Human resrouce management 12th mathis jacson chapter 0012

CHAPTER 12 Total Rewards and Compensation S E C T I O N Compensating Human Resources © 2008 Thomson/South-Western All rights reserved PowerPoint Presentation by Charlie Cook The University of West Alabama Chapter Chapter Objectives Objectives After you have read this chapter, you should be able to: ■ Identify the three general components of total rewards and examples of each ■ Discuss four compensation system design issues ■ List the basic provisions of the Fair Labor Standards Act (FLSA) ■ Outline the process of building a base pay system ■ Describe the two means of valuing jobs ■ Explain two ways individual pay increases are determined © 2008 Thomson/SouthWestern All rights reserved 12–2 Nature Of Total Rewards and Compensation • Total Rewards  Monetary and non-monetary rewards provided to employees in order to attract, motivate, and retain them • Rewards System Strategic Objectives:  Legal compliance with all laws and regulations  Cost effectiveness for the organization  Internal, external, and individual equity for employees  Performance enhancement for the organization  Performance recognition and talent management for employees © 2008 Thomson/SouthWestern All rights reserved 12–3 Compensation Approaches Traditional Approach Total Rewards Approach • Compensation is primarily base pay • Variable pay used with base pay • Bonuses are for executives only • Annual/long-term incentives provided to all employees • Fixed benefits tied to long tenure • Pay grade progression is based on organizational promotions • One organization-wide pay plan for all employees © 2008 Thomson/SouthWestern All rights reserved • Flexible and portable benefits offered • Knowledge-based broadbands determine pay grades • Multiple pay plans consider job family, location, and business units 12–4 FIGURE 12-1 Total Rewards Components © 2008 Thomson/SouthWestern All rights reserved 12–5 FIGURE 12-2 Continuum of Compensation Philosophies © 2008 Thomson/SouthWestern All rights reserved 12–6 FIGURE 12-3 HR Metrics for Compensation © 2008 Thomson/SouthWestern All rights reserved 12–7 FIGURE 12-4 Typical Division of HR Responsibilities: Compensation © 2008 Thomson/SouthWestern All rights reserved 12–8 Compensation System Design Issues Compensation Fairness and Equity External Equity Internal Equity Procedural Justice Distributive Justice © 2008 Thomson/SouthWestern All rights reserved Pay Secrecy vs Openness 12–9 Compensation System Design Issues (cont’d) Market Competitiveness and Compensation “Meet the Market” Strategy “Lag the Market” Strategy © 2008 Thomson/SouthWestern All rights reserved “Lead the Market” Strategy 12–10 Valuing Jobs with Job Evaluation Methods • Job Evaluation  The formal systematic means used to identify the relative worth of jobs within an organization • Compensable Factor  A job value commonly present throughout a group of jobs  Something for which an organization will compensate an employee © 2008 Thomson/SouthWestern All rights reserved 12–23 FIGURE 12-9 Examples of Compensable Factors for Different Job Families © 2008 Thomson/SouthWestern All rights reserved 12–24 Job Evaluation Methods Job Evaluation Methods Point Method Ranking Method © 2008 Thomson/SouthWestern All rights reserved Classification Method FactorComparison Method 12–25 Valuing Jobs Using Market Pricing • Market Pricing  Using market pay data to identify the relative value of jobs based on what other firms pay for similar jobs Advantages Disadvantages • Ties organizational pay levels to the external job market, without “internal” job evaluation distortion • It relies on market survey data • Communicates to employees that the compensation system is “market linked.” © 2008 Thomson/SouthWestern All rights reserved • A specific job may differ from a “matching” job in the survey • The market data’s scope (range of sources) is a concern • Tying pay levels to market data can lead to wide fluctuations 12–26 Pay Surveys • Pay Survey  Collection of data on compensation rates for workers performing similar jobs in other organizations • Benchmark Jobs  Jobs found in many organizations • Internet-Based Pay Surveys  Pay survey questionnaires are distributed electronically rather than as printed copies © 2008 Thomson/SouthWestern All rights reserved 12–27 Using Pay Surveys Participants Broad-based Survey Data Relevance and Validity Job-matches Timeliness Methodology © 2008 Thomson/SouthWestern All rights reserved 12–28 Pay Structures • Job Family  A group of jobs having common organizational characteristics • Common Pay Structures  Hourly and salaried  Office, plant, technical, professional, managerial  Clerical, information technology, professional, supervisory, management, and executive • Pay Grades  Groupings of individual jobs having approximately the same job worth © 2008 Thomson/SouthWestern All rights reserved 12–29 FIGURE 12-10 Compensation Administration Process © 2008 Thomson/SouthWestern All rights reserved 12–30 Pay Structures (cont’d) • Market Banding  Grouping jobs into pay grades based on similar market survey amounts • Market Line  Shows relationship between job value as determined by job evaluation points and job value as determined by pay survey rates  Shows distribution of pay for the surveyed jobs, allowing a linear trend line to be developed by the least-squares regression method © 2008 Thomson/SouthWestern All rights reserved 12–31 FIGURE 12-11 Market-Banded Pay Grades for Community Bank © 2008by averaging Thomson/South*Computed the pay survey summary data for the jobs in each pay grade Western All rights reserved 12–32 FIGURE 12-12 Example of Pay Grades and Pay Ranges © 2008 Thomson/SouthWestern All rights reserved 12–33 Pay Ranges • Broadbanding  The practice of using fewer pay grades having broader pay ranges that in traditional systems  Benefits  Encourages horizontal movement of employees  Is consistent with trend towards flatter organizations  Creates a more flexible organization  Encourages competency development  Emphasizes career development © 2008 Thomson/SouthWestern All rights reserved 12–34 Individual Pay • Rates Out of Range  Red-Circled Employees  An incumbent (current jobholder) who is paid above the range set for the job  Green-Circled Employees  An incumbent who is paid below the range set for the job • Pay Compression  A situation in which pay differences among individuals with different levels of experience and performance in the organization becomes small © 2008 Thomson/SouthWestern All rights reserved 12–35 FIGURE 12-13 Pay Adjustment Matrix 89 • Compa-ratio  The pay level divided by the midpoint of the pay range $13.35 (current pay) × 100 = 89 (Compa -ratio) 15.00 (midpoint) Thomson/SouthEmployee J = © 2008 Western All rights reserved 12–36 Standardized Pay Adjustments Standardized Pay Increases Seniority Cost-of-Living Adjustments (COLA) © 2008 Thomson/SouthWestern All rights reserved Across-theBoard Increases Lump-Sum Increases (LSI) 12–37 [...]... common organizational characteristics • Common Pay Structures  Hourly and salaried  Office, plant, technical, professional, managerial  Clerical, information technology, professional, supervisory, management, and executive • Pay Grades  Groupings of individual jobs having approximately the same job worth © 2008 Thomson/SouthWestern All rights reserved 12–29 FIGURE 12-10 Compensation Administration