MGMT 206 Lecture Notes - Lecture 7: Gender Pay Gap, Agency Cost, Life Insurance
Some definitions:
Remuneration: what employees receive in exchange for their work. Includes pay and benefits (total
remuneration) or just pay (cash remuneration).
Strategic remuneration: involves remuneration practices being aligned with the achievement of the
organisations strategic business objectives.
Remuneration policy:
• A remuneration policy should:
o Reflect the organisations strategic business objectives and culture
o Articulate the objectives that the organisation wants to achieve via its remuneration
programs
o Be communicated to all employees
o Provide the foundation for designing and implementing remuneration and benefit
programs.
Remuneration program objectives - for the organisation:
• Attract and keep desired quality/mix of employees
• Ensure equitable treatment
• Motivate employees to improve their performance
• Reinforce organisations key values, desired culture
• Drive and reinforce desired employee behaviour
• Ensure remuneration is maintained at the desired competitive level
• Control remuneration costs
• Ensure optimum value for each remuneration dollar spent
• Comply with legal requirements
Remuneration program objectives - for the employee:
find more resources at oneclass.com
find more resources at oneclass.com
• Ensure fair and equitable treatment
• Accurately measure and appropriately reward performance and contribution to the
achievement of the organisations strategic business objectives
• Provide appropriate remuneration changes based on performance, promotion, transfer or
changing conditions
• Provide regular remuneration and performance reviews
Agency theory, remuneration objective and policy setting:
• Owners or shareholders of the company (the principals) are reliant on managers (the agents).
This relationship is defined as agency relationship
• There is no guarantee that goals and interests of shareholders and managers are aligned
• To avoid agency cost, organisations should provide incentives to reward behaviours and
results that are in the best interest of the shareholders; but this can have serious implications
• Moral judgement became the focal point after the global financial crisis as managers acted
immorally and took excessive risks
Job evaluation
• The systematic determination of the relative worth of jobs within an organisation.
• Concerned with 'how big' or 'how small' a job is.
• Aim is to ensure that jobs of different sizes or relative worth attract the appropriate pay
differentials.
• Basis for establishing the organisations job hierarchy and associated pay structure.
An example of job grading:
Sales representatives grades: technical sales
• Grade 1: entry-level sales position. Requires relevant uni degree. Some experience desirable.
• Grade 2: requires uni degree plus knowledge of company products, min. 2-3 years experience.
• Grade 3: requires uni degree, considerable knowledge of products, min. 5 years experience.
• Grade 4: requires uni degree, in depth knowledge of products, min. 7-8 years sales experience,
with min. 2 years experience with major accounts.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Remuneration: what employees receive in exchange for their work. Includes pay and benefits (total remuneration) or just pay (cash remuneration). Strategic remuneration: involves remuneration practices being aligned with the achievement of the organisations strategic business objectives. Agency theory, remuneration objective and policy setting: owners or shareholders of the company (the principals) are reliant on managers (the agents). Sales representatives grades: technical sales: grade 1: entry-level sales position. Some experience desirable: grade 2: requires uni degree plus knowledge of company products, min. 2-3 years experience: grade 3: requires uni degree, considerable knowledge of products, min. 5 years experience: grade 4: requires uni degree, in depth knowledge of products, min. Which system should be used: basis for decision, objectives (including strategic dimension, the size of the organisation, plan users, corporate culture, employee attitudes, an appropriate job description is necessary for any job evaluation scheme.
