After reading chapter 11, you should be able to: Identify the kinds of decisions involved in establishing a pay structure, summarize legal requirements for pay policies, discuss how economic forces influence decisions about pay, describe how employees evaluate the fairness of a pay structure, explain how organizations design pay structures related to jobs.
Fundamentals of Human Resource Management 11e Chapter 11 Establishing Rewards and Pay Introduction § What is your biggest motivator at work? • • • • • Fundamentals of Human Resource Promotions Great work assignments Recognition Control over your own work? Pay – covered in this chapter Rewards Review Extrinsic Intrinsic Financial Non-financial participation in decision making greater job freedom more responsibility opportunities for growth diversity of activities Performance based assigned parking space Implied Explicit membership-based membership-based bonuses cost of living increase protection Program piecework labor market adjustment pay for time not worked profit sharing services/ perks commission incentive plans preferred assignments business cards own secretary impressive title time-in-rank increase merit pay plans Fundamentals of Human Resource IntrinsicversusExtrinsicRewards FundamentalsofHumanResource TypesofRewardPlans Đ Financialrewards • • • § Wages Bonuses Profit sharing Pension plans Paid leaves Purchase discounts Nonfinancialrewards Makelifeonthejobmoreattractive Employeesvaryontherewardstheyprefer FundamentalsofHumanResource Performanceưbasedversus MembershipưBasedRewards Đ Performanceưbasedrewardsaretiedtospecificjob performancecriteria Đ Commissions Pieceworkpayplans Incentive systems Group bonuses Merit pay Membershipbased rewards are offered to all employees • • • Costofliving increases Benefits Salary increases Fundamentals of Human Resource Compensation Administration § § Companies derive their compensation programs from job evaluation, which defines the appropriate worth of each job An effective, fair compensation program attracts, motivates and retains competent employees Both employees and employers can research compensation facts and issues at www.salary.com http://salary.nytimes.com/ http://www.salaryexpert.com/ Fundamentals of Human Resource Compensation Administration § The Fair Labor Standards Act (FSLA) requires: • • • • § The Fair Labor Standards Act is administrated by the Wage and Hour Division of the U.S. Department of Labor Click here to see the website Exempt employees • § Minimum wage Overtime pay Recordkeeping Child labor restrictions Include professional and managerial employees not covered under FSLA overtime provisions Exempt employees • Includeprofessionalandmanagerialemployeesnotcoveredunder FSLAovertimeprovisions FundamentalsofHumanResource CompensationAdministration EqualPayActof1963requiresthatmenandwomen hiredforthesamejobbepaidthesame. Đ CivilRightsAct: • • • Broader than Equal Pay Act Prohibits discrimination on the basis of gender Used to support comparable worth concept Salaries established based on skill, responsibility, effort, and working conditions Fundamentals of Human Resource JobEvaluationandthePay Structure Jobevaluationhelpssetpaystructure Đ Jobanalysisinformationdeterminestherelative value,orrank,ofeachjobintheorganization. Đ Otherpaystructurefactors: • Labor market conditions Collective bargaining Individual skill differences Fundamentals of Human Resource Research wage information at the Bureau of Labor Statistics http://www.bls.gov/bls/blswage.htm 10 JobEvaluationandthePay Structure FundamentalsofHumanResource 11 JobEvaluationandthePay Structure EstablishingthePayStructure Đ CompensationSurveys § Wage Curves • • § Used to gather factual data on pay rates for other organizations. Information is often collected on associated employee benefits as well Drawn by plotting job evaluation data (such as job points or grades) against pay rates (actual or from survey data) Indicates whether pay structure is logical WageStructure Designatespayrangesforjobsofsimilarvalue.Resultsinalogical hierarchyofwages,inoverlappingranges FundamentalsofHumanResource 12 JobEvaluationandthePay Structure Externalfactorsalsoinfluencepaystructure Đ Geographic differences (local supply and demand) § Labor supply (low supply = higher wages and vice versa) § Competition (HR can match, lead, or lag) § Cost of living as determined by the CPI § Collective bargaining (unions) Fundamentals of Human Resource 13 Special Cases of Compensation Incentive Compensation Plans individual organizationwide group Incentives can be added to the basic pay structure to provide rewards for performance Fundamentals of Human Resource 14 Special Cases of Compensation Individual Incentives • • • Merit pay plans (annual increase, based on performance) Piecework plans (pay based on number of units produced typically in a specified time period) Timesavings bonuses and commissions These work best where clear objectives are set and tasks are independent Fundamentals of Human Resource 15 Special Cases of Compensation Group Incentives § Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation. FundamentalsofHumanResource 16 SpecialCasesofCompensation OrganizationưwideIncentives Đ Directemployeeeffortstowardorganizationalgoals(suchas costreduction) ScanlonPlanưsupervisorandemployeecommittees suggestlaborưsavingimprovements. § • See http://www.scanlon.org/ IMPROSHARE formula is used to determine bonuses based on labor cost savings. § See http://www.qualitydigest.com/jul/gainshre.html Fundamentals of Human Resource 17 Special Cases of Compensation Payingforperformance Đ Competencyưbasedcompensation Đ Rewardedforskills,knowledgeandbehaviors Leadership Problem solving Decision making Strategic planning Broadbanding • Preset pay levels that determine what people are paid based on their type and level of competency. Fundamentals of Human Resource 18 SpecialCasesofCompensation TeamưBasedCompensation Đ Incentivesforempoweredworkteamstoexceed establishedgoalsandshareequallyinrewards Đ Dependson: Clarity of team purpose and goals Ability of the team to obtain needed resources Effective team communication skills and trust Fundamentals of Human Resource 19 Executive Compensation Programs Salaries of Top Managers § § § § Executive pay can run 400 times higher than that of the average worker Competition for executive talent raises the price of hiring an executive High salaries can be a motivator for executives and lower level managers Click here to see some of the highest paid executives FundamentalsofHumanResource 20 ExecutiveCompensationPrograms SupplementalFinancialCompensation Đ Deferredbonuses Đ Stockoptions § Paid to executives over extended time periods, to encourage them to stay with the company Allow executives to purchase stock in the future at a fixed price Hiring bonuses • Compensate for the deferred compensation lost when leaving a former company Fundamentals of Human Resource 21 Executive Compensation Program Supplemental Nonfinancial Compensation Perquisites club memberships free financial, legal and tax counseling paid life insurance supplemental retirement accounts interestfree loans perks may include postretirement consulting contracts mortgage assistance expense accounts company cars FundamentalsofHumanResource supplemental disability insurance 22 ExecutiveCompensationPrograms SupplementalNonfinancialCompensationPerks Đ Goldenparachutes • Protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position Click here for a list of some of the most expensive golden parachutes awarded Fundamentals of Human Resource 23 International Compensation International compensation packages generally utilize the balanceưsheetapproach,usingthesefourfactors: Đ Basepay Đ Differentials Đ Compensationgiventooffsethighercostsoflivingabroad Incentives • § Pay of employees in comparable jobs at home Inducements given to encourage employees to accept overseas assignments Assistance programs • Payment for expenses involved in moving a family abroad and in providing some services overseas HR needs to understand the statutory requirements of each country Fundamentals of Human Resource 24 Fillintheblanks _ rewards come from the job itself; _ rewards come from outside the job Intrinsic; extrinsic Wages, bonuses, and pension plans are examples of _ rewards financial The _ is the source of companies’ compensation programs job evaluation Scanlon and IMPROSHARE are examples of incentives organization-wide Using pre-set pay levels that determine what people are paid based on their type and level of competency is called _ Broad-banding _ protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position Golden parachutes Fundamentals of Human Resource 25 ... Dependson: • • Clarity of team purpose and goals Ability of the team to obtain needed resources Effective team communication skills and trust Fundamentals of Human Resource 19 Executive Compensation Programs... Group bonuses Merit pay Membershipbased rewards are offered to all employees • • • Cost of living increases Benefits Salary increases Fundamentals of Human Resource Compensation Administration § § Companies derive their compensation programs from job ... FSLAovertimeprovisions Exemptemployees Includeprofessionalandmanagerialemployeesnotcoveredunder FSLAovertimeprovisions FundamentalsofHumanResource CompensationAdministration EqualPayActof1963requiresthatmenandwomen