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CHAPTER 11

CHAPTER 11. Establishing rewards and pay plans. CHAPTER 11 TOPICS:. 1: Rewards classifications 2: Membership-based rewards 3: Goal of compensation administration 4: Approaches to job evaluation 5: Developing the final wage structure 6: Competency-based compensation

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CHAPTER 11

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  1. CHAPTER 11 Establishing rewards and pay plans DeCenzo and Robbins HRM 7th Edition

  2. CHAPTER 11 TOPICS: • 1: Rewards classifications • 2: Membership-based rewards • 3: Goal of compensation administration • 4: Approaches to job evaluation • 5: Developing the final wage structure • 6: Competency-based compensation • 7: Executive pay • 8: Global issues DeCenzo and Robbins HRM 7th Edition

  3. 1: REWARD CLASSIFICATIONS • Intrinsic - Extrinsic • Financial-Nonfinancial • Membership- Performance DeCenzo and Robbins HRM 7th Edition

  4. 1: INTRINSIC REWARDS • Personal satisfaction from the job itself • Consistent with own value system • Decision making • Freedom • Control • AND/OR…. DeCenzo and Robbins HRM 7th Edition

  5. 1: INTRINSIC REWARDS • Responsibility • Interesting work • Personal growth • Diversity of activities DeCenzo and Robbins HRM 7th Edition

  6. 1: EXTRINSIC REWARDS • Beyond the work itself • Come from management • Financial and/or non-financial • Financial may be performance- or membership-based DeCenzo and Robbins HRM 7th Edition

  7. 1: EXTRINSIC FINANCIAL REWARDS • Wages • Bonuses • Profit-sharing • Vacations • Sick leave • Purchase discounts DeCenzo and Robbins HRM 7th Edition

  8. 1: EXTRINSIC NONFINANCIAL REWARDS • Extras at the disposal of the company • Do not affect the financial position of the employee • Creative • Varied DeCenzo and Robbins HRM 7th Edition

  9. 1: EXTRINSIC NONFINANCIAL REWARDS • Office furnishings • Lunch hours • Parking spaces • Work assignments, locations • Business cards • Secretary • Titles DeCenzo and Robbins HRM 7th Edition

  10. 2: MEMBERSHIP-BASED REWARDS • Most organizational rewards • Regardless of performance • Examples • Cost-of-living increases • Benefits • Salary due to labor market conditions DeCenzo and Robbins HRM 7th Edition

  11. 3: COMPENSATION ADMINISTRATION GOALS • Job evaluation based • Cost-effective pay structure • Attract, motivate, retain • Fair • Legal DeCenzo and Robbins HRM 7th Edition

  12. 3: COMPENSATION ADMINISTRATION LAWS • FAIR LABOR STANDARDS ACT • EQUAL PAY ACT DeCenzo and Robbins HRM 7th Edition

  13. 3: FAIR LABOR STANDARDS ACT • Exempt - professional and managerial • Overtime pay • Minimum wage • Prevailing wage • Child labor restrictions • Record keeping DeCenzo and Robbins HRM 7th Edition

  14. 3: EQUAL PAY ACT • Prevents discrimination • Equal pay for equal work • Women still earn only 75% of what male counterparts earn DeCenzo and Robbins HRM 7th Edition

  15. 4: JOB EVALUATION • Job ranking indicates value to organization • Higher value jobs should be paid more • Skills and performance levels of individuals are additional issues DeCenzo and Robbins HRM 7th Edition

  16. 4: JOB EVALUATION CRITERIA • Present in all jobs • Present in varying degrees • Measurable • Compensable factors DeCenzo and Robbins HRM 7th Edition

  17. 4: COMPENSABLE FACTORS • Use 3 to 5 • May be subdivided • Examples • Skill • Education • Working conditions • Effort • Responsibility DeCenzo and Robbins HRM 7th Edition

  18. 4: METHODS OF JOB EVALUATION • Ordering • Classification • Point DeCenzo and Robbins HRM 7th Edition

  19. 4: ORDERING METHOD • No attempt to identify compensable factors • Rank order jobs from most important to least • No distance identification • Simple, good for small companies DeCenzo and Robbins HRM 7th Edition

  20. 4: CLASSIFICATION METHOD • Government • General Schedules • Compensable factors • Skill • Knowledge • Responsibility • Complicated to develop • Easy to use, stable DeCenzo and Robbins HRM 7th Edition

  21. 4: POINT METHOD • Compensable factors • Divided into degrees • Flexibility • Good to address comparable worth • See Exhibit 11-3 DeCenzo and Robbins HRM 7th Edition

  22. Exhibit 11-3: Excerpts from a Point Method DeCenzo and Robbins HRM 7th Edition

  23. 5: ESTABLISHING THE PAY STRUCTURE • Compensation surveys • Industry • Location • Items • Wage levels • Shift differentials • Vacation days • Holiday allowances • Minimum wage levels DeCenzo and Robbins HRM 7th Edition

  24. 5: ESTABLISHING THE WAGE STRUCTURE • Wage curves • Relationship between job value and wages • Plot on a graph • Identify outliers • Red circled - high • Green circled - low • See Exhibit 11-4 DeCenzo and Robbins HRM 7th Edition

  25. Exhibit 11-4: A Wage Curve DeCenzo and Robbins HRM 7th Edition

  26. 5: THE WAGE STRUCTURE • After drawing wage curve • Develop wage structure • See Exhibit 11-5 DeCenzo and Robbins HRM 7th Edition

  27. Exhibit 11-5: A Sample Wage Structure DeCenzo and Robbins HRM 7th Edition

  28. 6: COMPETENCY-BASED COMPENSATION • Individual incentives • Merit pay • Piecework plans • Commissions • Time saving bonuses • Group incentives • AND…. DeCenzo and Robbins HRM 7th Edition

  29. 6: COMPETENCY-BASED COMPENSATION • Plant-wide incentives • Scanlon Plan • IMPROSHARE • Cost reduction • Profit sharing • Gain-sharing • Dilution effect problem DeCenzo and Robbins HRM 7th Edition

  30. 6: PAYING FOR PERFORMANCE • More than time on the job • Piecework • Gainsharing • Wage incentive plans • Lump sum bonuses DeCenzo and Robbins HRM 7th Edition

  31. 6: PAYING FOR PERFORMANCE • Performance>>>> rewards • Motivation • Popular • Not added to base • Control of individual or group DeCenzo and Robbins HRM 7th Edition

  32. 6: PAYING FOR PERFORMANCE • EXAMPLES • Competency-based • Broad-banding • Team-based compensation DeCenzo and Robbins HRM 7th Edition

  33. 7: EXECUTIVE PAY • Salaries • Supplements • Deferred compensation • Hiring bonus • Stock options • Golden parachutes • AND…. DeCenzo and Robbins HRM 7th Edition

  34. 7: EXECUTIVE PAY • Perquisites • Cars • Country clubs • Consulting fees • Retirement supplements • Expense accounts DeCenzo and Robbins HRM 7th Edition

  35. 8: GLOBAL ISSUES • Base pay • Differentials • Incentives • Assistance programs DeCenzo and Robbins HRM 7th Edition

  36. REVIEW CHAPTER 11 • REMEMBER THESE TERMS??? • Wage structure • Compensation survey • Perquisite • Piece rate • Red circled job • Membership based rewards • Compensable factor DeCenzo and Robbins HRM 7th Edition

  37. QUICK: REVIEW CHAPTER 11 • ANSWER THESE QUESTIONS ON A SHEET OF PAPER. • 1. THE MOST IMPORTANT THING WE DID IN CLASS TODAY _______. • 2. I STILL HAVE QUESTIONS ABOUT___. • 3. THE BEST THING ABOUT CLASS TODAY WAS _______________. • 4. DON’T DO ____________ ANYMORE. • TURN THEM IN, PLEASE. NO NAMES. WE’LL TALK NEXT CLASS SESSION DeCenzo and Robbins HRM 7th Edition

  38. PREVIEW: CHAPTER 12 • Ask 3 employees you know: • 1 20-year-old • 1 40-year-old • 1 60-year-old • Which is more important to you??? • Vacation days or education allowance • Dental insurance or child care allowances • Work at home or more life insurance • Write up their responses for 1 extra point on your final grade. DeCenzo and Robbins HRM 7th Edition

  39. Exhibit 11-1: Structure of Rewards DeCenzo and Robbins HRM 7th Edition

  40. Exhibit 11-2: Federal Minimum Wage DeCenzo and Robbins HRM 7th Edition

  41. Exhibit 11-3: Excerpts from a Point Method DeCenzo and Robbins HRM 7th Edition

  42. Exhibit 11-6: A Sample Banding DeCenzo and Robbins HRM 7th Edition

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