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CHAPTER 13

COMPENSATION STRATEGIES
AND PRACTICES
Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-2
 Objectives

 Identify the two general types of compensation and give
examples of two different compensation philosophies
 Discuss four strategic compensation design issues
 Describe three behavioral considerations affecting compensation
activities
 Identify the basic provisions of the Fair Labor Standards Act
(FLSA)
 Discuss four methods of performing job evaluation
 Outline building a wage and salary administration system
 Discuss the establishment of a pay-for-performance system




Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-3
Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-4
 Strategic Compensation

 Compensation philosophies
 Entitlement orientation
 Performance orientation

 Compensation design
 Organizational culture
 Cost-effectiveness / labor market positioning
 Competency-based pay
 Broadbanding
 Base / variable pay
 Team-based compensation

Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-5
Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-6
 Legal Constraints on Pay Systems

 Fair Labor Standards Act (FLSA)
 Minimum wage
 Child-labor provisions
 Exempt and nonexempt status
 Computer-related occupations
 Overtime provisions
 Compensatory time off
 Independent contractor regulations
 Acts affecting government contractors
 Equal pay and equity
 State laws
 Garnishment laws
Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-7
Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-8
 Development of a Base Pay System

 Job evaluation
 Ranking method
 Classification method
 Point method
 Factor comparison
 Integrated / computerized
 Legal issues
 Americans with Disabilities Act (ADA)
 Gender issues
 Pay surveys
 Prepared pay surveys
 Developing a pay survey
 Legal issues and pay surveys




Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-9
 Establishing Pay Structures
 Market line
 Different pay structures
 Pay grades
 Pay ranges
 Individual pay
 Rate out of range
 Red-circled employees
 Green-circled employees
 Pay compression
 Pay increases
 Seniority
 Cost-of-living adjustments (COLA)
 Pay-for-performance systems
 Lump-sum increases (LSI)

Chapter 13 COMPENSATION STRATEGIES AND PRACTICES
Human Resource Management, 9E
Mathis and Jackson © 2000
South-Western College Publishing
13-10