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372 Compensation

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Tom Giberson

on 19 April 2010

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Transcript of 372 Compensation

Compensation Objectives:
Attract and retain the talent required for sustainable competitive advantage
Focus the energy of employees on implementing the organization’s competitive strategy
Control costs
Attract and Retain Talent
Pay Fairness: What people believe they deserve to be paid in relation to what others deserve to be paid.

Perceptions based on comparisons between an individual’s ratio of inputs and outcomes and the ratios of others doing similar work.
Inputs: What an employee gives to the job
Outcomes: What people get out of doing the job
Benefits Attract and Retain Talent Objectives Equity Perceptions Self Other How employees reduce inequity
Increase inputs (time, effort) to justify higher rewards when they feel overrewarded
Decrease inputs when feeling underrewarded
Change the compensation they receive
Form a union File a grievance Leave work early
Choose a different comparison “other”
Rationalize that inequities are justified
Leave the situation by quitting Strategic Issues
Companies choose to lead, lag, or match market pay rates
External equity
Fairness relative to the external market (outside the organization)
Difficult to make comparisons when companies mix forms of pay (e.g. salary, bonus, benefits)
Dissatisfied employees may
Leave the company
Perform poorly
Steal from the company
Pay Mix
Monetary Compensation
Direct payments such as salary, wages, and bonuses, and indirect payments such as payments to cover the costs of private and public insurance plans.
Nonmonetary Compensation
Forms of social and psychological rewards —recognition and respect from others, enjoyment from doing the job itself, opportunities for self development, and so on.
$ Exempt/Non Exempt
Persons NOT covered by overtime and minimum wage provisions
Includes executives, managers, professionals, and administrators
Must be paid fixed salary and meet criteria for job content by:
Undertaking management duties
Directing the work of two or more employees
Controlling or greatly influencing hiring, firing, and promotion decisions
Exercising discretion
Job Evaluation
The procedure for gathering information about a job and its relative value within the organization — a consideration for internal equity in the job-based pay structure of an organization.
Salary Surveys
Market information gathered about what other employers pay—validation of external equity in valuing jobs in an organization.
Job Evaluation Methods
Job Ranking Method
Places jobs into a rank order according to the perceived overall value or importance of the job.
when only a few jobs and one person is familiar with them.
Job Classification Method
Groups jobs into a set of classifications based on the job descriptions, and then ranks the jobs that are found within each classification.
Jobs classified as similar usually referred to as being in the same job grade.
Point Factor Rating Method
Uses a sophisticated system of points to assign values to jobs.
Compensable factors
The dimensions of work that an organization chooses to use when establishing the relative value of jobs.
Standardized factors (Hay Guide Chart-Profile)
Problem solving, know-how, accountability
Custom-designed factors
Factors developed by an organization to align its pay system with its strategic objectives.
Point Factor Rating Method
STEP 1: Select Compensable Factors
STEP 2: Assign Factor Weights
STEP 3: Define Factor Degrees
STEP 4: Establish the Degree of Each Factor Present in Each Job
STEP 5: Calculate Job Values
PROBLEM SOLVING: This factor examines the types of problems dealt with in your job. Indicate the one level that is most representative of most of your job responsibilities.
Degree 1:Actions are performed in a set order according to written or verbal instructions. Problems are referred to a supervisor.
Degree 2:Routine problems are solved and various choices are made regarding the order in which the work is performed, within standard practices. Information may be obtained from various sources.
Degree 3:Various problems are solved that require general knowledge of company policies and procedures applicable within own area of responsibility. Decisions are made based on a choice from established alternatives. Actions are expected to be within standards and established procedures.
Degree 4:Analytical judgment, initiative, or innovation is required in dealing with complex problems or situations. Evaluation is not easy because there is little precedent or information may be incomplete.
Degree 5:Complex tasks involving new or constantly changing problems or situations are planned, delegated, coordinated, or implemented, or any combination of these. Tasks involve the development of new technologies, programs, or projects. Actions are limited only by company policies and budgets.
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