Human Resource Management

Compensation and Benefits

Compensation
Hot topics Compensation Management Benefits

Hot or Warm Topics

Executive compensation - Are corporate executives overpaid or underpaid? Sex discrimination and comparable worth Open vs. secret pay plans Skill-based compensation plans Team vs. individual pay

Compensation Goals
Attracting good employees Retaining good employees Motivating employees Complying with the law Having a cost effective compensation system

Compensation and the Three Equities

External Equity
Attracting good employees

Internal Equity
Retaining good employees

Individual or Employee Equity

Motivating employees

External Equity
Attracting good employees Labor Market Model Market Surveys
http://salarysource.com/ http://swz.salary.com/

Pay strategy/policies

Internal Equity
Retaining good employees Job Evaluation Techniques
Ranking
Jobs are compared to each other based on their overall worth to the company. The worth of a job is usually measured by judgments of skill, effort, responsibility, and working conditions. The advantage of the ranking method is that it is simple. The disadvantages, similar to the ranking method of performance appraisal, are that the intervals between the ranks are assumed to be equal, the judgments are global, and as the number of jobs for evaluation increases it becomes increasingly difficult. Also, the evaluators must have knowledge of all jobs.

Classification method
Jobs are classified into a grade/category structure. Each tier of the structure has a description and associated job titles. For example, the Westinghouse system had:
Grade 1 Unskilled ex. File clerk Grade 2 Skilled ex. Typist, lathe operator Grade 3 Interpretive ex. Chief clerk Grade 4 Creative ex. Engineers, sales reps Grade 5 Executive ex. Department heads Grade 6 Administrative ex. Chief engineer, Director of R&D Grade 7 Policy ex. Vice-president of Marketing

Each job is assigned to the grade/category providing the closest match to the job. Standards are developed mainly along occupational lines. The standards help identify and describe key characteristics of occupations that are important for distinguishing different levels of work. Pay ranges are then assigned to grades. The advantages of this method are that it is simple and has been in use for many years. Its disadvantages include the fact that classification judgments are subjective, and the standard used for comparison may have built-in biases. Also, some jobs may fit into more than one grade/category or their descriptions are so broad that they do not relate to specific jobs.

Factor Comparison
Select benchmark jobs. Sets of compensable factors are identified as determining the worth of jobs. The number of factors is usually four or five and typically relate to skill, responsibility, effort and working conditions. Jobs are then ranked on each factor. Wages are then allocated to the factors. The organizations other jobs are then compared to the benchmark jobs and rates of pay for each of the other jobs. Factor comparison has the advantage that the value of the job is expressed in monetary terms, and the method is applicable to a wide range of jobs. The methods disadvantages are that the pay points for each factor is based on subjective judgments.

Point Method
The point method is an extension of the factor comparison method. Usually between eight and fourteen compensable factors (typically related to skill, effort, responsibility, and working conditions) are identified as determining the worth of jobs. Factors are divided into degrees Points are assigned the degrees Benchmark jobs are compared to market rates

Individual or Employee Equity

Motivating performance

Individual or Employee Equity

Motivating performance
At the individual level
Pluses and minuses Methods/techniques

At the organization level

Pluses and minuses Methods/techniques

Compensation and the Legal Environment

The Fair Labor Standards Act of 1938
Minimum Wage Exempt vs. Non-exempt and overtime
http://www.ewin.com/articles/exneot.htm http://www.dol.gov/elaws/esa/flsa/screen75. asp

The Equal Pay Act of 1963

Benefits continued
Paid time off Employee services