 Recognizing Employee Contributions with Pay Chapter 13 Employee Benefits Irwin/McGraw-Hill © The McGraw-Hill Companies, 11 Chapter Irwin/McGraw-Hill Pay Structure Decisions Objectives • List the major decision areas and concepts in employee compensation management • Describe the major administrative tools used to manage employee compensation • Explain the importance of competitive labor-market and product-market forces in compensation decisions • Discuss the significance of process issues such as communication in compensation management • Describe new developments in the design of pay structure • Explain the reasons for the controversy over executive pay • Describe the regulatory framework foe employee compensation © The McGraw-Hill Companies, 11-2 Administrative Tool Focus of Comparison Consequence Irwin/McGraw-Hill Pay Structure and Consequences Pay Level Job Structure Market surveys Job evaluation External Internal - external moves: attraction / retention of employees - labor costs - employee attitudes - internal moves: promotion, transfer - cooperation among employees - employee attitudes © The McGraw-Hill Companies, Equity Theory 11-3 Pay, benefits, opportunities, etc OUTCOME INPUTS the same, more or less ? OUTCOME INPUTS effort, ability, experience etc A person evaluates fairness by comparing their ratio with others Irwin/McGraw-Hill © The McGraw-Hill Companies, Three Employee Views of the Pay Decision 11-4 11 22 33 Pay LevelLevel- Same Same job job in in Different Different organizations organizations Pay Pay Structure Structure Different Different jobs jobs in in Same Same organization organization Pay Individual Pay Pay Differences Differences Different Different people people in in Individual Same job job Same Irwin/McGraw-Hill © The McGraw-Hill Companies, 11-5 Market Pressures in Developing Pay Levels Deciding What to Pay ? Product-market competition competition Product-market upper bound bound on on labor labor cost cost upper staffing level level staffing average cost cost per per employee employee average Labor-market competition competition Labor-market lower bound bound on on pay pay levels levels lower Irwin/McGraw-Hill © The McGraw-Hill Companies, Market Pay Surveys - Benchmarking 11-6 Factors to consider 11 22 33 44 Identify key key laborlabor- and and product-market product-market Identify competition competition Identify key key jobs jobs v v non-key non-key jobs jobs Identify Weight and and combine combine pay pay rates rates appropriately appropriately Weight Track appropriate appropriate ratios ratios over over time time Track revenues per per employee employee revenues revenues per per labor labor cost cost revenues work force force quality quality (e.g (e.g education education levels) levels) work Irwin/McGraw-Hill © The McGraw-Hill Companies, 11-7 Example of a Three-Factor Job Evaluation System Compensable Factors Total Job Title Complexity Experience Education Points Computer operator 40 30 40 110 Computer programmer 40 50 65 155 Systems analyst 65 60 85 210 Irwin/McGraw-Hill © The McGraw-Hill Companies, 11-8 Approaches to Developing a Pay Structure Market survey survey data data Market external comparisons comparisons external Pay policy policy line line Pay combines internal internal & & external external combines Pay grade grade Pay Irwin/McGraw-Hill © The McGraw-Hill Companies, Developing a Pay Policy Line 11-9 monthly salary ($000) PAY Line of Best Fit : using Market-Survey data in Table 14.4 40 80 120 160 200 240 280 Job Evaluation Points Irwin/McGraw-Hill © The McGraw-Hill Companies, 32 Developing a Pay Policy Line 11-10 Predicted Salary = $7,128 monthly salary ($000) PAY Predicted Salary = $6,486 Job Evaluation Points = 315 40 80 120 160 200 240 280 Job Evaluation Points Irwin/McGraw-Hill © The McGraw-Hill Companies, 32 Pay Grade Structure 11-11 monthly salary (000) PAY 100 Irwin/McGraw-Hill 150 200 250 300 Job Evaluation Points 350 © The McGraw-Hill Companies, Process Issues 11-12 Participation Participation Use task task forces forces for for suggestions suggestions Use Communication Communication Employees need need to to understand understand Employees system system Need to to keep keep managers managers aware aware of of Need changes changes Managers need need to to explain explain system system Managers changes changes Irwin/McGraw-Hill © The McGraw-Hill Companies, Current Challenges 11-13 Problems with with Job Job Based Based Pay Pay Problems Structure Structure too rigid, rigid, reduces reduces flexibility flexibility too reinforces top-down top-down reinforces retards changes changes retards does not not reward reward behavior behavior change change does discourages lateral lateral moves moves discourages Irwin/McGraw-Hill © The McGraw-Hill Companies, New Approaches 11-14 Delayering and and Banding Banding Delayering Skill (knowledge) (knowledge) based based pay pay Skill increases flexibility flexibility increases firm needs needs to to use use available available skills skills firm Irwin/McGraw-Hill © The McGraw-Hill Companies, Can the U.S Labor Force Compete? 11-15 Labor costs costs are are unstable unstable over over time time Labor Quality & & productivity productivity of of labor labor varies varies Quality Non-labor cost cost factors factors also also Non-labor important in in locating locating facilities facilities important market proximity proximity market response time time response Irwin/McGraw-Hill © The McGraw-Hill Companies, 11-16 Comparative Productivity and Unit Labor Costs: Unites States, Germany, and Japan Productivity (value added per labor hour) 100 100 $200 83 153 76 133 50 100 $100 Legend: U.S Germany Japan Irwin/McGraw-Hill © The McGraw-Hill Companies, Chief Executive Officer Pay in Selected Countries 11-17 Multiple of CEO to Manufacturing Employee Total Remuneration 30 24 20 16 11 10 United States Irwin/McGraw-Hill France Germany Japan © The McGraw-Hill Companies, [...]... McGraw-Hill Companies, New Approaches 11-14 Delayering and and Banding Banding Delayering Skill (knowledge) (knowledge) based based pay pay Skill increases flexibility flexibility increases firm needs needs to to use use available available skills skills firm Irwin/McGraw-Hill © The McGraw-Hill Companies, Can the U.S Labor Force Compete? 11-15 Labor costs costs are are unstable unstable... 11-12 Participation Participation Use task task forces forces for for suggestions suggestions Use Communication Communication Employees need need to to understand understand Employees system system Need to to keep keep managers managers aware aware of of Need changes changes Managers need need to to explain explain system system Managers changes changes Irwin/McGraw-Hill © The McGraw-Hill...Developing a Pay Policy Line 11-10 Predicted Salary = $7,128 8 7 6 monthly salary 5 ($000) 4 PAY Predicted Salary = $6,486 3 2 1 Job Evaluation Points = 315 40 80 120 160 200 240 280 Job Evaluation Points Irwin/McGraw-Hill © The McGraw-Hill Companies, 32 Pay Grade Structure 11-11 8 7 6 monthly salary 5 (000) 4 PAY 3 2 1 100 Irwin/McGraw-Hill 150 200 250 300 Job Evaluation Points 350 © The McGraw-Hill Companies,... Labor Quality & & productivity productivity of of labor labor varies varies Quality Non-labor cost cost factors factors also also Non-labor important in in locating locating facilities facilities important market proximity proximity market response time time response Irwin/McGraw-Hill © The McGraw-Hill Companies, 11-16 Comparative Productivity and Unit Labor Costs: Unites States, Germany,... States, Germany, and Japan Productivity (value added per labor hour) 100 100 $200 83 153 76 133 50 100 $100 Legend: U.S Germany Japan Irwin/McGraw-Hill © The McGraw-Hill Companies, Chief Executive Officer Pay in Selected Countries 11-17 Multiple of CEO to Manufacturing Employee Total Remuneration 30 24 20 16 11 10 United States Irwin/McGraw-Hill France 9 Germany Japan © The McGraw-Hill Companies, ... McGraw-Hill Companies, Current Challenges 11-13 Problems with with Job Job Based Based Pay Pay Problems Structure Structure too rigid, rigid, reduces reduces flexibility flexibility too reinforces top-down top-down reinforces retards changes changes retards does not not reward reward behavior behavior change change does discourages lateral lateral moves moves discourages Irwin/McGraw-Hill ©