What is strategic compensation
links the compensation of employees to the mission, objectives, philosophies, and culture of the organization
What are the goals of strategic compensation (7)
- to reward employee’s past performance
- to remain competitive in the labour market
- to maintain salary equity among employees
- to mesh employees’ future performance with organizational goals
- to control the compensation budget
- to attract new employees
- to reduce unnecessary turnover
What is pay equity
an employee’s perception that compensation received is equal to the value of the work performed
What are job evaluation systems
the systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization
Four methods of job evaluation
- Job ranking
- Job classification
- Point system
- Work valuation
What is the job ranking system, and what are the disadvantages of it
the simplest and oldest system of job evaluation by which jobs are arrayed on the basic of the their relative worth
Disadvantages:
- does not provide a precise measure of each job’s worth
- final job rankings indicate the relative importance of jobs
- method can be used to consider only a reasonably small number of jobs
What is job classification
a system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades
What is the point system
permits jobs to be evaluated quantitatively on the basis of factors or elements–compensable factors–that constitute the job
factors such as:
- skill
- effort
- responsibility
- working conditions
What is the point manual
a handbook that contains a description of the compensable factors and the degrees to which these factors may exist within the jobs
What is work valuation
- a job evaluation system that seeks to measure a job’s worth through its value to the organization
- jobs are to be valued relative to financial, operational, or customer service objectives of the organization
Define wage curve
a curve in a scatter gram representing the relationship between relative worth of jobs and wage rates
Define pay grades
groups of jobs within a particular class that are paid the same rate
Define rate ranges
a range of rates for each pay grade that may be the same for each grade or proportionately greater for each successive grade
Define red circle rates
payment rates above the maximum of the pay range
Define broadbanding
collapses many traditional salary grades into a few wide salary bands
Define competence based pay
pay based on an employee’s skill level, variety of skills possessed, or increased job knowledge
