Upload
bethanie-robertson
View
218
Download
2
Embed Size (px)
Citation preview
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 1
10
Managing Compensation
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 2
HR Challenges
• What compensation practices are
most appropriate for a firm?
• What (dis)advantages of compensation systems exist?
• On what is employee compensation based?
• How are compensation decisions affected by the legal system?
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 3
Total Compensation Package
Quantifiable rewards employee gets for work done…
• base compensation,
• pay incentives
• indirect compensation
and benefits
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 4
Total Compen$ation
Pay Incentives
Indirect Compensation
Benefits
Base Compensation
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 5
9 Elements of a Compensation Plan
1. Internal vs. External Equity perceived fairness
2. Fixed vs. Variable Pay paid at fixed times via base salary or
fluctuate based on criteria
3. Performance vs. Membership tie pay to individual or group
contributions
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 6
9 Elements of Compensation Plan (cont’d)
4. Job vs. Individual Pay based on job or skill / knowledge
5. Egalitarianism vs. Elitism all have same plan or establish different plans
6. Below-Market vs. Above-Market Pay above-market level
at market level below-market level
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 7
9 Elements of Compensation Plan (cont’d)
7. Monetary vs. Nonmonetary Awards motivate via money or job security
8. Open vs. Secret Pay know what others are paid or not
9. Centralization vs. Decentralization made in central location or
delegated to unit managers
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 8
The Labor Market Model
Supply of workers
Demand for workers
Number of Qualified Workers
Wages
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 9
Percent of Salary in Form of Bonus and Long-term Income for Various
Salary Brackets
88
6560
5550
4540
3225
167
0
10
20
30
40
50
60
70
80
90
Over$750
$550-$750
$450-$550
$350-$450
$250-$350
$200-$250
$165-$200
$135-$165
$105-$135
$65-$105
$25-$65
Percent of base salary
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 10
Use Job-based Pay Policy When…
• job and technology are stable• staff do not cover for one another • training is required • turnover is relatively low• jobs are fairly standardized in industry
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 11
Use Individual-based Compensation When…
• firm has educated workforce • firm is in uncertain environment• collaboration occurs in organization• limited mobility exists• chances to learn new skills exist• lost production cost high due to
employee turnover / absenteeism
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 12
Pay Structure of Large Restaurant Developed Using Job-Based Approach
JOBS # POSITIONS PAY6
GRADE 6 Chef 2 $21.50-32.00 / hr
GRADE 5 Manager 1 $12.50-22.00 / hrSous-Chef 1
GRADE 4 Assistant Manager 2 $8.50-13.00 / hrOffice Manager 1
GRADE 3 General Cook 5 $7.50-9.00 / hr
GRADE 2 Server 45 $7.00-8.00 / hrCashier 4
GRADE 1 Dishwasher 3 $6.50-7.25 / hr
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 13
Pay Schedule of Large Restaurant Designed Using Skill-Based Approach
Creating new items for the menu!
• Find different uses for leftovers$23.00 /hr (e.g., hot dishes, buffets)• Coordinate staff in manager absence
• Cook food following recipes $17.00 / hr• Supervise kitchen help• Prepare payroll• Ensure adherence to standards
• Schedule servers / workstations $10.50 / hr• Conduct inventory• Organize work flow on restaurant floor
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 14
Pay Schedule of Large Restaurant Designed Using Skill-Based Approach
• Organize tables $7.50 / hr• Take orders from customers• Bring food to tables• Assist kitchen with food prep• Perform security checks• Help with delivery
• Use dishwashing equipment $6.00 / hr• Clean premises with disinfectants• Clean and set up tables• Perform routine kitchen chores
(e.g., making coffee)
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 15
MAA National Position Evaluation Plan
Factor 1st 2nd 3rd 4th 5th
SKILL
1. Experience 22 44 66 88 110
2. Initiative 14 28 42 56 70
EFFORT
3. Physical demand 10 20 30 40 50
4. Mental demand 5 10 15 20 25
RESPONSIBILITY
5. Material or product 5 10 15 20 25
6. Work of others 5 10 15 20 25
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 16
Hierarchy of Clerical Jobs in an Office
1
point
2 grade
3
wkly pay range
Customer Service Rep 300 5 $500-650
Administrative Assistant 298 5
Secretary 230 4 $450-550
Accounting Clerk 175 3 $425-475
Senior Word Processor 160 3
Word Processor 125 2 $390-430
Payroll Clerk 120 2
Mail Clerk 80 1 $350-400
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 17
Market Salary Data for Selected Benchmark Office Jobs
Weekly Pay PercentileBenchmark Jobs 25th 50gh 75th Weekly Pay
Average
Customer Service Representative
$400 $500 $650 $495
Credit Clerk $400 $450 $550 $455
Accounting Clerk $370 $425 $475 $423
Word Processor $380 $390 $430 $394
Clerk Typist $330 $350 $400 $343
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 18
Drawbacks of Job-based Compensation Programs
• Uniqueness of firm not taken into account
• Subjective, arbitrary process
• Less appropriate at high levels of firm
• Wage and salary data obtained from market surveys are not definitive
• Employees’ perception of internal/external equity matter
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 19
Suggestions for Implementing Job-based Compensation Plans
• Think strategically
• Secure employee input
• Increase job range of pay and
expand scope of responsibility
• Expand variable proportion of pay
• Establish dual-career ladders
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 20
Example of a Dual-Career LadderBand Managerial Individual Contributor
13 President
12 Executive VP
11 VP Executive Consultant
10 Assistant VP Senior Consultant
9 Director Consultant
8 Senior Manager Senior Adviser
7 Manager Adviser
6 Senior Specialist
5 Specialist
4 Senior Technician
3 Senior Administrative Support
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 21
Pay Systems and the Legal Environment
• Fair Labor Standards Act of 1938
• The Equal Pay Act of 1963
• The Internal Revenue Code
© 2004 by Prentice Hall Terrie Nolinske, Ph.D.
10 - 22
As an employee, many firm’s expect that you take a percent of the risk with them. Firms have moved away from fixed forms of compensation in favor of variable forms. No longer are there many jobs where your benefits and pay steadily climb.
What do you think about this trend – how did it start, is it a good thing?
Case