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Compensation and Benefits

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Sidney Shin-ny Yang

on 20 November 2014

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Transcript of Compensation and Benefits

Compensation and Benefits
2. Definition and Justification
1. Introduction
- What are compensation and benefits?
- Why is it a social and societal issue?
- Types of compensation and benefits.
- History of compensation and benefits in Human Resource Management.

1.The reason for the company to create the program about salary
A three-year pay freeze

Making the most of limited resources

Developing career status in the company

Makeover at Acme
1.The reason for the company to create the program about salary

2.The process of making the program

3.How did it work?

Compensation and Benefits
Compensation and benefits are the total amount of monetary and non-monetary pay rewarded to an employee by an employer in exchange for work performed as required.
2.The process of making the program
- Creating job classes and categories
- Writing a job description for every position
- Using database to find equivalent jobs in related industries, and set three-tiered salary ranges based on those numbers.
- The program roll out in 2012, and saw immediate results.

HRD definition
Why is it a social and societal issue?
- Compensation and benefits are a social and societal issue as it is directly related to the treatment of employees by companies and employers.
- It is a social issue as compensation and benefits are part of what constitutes fair treatment of employees.

Is it all about the salary?

Types of Compensation
1. Direct financial compensation 

2. Indirect financial compensation 

3. Non-financial compensation 

1. Direct Financial Compensation
Consisting of pay in the form of wages, salaries, bonuses and commission provided at regular and consistent interval
2. Indirect Financial Compensation
- Allowing employees to access their benefit as of their hire date
- Able to accumulate sick days to bridge to disability coverage
- Able to use some sick days as personal health days to allow employees to have a break without using all their holidays or pretending to be sick
- Receiving your birthday off with pay

The Basics: Health, Dental and Retirement Benefits
1. Health
Hospital room charges in excess of the standard rate to cover semi-private or private accommodation.
Drugs, medication and vaccines and other supplies available only by prescription. Non-emergency ambulance services.
Professional services provided by licensed paramedicals, such as psychologists, massage therapists, speech therapists
2. Dental
Although the type of dental work can differ from person to person, some common elements have been found:
preventative dental care and repair.

3. Retirement Plans
Retirement plans may be set up by in a variety of ways but typically will have a form of a guaranteed payment. 
Pension Plans : a defined benefit plan guarantees a predictable monthly payment at retirement, calculated by using an established formula with some combination of the employee's salary, years of service and/or age.

3. Non-Financial Benefits
- Indirect benefits will look different in every organization. Ultimately it is the way in which you choose to define the culture of your organization and your total compensation rewards program that will differentiate it. 
- Employees who were surveyed and asked what kept them in their current role, indicated that having a culture that recognized the importance of connecting performance to rewards were key to their satisfaction.
- example: fitness card, company car, business phone, travel expense
Flexible time
- This can be establishing core hours, then allowing employees to work earlier in the day or later in the day
Example: Core hours are 9 to 2. Person A starts at 7 and works till 3, Person B works from 9 to 5.

History of
compensation and benefits

Nowadays influencers

-Business Objectives
-Labor Unions
-Internal equity
-Organizational culture
-Organizational structure


- State of the economy
- Inflation
- Unemployment rate
- Relevant labor market
- Labor law
- Tax law
- Industry habits and trends

Compensation and benefits are rewarded to employees in four different ways:

- Reinforcement Theory
- Expectancy Theory
- Equity Theory
- Agency Theory

Each method of awarding compensation and benefits have strengths and weaknesses.

Reinforcement Theory
- A response followed by a reward is more likely to occur in the future.
- If an employee receives compensation or benefits for work they have done they will be motivated to work hard in the future.
: Employees perceive a link between behavior and reward which encourages employees to work harder.
: Alternatively, if employees receive no rewards they will not be encouraged to work.

Expectancy Theory
Similar to reinforcement theory but focuses on expected rather than experienced rewards.

Employees are motivated to work as they expect to receive a reward for their work.
Complaints if rewards are not as expected. This could lead to a lack of motivation amongst employees.

Equity Theory
The employee’s perceptions of what they contribute to the organisation, what they get in return and how their return contribution ratio compares determines how fair they perceive their employment relationship to be.

Perception of fairness increases employee moral.
Perceived inequality may have adverse motivational consequences and lead to counter-productive behaviour.

Agency Theory
- Focuses on divergent interests and goals and how employee compensation can align the goals.
- Compensation encourages the employee to work to achieve the same goals that the employer desires.
- Two different methods:
1) Outcome orientated contracts.
2) Behaviour based contracts.

- Methods of compensation and benefits payment
- Human Resource Development and compensation and benefits.

1. Outcome Orientated Contracts
- If profits for the company are high, compensation will go up.
- If profits for the company are low, compensation will go down.
Employee and owner interests are aligned.
There is an increased amount of risk borne by the employee, therefore they may require a higher salary to make up for it.
2. Behaviour Orientated Contracts
- Employees are rewarded based on their behaviour which must be monitored by their employer.
Risk is not transferred to the employee so their wages do not have to be increased.
The manager must invest money to monitor the employees actions.

Learning experiences
in a definite time period to increase the possibility of
improving job performance growth
Leonard Nadler

HRD definition

The study and practice
of increasing the learning capacity of individuals, groups, collectives, and organizations through the development and application of learning-based interventions for the purpose of optimizing human and organizational growth and
Neal Chalofsky

Neal Chalofsky

HRD definition
“The integrated use of

career development
, and
organization development
individual and organizational

Patricia A. McLagan & Debra Suhadolnik

HRD definition

A process
and unleashing human expertise through
organization development
personnel training
and development for the purpose of
improving performance

Richard A. Swanson & Elwood F. Holton III

HRD definition
"A set of
systematic and planned activities
designed by an organization to provide its members with the opportunities
to learn necessary skills
to meet
current and future job demands

Jon M. Werner & Randy L. DeSimone

HRD definition
From the view point of group member:
-Process of learning
-sharpen individual skill, attitude

From the view point of organization
- Systematic and planned activities
-Let group members to learn necessary skills to meet current and future job demands

Activities of HRD
and development
Performance Appraisals
Career planning
and development
- Change Management

Connection with compensation & benefits
HRD vs. Compensation & Benefits
3) The Companies’ issues : what are the good practices in the companies?
- Case study
- What really motivates people today
3.How did it work?
- All employees know how the new program worked, and where they fell in the pay range, so there was consistency across the organization
- Let everyone see where they were in their salary range and what they needed to do to improve.
- People can now see their growth over time, and what they can accomplish if they push themselves

Career planning

→ Intrinsic compensation(Non-financial compensation) : Mental income

Intrinsic compensation – Career planning
Connection with compensation & benefits
Performance Appraisals Management

→ Extrinsic Compensation

4 ways to distribute compensation

Reinforcement Theory
Expectancy theory
Equity Theory
Agency Theory
- Edict of maximum prices
- Compensations for injured body parts
- Impairment and disability

- Civil lawsuits & contracts of death
- Protests and strikes
- 1884 Otto Von Bismark
- Taylor, Gantt & Rowan
- 1945 unholy trinity of defenses

Barbora, Shin-ny,
Jing-lun, Yichen, Aishling, Marina.
Video of Walmart Healthcare
The candle Problem

Video about Intel
- Nazir, N. (2010). Compensation and Benefits: Definition and Importance.Available: http://www.hr.com/en/app/blog/2010/02/compensation-and-benefits-definition-and-importanc_g5kiosxm.html. Last accessed 18th November 2014.

- Guyton, G. (1999). A Brief History of Workers' Compensation. Iowa Orthopaedic Journal. 19 (1), p106-110.

- Gerhart, B., Minkoff, H. et Olsen, R. (1995). Employee Compensation: Theory, Practice and Evidence. Available: http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1193&context=cahrswp. Last accessed 15th November 2014.
Video about google working environment
HRD V.S. Compensation & Benefit
Full transcript