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Compensation Strategy & Structure. Strategic role of compensation What determines pay Reward system objectives External & internal considerations. Strategic Role of Compensation. To attract, retain and motivate employees Link to business plan Internal pay structure External equity

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compensation strategy structure
Compensation Strategy & Structure
  • Strategic role of compensation
  • What determines pay
  • Reward system objectives
  • External & internal considerations
strategic role of compensation
Strategic Role of Compensation
  • To attract, retain and motivate employees
  • Link to business plan
  • Internal pay structure
  • External equity
  • Administrative policies
  • Performance focus
what determines pay
What Determines Pay?
  • Organizational differences --corporate culture & ability to pay
  • Work differences: intellectual and interpersonal competencies, skills, responsibility, working conditions
  • Employee differences: Education, experience, skills
  • Market & country differences
reward system objectives
Reward System Objectives
  • Improving productivity
  • Controlling costs
  • Fair treatment
  • Legal compliance
external considerations
External Considerations
  • Legislation
    • Fair Labor Standards Act -- 1938
    • Davis-Bacon Act -- 1931
    • Walsh-Healy Act 1936
    • Equal pay act (1963)
  • Labor union
  • Labor markets
  • Compensation surveys
internal considerations
Internal Considerations
  • Organizational considerations
  • Traditional job evaluation
  • Skill based evaluation
  • Market based evaluation
point evaluation method
Point Evaluation Method
  • Compensable Factors
    • Aspects of the job that are valued by the organization
  • Numerically Scaled Factors
    • Committee decides number of scale points & total points (often 500 or 100)
  • Factor Weights
    • Importance of factor
calculating points
Calculating Points
  • Maximum for each factor is the factor weight X the total points
    • Example: for Know-how .50 X 1000 = 500
  • Minimum for each factor is factor weight X 100
    • Example: for Know-how .50 X 100 = 50
  • Interval points = Maximum - Minimum
  • # of degrees - 1
    • Example = 500 - 50 = 450/3 = 150
    • 3
skilled based market based methods
Skilled Based & Market Based Methods
  • Skill based: Compensates on the basis of job-related skills
  • Market based: Compensates on the basis of surveys determining going rate in area and profession
backwards forwards
Backwards & Forwards
  • Summing Up: Today we considered strategic aspects of compensation, factors that determine pay, objectives of the reward system and external & internal considerations in setting pay scales. The point evaluation method was examined
  • Looking ahead: Next time we explore pay for performance for individuals and teams