Introduction

এটা করে আমার কি লাভ ?

আমি কি কিছু পাব?

Fundamentals of Human Resource
Management, ELEVENTH EDITION

David A. DeCenzo,
Stephen P. Robbins, and
Susan L. Verhulst

Chapter 11
Establishing Rewards and Pay Plans
আমি কি করব?--What people do?--Job

আমি কেন করবো?--They do to satisfy some need.

আমার কি লাভ?-They look for a payoff or reward.

আর কি দেবে আমাকে?--The most obvious reward is

pay, but there are many others.
 Introduction
• People do anything
to satisfy some
need and to get a
payoff or reward.

• There are many others,

including:
• Promotions, desirable
work assignments, peer
recognition, work
freedom
 Types of Reward Plans
Intrinsic versus Extrinsic Rewards
• Intrinsic rewards (personal satisfactions) one derives from
doing the job. These are self-initiated rewards. Such as:
• pride in one’s work,
• a sense of accomplishment,
• enjoying being part of a work team.
• Extrinsic rewards come from an outside source, mainly
management. Such as:
• Money
• Promotions
• Benefits
 Intrinsic
You are given a mug of
coffee.
Extrinsic
Introduction

Fundamentals of Human Resource

Management 8e, DeCenzo and Robbins
 Types of Reward Plans
Financial versus Non-financial Rewards
• Financial rewards include:
• Wages, bonuses, profit sharing, pension plans, paid
leaves, purchase discounts
• Non-financial (desirable to employees) rewards emphasize
making life on the job more attractive
• “One person’s food is another person’s poison”.
• One employee views as “something I’ve always
wanted,” another might find relatively useless.
• Such as: impressive job title, own business cards,
own administrative assistant, opportunities to dress
casually at work or even work in part at home.
 Types of Reward Plans
Performance-based versus Membership-Based Rewards

• Performance-based rewards are tied to specific job performance

criteria. Such as:
• Commissions, piecework pay plans, incentive systems,
group bonuses, merit pay
• Membership-based rewards
• such as cost-of-living increases, benefits, and salary
increases, seniority or time in rank, a degree or a graduate
diploma, a specialized skill, or future potential (for
example, the recent MBA graduate from a prestigious
university).
 Compensation Administration

• The process of managing a compensation program so that

the organization can attract, motivate and retain
competent employees who perceive that the program is
fair.
• Fairness means a wage/salary that is adequate for the
demands and requirements of the job. Of course,
fairness is a two-way street.
 Government Influence

• Fair Labor Standards Act 1938 Requires-

• minimum wage, overtime pay, record-keeping, child
labor restrictions
• Fair Labor Standards Act 1938 Protect-
• Exempt employees
• include professional and managerial employees
• not covered under FLSA overtime provisions
• Nonexempt employees
• eligible for premium pay (time and one-half)
• when they work more than 48 hours in a week.
 Government Influence

• Equal Pay Act of 1963 act requires-

• that men and women hired for the same job be paid the
same.

• Please watch the movie “Made in Dagenham”

 Job Evaluation and the Pay Structure

Job Evaluation – the process used to determine each job’s

appropriate worth within the organization. (Based on job
analysis information.)

• Use of job analysis information to determine the relative

value of each job in relation to all jobs.
• Most job-evaluation plans use responsibility, skill, effort, and
working conditions as major criteria.
• As job criteria is not constant across jobs, it is traditional to
separate them into common groups, such as, production,
clerical, sales, and managerial jobs.
 Job Evaluation Methods

1. The Ordering Method or Ranking of jobs

• This method requires a committee— typically composed of
both management and employee representatives.
• The committee compare two jobs and judge which one is
more important or more difficult to perform.
• Then they compare another job with the first two, and so
on until all the jobs have been evaluated and ranked.
• The limitation:
• un-manageability with numerous jobs.
• subjectivity— no definite or consistent standards by
which to justify the rankings—
• Difficult to know the distance between rankings.
 Job Evaluation Methods

2. Classification Method
• Made by the Civil Service Commission of U.S.A, now the
Office of Personnel Management (OPM).
• Use some common denominator—skills, knowledge,
responsibilities—to create distinct classes or grades of jobs.
• Examples: shop jobs, clerical jobs, sales jobs.
• After classifications jobs are ranked according to the
criteria chosen comparing each position’s job description
and benchmarked jobs.
• Disadvantages: difficulty of writing classification
descriptions, judging which jobs go where.
• Advantage: has proven successful and viable in classifying
millions of kinds and levels of civil service jobs.
 Job Evaluation Methods

3. Point Method
• Identify various required criteria (skill, effort, and
responsibility) for a particular job.
• Appropriate weights are given depending on the importance
of each criterion, points are summed. And jobs with similar
total points are placed in similar pay grades.
• Pros: greatest stability as jobs may change over time, but the
rating scales established under the point method stay intact.
• this method appears to be the most widely used method.
• Cons: this method is complex and therefore costly and time-
consuming to develop.
 Stablishing Pay Structure

• Any of the three job evaluation methods can provide the

necessary input for developing the organization’s overall pay
structure.
• Then combined with compensation survey data to form wage
curves.
• Compensation Surveys
• The information from survey is used for comparison
purposes.
• The U.S. Department of Labor, through its Bureau of Labor
Statistics, regularly publishes a vast amount of wage data
broken down by geographic area, industry, and occupation.
• HRM director at Microsoft in Seattle regularly share wage
data on key positions.
 Stablishing Pay Structure

• Wage Curves
• After job evaluation and obtains survey data, wage curve is
developed and drawn.
• An example of a wage curve is shown in Exhibit 11-5. T
• A completed wage curve tells about the average
relationship between points of established pay grades and
wage base rates.
• When a job’s pay rate is too high, it may be identified as a
“red circle” rate, means that the pay level is frozen.
• A wage rate may also be too low. Such undervalued jobs
carry a “green-circle” rate, and the company may attempt to
grant these jobs above-average pay increases or salary
adjustments.
Stablishing Pay Structure
 Stablishing Pay Structure

The Wage Structure

•From a wage curve, organizations develop wage
structure.
•Jobs similar in terms of classes, grades, or points are
grouped together.
•For instance, pay grade 1 may cover the range from 100
to 300 points, pay grade 2 from 300 to 500 points, and so
on. Range can be overlapping.
•Jobs may also be paid in accordance with knowledge- or
competency-based pay.
 Stablishing Pay Structure

• External Factors
• HR must also consider external factors like geographic
differences in wages and labor supply.

• Geographic Differences
• Cost of labor is a function of supply and demand,
among many other factors. When local supply of labor
falls short of demand, wages will increase.
• This can cause wage fluctuations in some geographic
areas or cities, depending on how far workers are
willing to travel for a job.
 Stablishing Pay Structure

• External Factors
• Labor Supply
• When unemployment rates are low, employers must
work harder to attract qualified workers. This often
includes raising wages to tempt workers to leave their
current employment and apply.
• Employers when encounter shortage of workers with
particular skills, required a higher starting salary to
attract workers with the correct skills.
 External Factors

• Competition
• Organization must consider the influence of
competition on wages. HR have three choices:
■ Match the competition by paying the market on
going rate for labor.
■ Lead the competition: Many organizations feel
that by paying higher wages organization will lead the
market, they will attract better qualified employees,
leading to lower training costs, better productivity, and
lower turnover.
■ Lag the market by paying slightly less than the
market competition to lower labor costs.
 External Factors

• Cost of Living
• Inflation raises the price of consumer goods and
reduces the buying power of wages in real terms.
• The Consumer Price Index (CPI) reports the prices
consumers pay for a representative basket of goods and
services.
• As the CPI increases, wages must also increase to allow
workers to maintain their standard of living.
• The cost of living also varies according to location.
 External Factors

• Collective Bargaining
• The major function of most unions or collective bargaining
units is to negotiate for the wages of its members.
• Communicating with Employees
• No matter how the wage structure is developed, employees
must know how the system is derived.
• If an organization neglects to inform its employees and fails
to communicate how the process works, it will only lead to
problems later.
 Special Cases of Compensation

Incentive Compensation Plans

• Organizations are finding that they can no longer increase wage
rates by a certain percentage each year (cost-of-living raise)
without some comparable increase in performance.
• Thus include incentive compensation plans, and competency-
and team-based compensation.

• Individual Incentives include

• merit pay plans (annual increase, based on performance)
• piecework plans (pay based on number of units produced
typically in a specified time period.)
• time-savings bonuses and commissions
 Special Cases of Compensation

• Group Incentives
• Incentives are offered to groups when employees' tasks
are interdependent and require cooperation.

• Organization-Wide Incentives
• Direct the efforts of all employees toward achieving overall
organizational effectiveness.
• Example: Lincoln Electric in Canada has had a year-end bonus
system for decades, “ranging from a low of 55 percent to a high
of 115 percent of annual earnings” when employees beat previous
years’ performance standards, which has made Lincoln Electric
workers some of the highest-paid electrical workers in the United
States.
 Special Cases of Compensation

• Organization-Wide Incentives

• Scanlon Plan: Considered as one of the best-known

organization-wide incentive systems.
• Under Scanlon, each department in the organization make
a committee composed of supervisor and employee
representatives to share problems, goals, and ideas
• Suggestions for labor-saving improvements if accepted
and proved, cost savings and productivity gains are
shared by all employees of the organization, not just the
individual who made the suggestion.
• Typically, about 80 percent of the suggestions prove
practical and are adopted.
 Special Cases of Compensation

• Organization-Wide Incentives

• IMPROSHARE: means “Improving Productivity through

Sharing”, aim to increase commitment and loyalty to the
organization.
• A predetermined portion of the labor savings goes to the
employee, if workers save labor costs in producing a
product.
• They allow employees to share in the firm’s success by
distributing part of the company’s profits back to the
workers.
• Example: profit-sharing plans, gain sharing plans,
organization-wide incentives.
 Special Cases of Compensation

• Organization-Wide Incentives –Negative side

• Dilution effect
• It is hard for employees to see how their efforts affect
organization’s overall performance and decrease motivation
in employees, as payoffs are distributed at wide intervals.
• When organization-wide incentives become both large and
recurrent, employees often begin to anticipate and expect
the bonus, and adjust their spending patterns as if the bonus
was a certainty.
• It may perceived as a membership-based reward.
 Executive Compensation Programs

Supplemental Financial Compensation

• Deferred bonuses – paid over extended time periods.
• Stock options – allow to purchase stock at a fixed price.
• Hiring bonuses – compensate for the deferred compensation
lost when leaving a former company.

Supplemental Non-financial Compensation:

• Perquisites (Perks) may include: paid life insurance, club
memberships, company cars, interest-free loans, free financial
legal and tax counseling, mortgage assistance
• Golden parachutes: when a merger/hostile takeover occurs by
providing severance pay or a guaranteed position.
 International Compensation

• An international compensation package determines: parent-

country nationals (PCNs), host-country nationals (HCNs), and
third-country nationals(TCNs) will be treated differently or one
policy will apply to all employees. It is also necessary to comply
with international as well as with local laws.

• International compensation packages in the USA generally use

the balance-sheet approach, which considers four factors:
• Base Pay: pay of employees in comparable jobs at home.
• Differentials: given to offset higher costs of living abroad.
• Incentives: inducements to accept overseas assignments.
• Assistance Programs: payment for moving a family abroad
and in providing some services overseas.
Bangladesh Wage Structure for Garments
সব মানি কিন্তু তাল গাছ আমার।