HRM 648 COMPENSATION MANAGEMENT

TUTORIAL ON CHAPTER 9 & 10

Name: Aina Amnani binti Abd Hamid

Group: BA2434A

Answer for all questions:

1. What are the four (4) behaviours sought by employers through their compensation
system?
a. Attract good employment prospect to join our company
b. Retain employee in a firm
c. Encourage for further KSAOs and develop skills
d. Motivate employee to perform well

2. Describe five (5) components of total reward system.

a. Compensation
Total cash (wages, commissions) and non-cash payment (performance, career
development) that employer give to employee in exchange for the work they do

b. Benefits
Example benefits are insurance, medical care, unemployment insurance, worker’s
compensation insurance and state disability insurance. 

c. Social interaction
Employees feel social interaction and harmonious relationships are inherently enjoyable,
people might want to interact with others even when the encounter has no purpose
other than the interaction itself because it has the potential for improving feelings of
self-worth and importance through praise and the attention from others

d. Security
Employees concerns about the risk. They view a stable, consistent position and rewards
are important and it determine whether to stay or leave the employment.

e. Status/ recognition
Employees concerns about status and prominence due to work. They love to be
recognised and being respected. Thus, they view a higher position give greater
compensation probably along with higher respect.
 f. Workload
Employees feel satisfied if their rewards are equitable with amount of work and
responsibility that they carry. It must be not too much and not too little.

3. Explain four (4) standards needed in designing a pay for performances system.
a) Objectives
Employer must have specific objectives. The objective created must be something that can
influence employee’s behaviour toward achieving the objective. The objective also must be
achievable.

b) Measures
There must be measurement towards the employee’s performance. Measurements such as
individual appraisals, peer reviews of team performance, corporate financial measures
should be used to assess whether performance is sufficiently good to merit a payout.

c) Eligibility
All parties such as top management, bottom line, government that related with the firm
should be included in designing a pay-for-performance system. No one should be excluded.

d) Funding
Employer should fulfil whatever they promise to give to the employees. Funding must be
managed properly. Employer should decide what to do if they get extra revenue or during
explicit revenue. This is because many employees become disillusioned when they feel they
have work harder but economic conditions or poor management decision conspire to cut or
eliminate bonuses.
4. Describe four (4) individual short term variables pay plan.

a) Merit Pay

A merit pay system links increases in base pay to how highly employees are rated on a
performance evaluation. Employee achievements are rewarded every year the
employee remains on the job. Meaning that the employees’ salaries will increase every
year.

b) Merit Bonuses

Merit bonuses is substitute for merit pay. It is based on employee’s performance and
received as an end-of-year bonus. Merit bonus is different with merit pay since it does
not build into base pay. Employees also are not fond of merit bonuses. They might be
given merit bonuses for several years and could be just a base pay.

c) Individual Spot Awards

This plan usually offers to extra ordinary employee only that aim to motivate employee.
It is usually awarded for exceptional performance such as Employee of The Month
Award.

d) Individual Incentive Plans

It offers a promise of pay for some objective, pre-established level of performance. All
plans use an established standard for comparing worker performance to determine
magnitude of the incentive pay.
5. Explain four (4) disadvantages of individual incentives plan

a) Conflict occurs between employees and managers

Greater conflict may emerge between employees seeking to maximize output and managers
concerned about deteriorating quality level. This happens because of the form of the
incentive plan itself. Employee prioritize their output to gain more income rather than
quality of product. However, manager concern about quality level.

b) Avoid new technology

Attempts to introduce new technology may be resisted by employees concerned about the
impact on production standard. This will reduce the competitiveness of the organization
since people resisted to use new technology while other organization maybe have start
using new technology.

c) Reduced willingness of employees to suggest new production methods

Reduced willingness of employees to suggest new production methods for fear of

subsequent increases in production standards. This will reduce the competitiveness of the
organization since people resisted to change while other organization maybe have started
the new production methods.

d) Increased turnover among new employees

Increased turnover among new employees discouraged by unwillingness of experienced

workers to cooperate in on-the-job training. When incentive plan is offered, experienced
workers does not want to cooperate because they do not want their work being interrupt
and delay to produce maximum output. This makes the new employee demotivate and
decide to leave the job.

6. Identify four (4) characteristic that can affect organization’s decision in choosing either
individuals or groups incentive plan.

a. Performance Measurement
b. Organizational Adaptability
c. Organizational Commitment
d. Union Status