LESSON 1 REMUNERATION People working in organizations do in terms of certain expectations and results, and are willing to devote to work

and meet the goals and objectives of the organization if it's reported a significant benefit for their effort and dedication. In other words, the commitment of people in or ganizational work depends on the degree of reciprocity perceived by them: to the extent that labor produces expected results, the greater the commitment. Hence the importance of designing reward systems that can increase the commitment of t he people in the business of the organization. Organizational Rewards Organizational activity can be viewed as a complex process of conversion of reso urces through an integrated system capable of delivering outputs or results. The conversion process requires the optimal combination of inputs (human effort, te chnology, raw materials, capital, etc.) Into a set of labor to produce the desir ed result. The human element is vital and indispensable part of this activity. E conomists usually have three factors of production: natural resources, capital a nd labor. When the three get together and combined in proper management, you cre ate more capital or wealth. For those who know the systems theory, this represen ts a synergistic or emerging systemic phenomenon. The capital or wealth that is created is being divided the parties involved in his generation: part, represent ed in costs, is given to suppliers (which provide the raw materials or equipment , the owners of machines, equipment or rented buildings, etc. .), the other in i nterest (to those who lent money to the organization), the other hand, dividends (for those who provided the equity capital or business risk) and partly, in wag es (a employees and social benefits derived). Thus, each productive resource is its cost and benefit, investment and return. The emerging systemic or synergisti c effect allows the benefit outweighs the cost and offset the return on investme nt. The production process becomes viable only when it includes the joint partic ipation of various partners, each of which contributes to any activity or resour ce. Providers contribute to commodities, services, technologies, buildings or pr operty rented, etc., Investors and shareholders, capital and credit for the acqu isition of other resources productive people working in the company contribute their knowledge, skills and abilities to perform various tasks, and clients, acquiring and paying for goods and services produced by the organization. Each of these partners brings somethi ng the organization hopes to obtain some return for their contribution. The comp ensation offered by the organization influencing the satisfaction of the partner s, since each partner is willing to invest their individual resources, in so far as to obtain returns and returns on investment. Depending on its systemic chara cteristics, the organization is able to gather the resources offered by the vari ous partners and leverage their performance through the synergistic effect. With these results, it is possible to obtain a return greater than the contributions made, and maintain business continuity. The generation of wealth is one of the main objectives of organizations. This objective depends on another: the distrib ution of wealth generated between the partners that contributed to that generati on. One of the most important aspects of the philosophy of an organization is re lated to the compensation policy and compensation to workers. Since compensation is a cost for organizations, they should analyze the relationship between costs and benefits of their systems of remuneration, in other words, compensation sys tems must generate returns for the organization, as well as encourage people to contribute it. Remuneration

Nobody works for free. As a member of the organization, each employee is interes ted in investing work, dedication and personal effort, knowledge and skills, if you receive the appropriate compensation. Similarly, organizations interested in investing in compensation to people, if they receive contributions that are wit hin reach of its objectives. From this stems the concept of total employee compe nsation, which has three main components, as shown in the figure below. The rela tive proportion of each of the three components varies from one organization to another. The three components of total compensation In most organizations,€the main component of total compensation is the basic pa y or fixed pay the employee receives a regular basis as the monthly salary or ho urly wage. The basic pay is represented by wages, either monthly or hourly. In e conomic jargon, pay is cash compensation received by the worker in the sale of i ts workforce. Although there were employees in other periods of history only the arrival of capitalism became the dominant form of wage payment of the so-called labor. The second component of total compensation are salary incentives: progra ms designed to reward employees for good performance. The incentives are granted in various ways, for example, bonuses and profit sharing, by way of reward for achieving them. The third component of total compensation are the benefits, ofte n called indirect remuneration. The benefits are granted through various program s (vacation, life insurance, subsidized transportation, subsidized restaurant, e tc.).. The total remuneration package is quantifiable compensation an employee r eceives for his work, and is the most important cost in many organizations: reac hes 60% of total costs in manufacturing companies or services. In some cases, la bor costs (including salary and benefits) reach 80% of budget expenditure, as in the case of the U.S. Postal Service, indicating that the efficiency with which manages the remuneration is a significant difference to increase or decrease org anizational competitiveness. A high technology organization depends on the resul ts of its research and development to generate new products and services, and ma y lose their innovative capacity and competitiveness of insufficient salary offe rs rewards for its staff, which would allow competitors to make piracy and steal ing their best talent. How to pay and who pays are two crucial aspects in the st rategy of the organization, affecting the cost of the financial plan and determi ne how high or low they get a return of money for compensation. The level of wag es is the essential element in the organization's competitive position in the la bor market and in its relations with its employees. Financial and nonfinancial compensation Compensation can be classified as financial and nonfinancial. Financial compensa tion can be direct and indirect. The figure below provides a brief idea about it . The direct financial compensation is the payment that each employee receives as salary, bonuses, awards and commissions. The salary, which represents the most i mportant element is the reward in money or equivalent paid by the employer to th e employee on the charge that the exercises and the services it provides for a c ertain time. The salary can be direct or indirect. The perceived direct consider ation of the service in the position held, can refer to the months or hours work ed. Hourly employees receive the number corresponding to the number of hours act ually worked in the month (excluding paid weekly rest, DSR) multiplied by the va lue of the hourly wage. Monthly employees receive the value of their monthly sal ary. The payment of staff salary for hours Helps in calculating production costs : the hours worked are charged to the direct costs of production, while the hour s not worked (DSR and holidays) and social benefits are charged to indirect cost s . Because workers for months are defined as indirect personnel (not directly r elated to the production process), their wages and benefits are charged to the e xpenditure budget of the organization. Indirect financial compensation is derive d from indirect wage provisions of the collective agreement and plan of social b enefits and services offered by the organization. The holiday includes indirect

salary, bonuses, gratuities, additional (hazardous, unhealthy conditions, night work, length of service, etc.), Profit sharing, overtime, and the cash equivalen t to the services and benefits offered by the organization (subsidized food, subsidized transportation, group life insu rance). The amount of direct wages and indirect wages constitute payment. Accord ingly, the remuneration covers all elements of direct wages and indirect wage co mponents. In other words, compensation is all that the employee receives as a re sult of work done in an organization. The remuneration is the gender, salary, sp ecies.€Financial compensation is not offered by the organization (eg, prestige, esteem, recognition, job security, etc.) Affect people's satisfaction with the system of remuneration. Hence the need to consider them all together. Nominal wage and real wage The salary is the primary organizational form of compensation. There are nominal wages and real wages. The nominal wage represents the amount of money specified in the individual contract to compensate the position held. In an inflationary economy where nominal wages are not regularly updated, it erodes and thus lose p urchasing power. The real wage is the amount of assets that the employee can pur chase with the amount of money you receive monthly or weekly, and corresponds to the purchasing power or quantity of goods to be purchased with a paycheck. Cons equently, the mere replacement of the actual value does not mean salary increase , the nominal wage is amended to provide the equivalent real wage in the previou s period, hence the distinction between wage adjustment (reconstruction of the r eal wage) and increase in real wages ( real wage growth). There is also a lower minimum wage or permitted by law to pay workers from one country or sector of ec onomic activity. To fix it, the state intervenes in the labor market or, as in m any countries, is negotiated between employees and employers. The salary can be considered from several different aspects: 1. Payment for work. 2. Measure the v alue of an individual in the organization. 3. Hierarchical status of the person in the organization. The salary is the core of trade relations between people an d organizations. All persons giving their time and effort to organizations and, therefore, receive money that represents the exchange of rights and reciprocal r esponsibilities between employee and employer. The salary administration is the process of administering the compensation program of the organization. Several concepts of pay ⠢ Compensation is the process that includes all forms of payment or compensation given to employees resulting from their employment. ⠢ ⠢ ⠢ Compensation is the HR function that handles the rewards that people receive in return for performance of organizational tasks. Compensation includes financial returns and tangible services, as well as employee benefits as part of employmen t relationships. Remuneration package is measurable rewards an employee receives for his work. It includes three components: basic pay, incentive pay, and indir ect remuneration and benefits. Wage classes There are three types of pay: per unit of time, and salariotarea result. The wag e per unit of time is to pay according to the time at which the worker is availa ble to the company, and the time unit can be dimensioned in one hour, week, fort night or month. For this reason employees are known for hours or months. The wag e results refers to the amount or number of pieces or works produced, and covers the systems of incentives (commissions or percentages) and production bonuses ( rewards productivity achieved by the business or made). The salary for work is a fusion of the two previous classes: the employee is subject to a working day, a nd the wage is determined by the number of pieces produced.

Meanings of Wages The salary is a consideration for the work of one person in the organization. In exchange for the money, interchangeable symbolic element, the person engages pa rt of herself, her efforts and her life, engaging in an everyday activity and a performance standard in the organization. For individuals, the work is a means t owards an intermediate target, which is the salary. According to expectancy theo ry, the wage can achieve many goals expected by the individual final. In practic e, the salary is the source of income that gives each person purchasing power. T he purchasing power define the standard of living of every person and the satisf action of his hierarchy of needs. The payment the employee receives the organiza tion is the most important element of their purchasing power. The amount of mone y a person earns also serves as an indicator of power and prestige, which influe nces their feelings of self-esteem. In short, the remuneration affects people fr om the standpoint of economic, sociological and psychological. For the organizat ion, pay a cost, and an investment. Cost, because the salary is reflected in the cost of final product or service, investment,€because it represents the applic ation of money by a factor of production-labor-(as a means of adding value and t o return greater or short or medium term). The proportion of wages and social benefits in the respective value of the produ ct or service offered by the organization depend on the sector of activity of th e organization. The more automated is the production technology (capital intensi ve) the lower the share of wages in production costs. Moreover, the higher the r ate of manufacturing technology (capital intensive), the greater the impact of w ages and social benefits in production costs. In either case, wages for the orga nization always represent a considerable amount of money owed to manage very wel l. Hence the need for salary administration. Composition of wages Wages depend on several internal factors (organizational) and external (environm ental) that are affected. The definition of wages is complex and includes multip le decisions, because the internal and external factors are interrelated and exe rt differential effects on wages. These factors act independently or together to raise or lower harmonic wages. Decisions about wages are made taking into accou nt all the internal and external factors, which are the wage since, as shown in the figure below: Pay system design Compensation is a complex issue, it depends on many factors. There are several p olicies and procedures for compensation. The development of the pay plan require s care, it provokes strong impact on people and organizational performance throu gh its effects and consequences. The design of the remuneration system presents two main challenges: first, you must enable the organization to achieve its stra tegic objectives and, on the other, they must shape and adjust to the characteri stics of the organization and the external environment that surrounds it. In the construction of a compensation plan should be nine criteria: 1. Internal versus external balance Balance: Does the compensation plan can be perceived as fair w ithin the organization or just in relation to the wages of other organizations f or the same office? Internal equity reflects the principle of distributive justi ce that sets wages according to the contributions or inputs that employees excha nged with the organization. The salary represents the most important of these re sults, although the monetary benefits are also important. Within this perspectiv e and psicososiologica, people are always comparing their contribution to the or ganization in return receiving and comparing the equation of inputs / outputs wi th that of other colleagues within and outside the organization. The distributiv e justice model emphasizes that people will be satisfied when they perceive that they are paid fairly in relation to colleagues who have the same job. In additi on, foreign equity is due to labor market model that sets wages according to occ upations like other organizations of the same sector. The external equity balanc es of the organization wages with the labor market. The organization needs to ba

lance the two forms of equity to maintain consistency in its wage structure. 2. Fixed or variable remuneration Remuneration: The remuneration is payable on a fi xed basis (through monthly or hourly wage) or vary according to predefined crite ria, eg, goals and profits of the organization most organizations pay your emplo yees' monthly salaries, as this reduces the risks for the employer and the emplo yee. Others opt for flexible values for high office, as presidents and directors (depending on the operational results) and Sellers (commission based on sales). In the United States 5% of employees are paid with variable values, in Japan, t he percentage rises to 20% Apple Computer adopts flexible pay for benefits for t he company and employees, since they prefer low wages in exchange for shares in the company. Many of them became millionaires in the early 1980.Los Wal-Mart man agers worked for years at low wages and shares of the company, and do not regret this. 3. Performance or time in the company: the compensation can enhance performance and pay according to individual or group contributions or you can highlight the service time employee of an organization.€This highlights the performance as pa rt of the earnings of employees depend on individual and group contributions. Th e situational pay for performance can take extreme forms of pay for production ( profit based on units produced) and sales commissions. Other ways to use bonuses to cost-cutting suggestions, perfect attendance bonuses or merit pay based on p erformance evaluation. Some organizations provide situational compensation for l ength of service that provides a salary according to the office, increased added value in terms of years of service in the organization. The wage progression ca n occur in advance within the organization. Indeed, organizational culture defin es which model to choose. At 3M, a company that dominates a culture of creativit y and innovation, pay highlights the performance and contribution of individuals to the final results. 4. Remuneration of office or the person: The compensation can focus on how the position contributes to the values of the organization or the knowledge and skills of the person who contributes to the office or organiza tion. The traditional system favors the salary for the contribution of the charg e or not the employee's performance. In this system, the office represents the u nit of analysis to determine the wage structure in this case, not interested in the position occupants. Wage policy based on the charge works well when there ar e no changes, the technology is stable, the turnover is low, employees receive i ntensive training to meet the tasks, the charges are standard in the market and people want to grow through increases in the career. The system of remuneration in the knowledge or skills are based on the talents that people should have to a pply to a variety of tasks and situations. The pay increases as a person can per form more tasks successfully. This fee based on the individual is appropriate wh ere the workforce is skilled and has the ability and willingness to undertake ne w tasks, when technology and constantly changing organizational structure, oppor tunities for upward mobility are limited, participation and team spirit encourag es the organization and losses are high turnover and absenteeism. 5. Egalitarian ism and elitism: Compensation can include as many employees as possible under th e same system of remuneration (egalitarianism) or set different plans, according to hierarchical levels or groups of employees (elitism). In the egalitarian sys tem all employees are part of the remuneration system and plans for participatio n in the results set the same percentage for all employees from the top to the b ase of the organization. The elitist system is used by more organizations old, well established in the market with little competition. Elitism reinforces the traditional organizational hierarchy moves the current trend towards egalita rian systems that give little importance to the hierarchy, provides flexibility, encourages better relationship between supervisors and subordinates and greater cooperation among employees. 6. Pay below market or above market: Employees may be paid below or above the market wage in a percentage level. This choice affec ts the costs of the organization and employee satisfaction. The decision to pay below market is common in small organizations, youth and non-unionized, operatin g in economically less developed areas which have high proportion of women and m

inorities in its workforce. The decision to pay above the market is common in or ganizations that seek to retain and motivate their employees and minimize the co sts of turnover and absenteeism. 7. Monetary or non-monetary prizes: The compens ation plan can highlight employees motivated by monetary rewards (salaries or in centive pay) or non-monetary awards highlight (most interesting positions or job security). The monetary awards are given cash and strengthen individual respons ibility and scope of objectives, while reinforcing the non-monetary commitment t o the organization. The prevailing monetary rewards in organizations operating i n volatile markets with little job security, who value the sales and customer se rvice made the domestic competitive environment, rather than compromise long-ter m employee. The non-monetary rewards are intangible and include interesting and enjoyable work, challenges and public recognition.€Certain non-cash prizes can be transformed into money in the future (acquisition of shares in the company or retirement plans). 8. Open or confidential compensation Compensation: Employees may know what the compensation of other employees and how decisions are made sa lary (remuneration open) or ignore this information (confidential compensation). The organizations vary in how to communicate the levels of remuneration for its employees. The open wage has two advantages over the salary confidential: When wages are secret, people are less rewarded than they really are and managers sho uld ensure that they do not leak information. The salary open requires managers to be less innovative and publicly defend their decisions, as the cost of a wron g decision is higher. Compensation is open most successful in organizations that allow great employee involvement and have an egalitarian cult ure that promotes trust and commitment. 9. Centralization or decentralization of pay decisions: Decisions on compensation can be controlled through a central ag ency, or delegated to managers of organizational units. In the centralized syste m, decisions are taken and controlled through a central body normally HRD. In th e decentralized system, decisions are delegated to line managers. Centralisation is appropriate when the organization considers it prudent to assign specialists responsible for the risks and controls, wage research benefit management to add ress business challenges. Monsanto pay decentralized its role in 1986 as part of an effort to give more autonomy to each of its four operational units. Although philosophy is corporate performance standards and incentives vary from unit to unit. The manufacturing unit employee performance measured by criteria such as p roductivity, cost and safety, while the group using criteria such as sales turno ver and generation of new sales. As the managers of each unit are well equipped to evaluate employees directly, the role of authority for salary changes that co uld shape policy. and basic guidelines. HR professionals Monsanto asks for detai ls about compensation of managers, supervisors and employees to monitor policies and basic guidelines. Meaning of salary administration Administration salaries is the set of rules and procedures used to establish or maintain equitable wage structures and fair in the organization. As the organiza tion is an integrated set of positions at different hierarchical levels in diffe rent sectors of activities, the salary administration is an issue that involves the organization of a set and affects all levels and sectors. The wage structure is the set of paths linking the different wage positions in the organization. T o establish and maintain fair and equitable salary structures is necessary to pr ovide two forms of balance. 1. Internal balance: internal consistency between sa laries and positions of the organization. Internal balance requires a fair wage structure and well proportioned. 2. External balance: external consistency of wa ges on the same charges of other organizations active in the labor market. The e xternal balance requires a wage structure compatible with the market. The intern al balance is achieved by applying the information obtained through the evaluati on and classification of positions, usually based on a program preliminary description and analysis of charge. The external balance is achieved by applying external information obtained through research salaries. Based on i

nternal and external information, the organization can trace its wage policy, as part of its HR policy to standardize procedures for the remuneration of staff. Wage policy is a particular and specific aspect of the HR policies of the organi zation. Objectives of the salary administration The reward system must be designed to achieve several objectives 1. Motivation a nd commitment of staff in February. Increased productivity 3. Cost Control 4. Fa ir treatment of employees in May. Compliance with legislation Case for Discussion As the cost of running brasil General Motors of Brazil found that the average wage of workers in the ABC Pauli sta (U.S. $ 10 to U.S. $ 12.50 per hour) with all the benefits and social servic es and included equals average total cost of labor paid by the subsidiary Compan y in England.€However, in this country, for every 100 pounds 75 costs an employ ee goes to the pocket. In Brazil only half of what you pay goes to the employee' s pocket. Voith, a major producer of capital goods, buy the benefits the Germans and Brazilians in Brazil concluded that employment benefits represent 123.77% o f payroll, while there only reach 43.62% Brazilian companies directly with a liv e set of distortions which, in recent times, are known as Cost in Brazil. This c ost represents huge amount of rules, capital tax and infrastructure deficiencies that urges the Brazilian production on the outside, reducing drastically the ab ility to compete with products imported or exported its products to other countr ies. Not to mention the endless tangle of laws and decrees that proliferate alon g with bureaucratic rules that make life a hell of companies. The Brazil Cost gr eatly reduced the competitiveness of their businesses. FAQ 1. What is the reason for the delay of Brazil in regard to labor laws? 2. What s uggestions would you make to improve the current situation? 3. How to prepare a control box of wages and social benefits of your company?