MGMT20004

Managing People at
Work
Lecture week 5 Remuneration and Benefits
 – How are remuneration (pay) and benefits
determined?

– Why are some jobs paid more or less than

others?

Key questions – Even doing the same job, why might some
people earn more than others?

– Is pay all that matters? Does money

motivate people?
 – Remuneration and benefits – objectives
– Intrinsic vs extrinsic rewards
Part 1
– Basis for pay and benefits
– Internal relativities
– Job evaluation
Plan for this
session – External relativities
– Variations in pay
Part 2
– Equity & ethics in remuneration &benefits
– Gender pay differentials
– Does money motivate?
 – Remuneration
– What employees receive in exchange for
their work (includes pay but other benefits,
Strategic both financial and non-financial).
remuneration
and benefits
– Strategic remuneration
– Remuneration aligned with the
organisation’s strategic business objectives.
 – Attract & keep employees
– Ensure equitable treatment
Remuneration – Motivate employee performance
objectives – – Reinforce organisation’s values, desired culture
for the – Reinforce desired employee behaviour
organisation – Ensure remuneration is competitive
– Control remuneration costs
– Ensure optimum value for remuneration
– Legal compliance (e.g. ‘wage theft’)
 – Ensure equitable treatment
– Accurately measure and appropriately reward
performance and contribution to the
achievement of the organisation’s strategic
Employee business objectives
perspective – Provide appropriate remuneration changes
based on performance, promotion, transfer or
changing conditions
– Provide regular remuneration and
performance reviews.
Types of
employee
rewards
–Intrinsic
– originates from ‘inside’ experience of work
itself e.g meaningful work, mastery of skill,
making a difference, social connections

–Extrinsic
– originates from outside the work e.g. $,
recognition
 – Benefits can be financial and/or non-financial

– Can influence attraction, retention and

motivation of employees

Benefits – Vary depending on organization,

characteristics of workforce and national
context

– E.g. Medical and health care – much more

important in U.S. than in Australia
Examples of
employee
benefits
Employees vary so
let them choose
which benefit or
reward they value
most
 – Base wage rate (National minimum, industrial
awards, collective agreements

Relevant – Extra pay (overtime, penalty rates)

Factors – Legal
‘rules’ – Leave entitlements
(minima)
– Superannuation (employer contribution)

– Breaks and work scheduling

 – Is it trying to recruit and retain people in a tight
labour market?

Relevant
factors – – Is it positioning itself as an ‘employer of
organization’s choice’?
strategy
– What message does it want to communicate
about its values with its remuneration and
benefits position in the market?
 – Collective bargaining/negotiation (e.g.
professional body or trade union)
Relevant
factors – – Individual bargaining/negotiation
negotiation
– Significant power differences relevant here
Internal (within the organization) and
external relativities
 – The systematic determination of the
relative worth of jobs within an
organisation.
– Concerned with ‘how big’ or ‘how small’ a
job is.
– Aim is to ensure that jobs of different sizes
Job evaluation or relative worth attract the appropriate
pay differentials.
– Basis for establishing the organisation’s job
hierarchy and associated pay structure.
Example of job
ranking
Examples of
job grading
Example of a
point system
Job evaluation
requires a job
description
 – Pay survey
– The vehicle for relating an organisation’s
pay rates to those of similar jobs in other
Pay surveys organisations.
(external
relativities)
– Benchmark jobs
– Jobs that are similar or comparable in
content across firms.
 – The standard range: most generally accepted
pay range for professionals and managerial
position is plus or minus 20 from the midpoint
pay.
– Broadbanding: involves the clustering of
numerous individual pay grades into a few broad
Pay ranges pay grades.
– Market posture:
– pay above market average or
– pay market average or
– pay below market average.
– Selecting a policy pay line.
Pay trend lines
Fluctuations in
external labour
market
Pay increases

– Types of pay increases include:

– Merit increases
– Promotional increases
– General adjustments (inflation,
company profitability)
– Automatic progression (seniority)
– Pay reviews
A performance management process
Relating pay to
performance
 – Guaranteed (base pay) vs. at-risk remuneration
(bonuses, stock options).
– Bonuses
Incentive – Discretionary rewards paid for achieving
performance targets.
remuneration
– Options
– An option to buy shares at some future date
(usually, but not always, if certain
performance targets are met).
Guaranteed and at-risk remuneration
What employee
behaviour/ – Retention?
outcome are you – Performance?
trying to – Innovation?
influence with a
particular benefit
– Needs to be a ‘direct
or reward? line of sight’ between
outcome and reward
 – Pay secrecy: occurs where pay is kept
confidential between employer and employee.
– Pay dispersion (e.g. CEOs)
Ethics and – Gender pay gap: there are number of ways
equity in that gender discrimination in pay rates can
remuneration occur
– US female managers receive only 81 cents
for every dollar earned by their male
counterparts.
Gender bias in
job evaluation
Gender pay
differentials
Does money
motivate people?
 – Above a certain amount,
– money less effective motivational mechanism
– Intrinsic rewards more motivating
– BUT
– Money can symbolize (stand in for) other things
– Status,
Relevant – Success
– Achievement
factors
– Perceptions of equity, relative to others, matter to
people

– Individual differences

– PAY is easily matched by competitors

Job design, job analysis and work arrangements