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Compensating Employees
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Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
7-1
Compensating Employees
7
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Learning Objectives
When you finish studying this chapter, you should be able to:1. Discuss four basic factors determining pay rates.2. Explain each of the steps in establishing market-
competitive pay rates.3. Compare and contrast piecework and team or
group incentive plans.4. List and describe each of the basic benefits
most employers might be expected to offer.
7-2
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
What Determines How Much You Pay?
7-3
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
What Determines How Much You Pay?
• Legal: Important compensation laws
• How unions influence compensation decision
• Compensation policies
7-4
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
How to Create a Market-Competitive Plan
7-5
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Step 1: Determine the Worth of Each Job: Job Evaluation
1. Purpose of job evaluation 2. Compensable factors 3. Job evaluation methods
a. Rankingb. Job classificationc. The point method
7-6
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Step 2: Group Similar Jobs into Pay Grades
7-7
Points from Job Evaluation
Process
Job Grade
50 – 60 1
61 – 70 2
71 – 80 3
81 – 90 4
91 – 100 5
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Step 3. Price Each Pay Grade
7-8
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Step 4: Conduct Salary Survey
• Benchmark job• 20% or more directly
from the marketplace• Collect data on
benefits
7-9
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Step 5: Compare and Adjust
7-10
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Step 6: Develop Rate Ranges
7-11
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Pricing Managerial and Professional Jobs
• Pay package elements • Strategy and executive pay – Strategic direction– Skills and competencies list–Does existing pay plan produce results?– If not, re-design
• Pay for professionals
7-12
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Incentive Plans (1)
• Piecework plans • Team or group incentive plans• Incentives for managers and executives– Stock Options – Sarbanes-Oxley
• Incentives for salespeople
7-13
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Incentive Plans (2)
• Non-tangible and recognition-based merit pay as an incentive
• Profit-sharing plans • Employee Stock Ownership Plans (ESOPs)• Gainsharing plans • Earnings-at-risk pay plans
7-14
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Incentive Plans (3)
• Incentives at Nucor Corporation • Improving Productivity through HRIS• Job Design • Designing effective Incentive Program– The five building blocks of effective
incentive plans
7-15
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Employee Benefits
7-16
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Employee Benefits (1)
• Pay for time not worked–Unemployment insurance–Vacations and holidays– Sick leave– FMLA– Severance
7-17
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Employee Benefits (2)
• Insurance benefits–Workers’ compensation
• Hospitalization, medical and disability insurance– Pregnancy Discrimination Act– COBRA– Insurance cost control– Protection and Affordable Care Act of 2010
7-18
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Employee Benefits (3)
• Long-term care• Retirement benefits– Social security–Pension plans–401(k) plans–Cash balance pensions– ERISA–Vesting
7-19
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Employee Benefits (4)
• Employee services and family-friendly/work-life – Family-friendly benefits–Why Work-Life Benefits?–Workplace flexibility
• Flexible benefits• Employee leasing• Websites
7-20
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Current Compensation Trends
7-21
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Current Compensation Trends
• Competency and skill-based pay• Broadbanding• Actively managing pay allocation and
talent management• Board oversight of executive pay• Total rewards
7-22
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Copyright
7-23
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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