Explain the various classifications of rewards
Intrinsic rewards (personal satisfactions) come from the job (internal) itself, such as: pride in one’s work feelings of accomplishment being part of a work team
*something we feel from the inside
Extrinsic rewards come from a source outside the job (mainly offered by management), include: money promotions benefits
*given to us by someone else
TYPES OF REWARD PLANS:
Performance VS Membership-Base rewards
Performance-based rewards are tied to specific job
performance criteria.
commissions, piecework pay plans, incentive systems, group bonuses, merit pay
(based on individual and criteria)
Membership-based rewards such as cost-of-living increases,benefits, and salary increases are offered to all employees.
(everybody gets the same gig)
Financial versus Nonfinancial Rewards
Financial rewards include: wages, bonuses, profit sharing, pension plans, paid leaves, purchase discounts
(paid based from what are you contributing)
Nonfinancial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find
desirable.
(ex. cool parking spot; not financial)
Define the goal of compensation administration
COMPENSATION ADMINISTRATION
-The process of managing a compensation program so that The organization can attract, retain, and motivate competent employees who perceive that the program is fair.
From the employer’s point of view:
-Pay is critical in attaining strategic goals.
-Pay has a major impact on employee attitudes and
behaviors.
-Employee compensation is typically a significant
organizational cost.
From the employee’s point of view:
-Policies having to do with wages, salaries,
and other earnings affect their overall income and thus their standard of living.
-Both level of pay and fairness compared with others’ pay are important.
Understand government’s influence on compensation administration, including the Fair Labor Standards Act, Civil Rights Act, and Equal Pay Act
INFLUENCES:
- Internal consistency- figure out structure
- force the company to define the value of each job relative to others and the associated responsibility task
- each job compare tot other job; creates a hierarchy - External Competitiveness- force company to compare the value of the jobs within the company to those in other companies
- Individual contributions- forces company to value the individual contributions
Fair Labor Standards Act: 1938 act which requires minimum wage overtime pay record-keeping child labor restrictions
Exempt employees
include professional and managerial employees
not covered under FLSA overtime provisions
Nonexempt employees
eligible for premium pay (time and one-half)
when they work more than 40 hours in a week
must be paid the Federal minimum wage, $7.25
per hour (2009)
Equal Pay Act: 1963 act requires that men and women hired for the same job be paid the same.
Salaries should be established on the basis of skill, responsibility, effort, and working conditions.
Civil Rights Act: 1964 act that prohibits discrimination on the basis of basis of race, religion, sex, color, or national origin
broader than Equal Pay Act
used to support comparable worth concept
Define the term job evaluation
Job Evaluation- Uses job analysis information to determine the relative value of each job in relation to all jobs within the organization. Ranking of jobs Labor market conditions Collective bargaining Individual skill differences
Isolating Job Evaluation Criteria
Judgment is involved in defining what factors should be used to compare jobs. Typical criteria: mental requirements supervisory control complexity physical demands personal contacts
Typically jobs are grouped according to type and compared within their group
clerical jobs
sales jobs
professional jobs
JOB EVALUATIONS METHOD
- Ordering method:A committee places jobs in a simple rank order from highest worth (highest pay) to lowest. ( TAKE FIRST JOB AND COMPARE IT TO ANOTHER AND WHOEVER GETS A HIGHER RANKING IS COMPARED AGAIN TO ANOTHER)
- Classification method:
Jobs are placed in classification grades
Compare their descriptions to the classification description and benchmarked jobs
Look for a common denominator such as skills,
knowledge, responsibility, or working conditions
(TAKE THE JOBS IN AND PUT GRADES ON THEM AND TAKE THE JOB AND LOOK AT THE CLASSIFICATION) (NOT AS POPULAR BUT GOVT USE IT) - Point method: Jobs are broken down into categories (edu, skills, effort,responsibility, working conditions)
Points are assigned to each category.
Pay grades are assigned to jobs based on a total number of
points.
(MOST POPULAR)
Describe how to establish a pay structure
- Compensation surveys
Used to gather factual data on pay rates for other
organizations
Information is often collected on associated employee benefits as well (vacation, holiday allowances, etc.)
(YOU CAN GO ON YOUR OWN AND COLLECT DATA OR USE A 2ND SOURCE LIKE THE DEPT OF LABOR) - Wage curves
Drawn by plotting job evaluation data (such as job points or grades) against pay rates (actual or from survey data).
Indicate whether the pay structure is logical
(PLOT JOB EVALUATION DATA) - Wage structure
Designates pay ranges for groups of jobs which are similar in value to the organization
grouped by their classifications, grades or points.
Results in a logical hierarchy of wages, consisting of ranges that overlap.
(YOU PROPOSE A RANGE NOT JUST A # TO MAKE ROOM FOR NEGOTIATION)
(HAVING A RANGE ALLOWS COMFORT)
Understand incentives, pay-for-performance, and team-based compensation plans
TEAM-BASED COMPENSATION
-based on how well the team performed
PAY-FOR-PERFORMANCE
-rewarding employees based on their performance
Discuss why executives’ salaries are significantly higher than employees
to attract and retain executives and motivate them to higher performance levels
