Introduction to

Human Resource

Management

Class 14

Class Overview

Often, organizations that possess strong

compensation and benefits plans attract

great long-term employees who are

dedicated to the organization’s success and

longevity. This class, we will discuss the

basics of compensation and benefits.

Compensation

“Compensation is the total amount of the

monetary and non-monetary pay provided to

an employee by an employer in return for

work performed as required.”

Video - Understanding

Compensation

Please click on the image above for a video regarding compensation.

Types of Compensation Systems

• Internal versus external

equity

• Fixed versus variable pay

• Job versus individual pay

Internal versus External Equity

• Internal Equity - Balance between job

position / profile and compensation.

– Factors of consideration - level of status, job

classification, job rank, etc.

• External Equity - Compensation

determined based upon competition pay /

fair market value.

Pictures - Internal versus External

Equity

Fixed versus Variable Pay

• Fixed Pay - “Fixed pay is generally decided

on the basis of what the person is worth — it

depends on his or her capability.”

• Variable Pay - “Based on the market value of

the person, companies enhance that

payment through a variable pay component

that is linked both to the performance of the

company and the individual.”

Strength and Weaknesses of

Fixed Pay and Variable Pay

• Discourages productivity

– “A fixed payment system may not encourage

employees to work as hard and can result in

overcompensating poor performers and

under-compensating top performers.”

• Creates competition between employees

– “A potential advantage of offering fixed wages

instead of variable pay is that a variable pay

system can create unhealthy competition

between employees.”

Job versus Individual Pay

• Job / Team Pay - Payment is dependent

upon the success of a team in meeting a

deliverable, advancement, level of

satisfaction, etc.

• Individual Pay - Payment is received

based upon one’s individual performance.

Additional Types of Pay Systems

• Elitism versus Egalitarianism

• Below Market versus Above Market

Compensation

• Monetary versus Nonmonetary Rewards

• Open versus Secret Pay

• Centralization versus Decentralization of

Pay

Employee Benefits

“Employee benefits protect employees from

risks that could jeopardize their health and

financial security.”

Types of Benefits

• Legally Required Benefits

– Social Security

– Workers Compensation

– Unemployment Insurance

– Unpaid Leave

• Health Insurance

• Retirement

• Insurance

• Paid Time Off

• Employee Services

Legally Required Benefits

• Social Security

• Workers Compensation

• Unemployment Insurance

• Unpaid Leave

Legally Required Benefits

Health Insurance

“Health insurance is a type of insurance coverage

that covers the cost of an insured individual's

medical and surgical expenses. Depending on the

type of health insurance coverage, either the

insured pays costs out-of-pocket and is then

reimbursed, or the insurer makes payments

directly to the provider.”

Retirement

“The action or fact of leaving one's job and

ceasing to work.”

Important Retirement Facts

• People are staying in the workforce for longer periods of time.– Raising retirement rate.

• Many people do not properly save for retirement and are not prepared to retire.– Often, individuals do not begin planning for their

retirement until their 40s.

• With the lifespan of individuals increasing significantly, sufficient funds need to be set aside for expenses.

Shocking Retirement FactsClick on the images for more information.

Paid Time Off

Paid time off is the option that many

organizations offer to employees, which

allows the employee to take time away from

the workplace while still receiving

compensation.

Paid Time Off - Think Again…

Americans are notorious for working excessively.

In fact, according to one study, the American

workforce is now taking the fewest vacations that

they have in four decades.

For more information, click

on the image to the left.

Additional Examples of Employee

Coverage Benefits

• Sick time

• Injury

• Unemployment

• Old age

• Death