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Lecture 28

COMMERCE 2BC3 Lecture 28: Week 10 – Compensation and Benefits


Department
Commerce
Course Code
COMMERCE 2BC3
Professor
Weisner
Lecture
28

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Week 10 Compensation and Benefits
Agenda
Strategic issues in Compensation
Establishing Base Pay
Performance-based Pay
Pay Equity
Benefits
Compensation
Goals of Compensation:
Attract
Retain
Motivate
Batter employer, better quality
Compensation costs are single largest cost category in most firms
60% in some manufacturing organizations
Up to 80% in service organizations such as colleges & universities
Pay is a statement of an employees worth by an employer
Pay is a perception of worth by an employee
Pay carries a great deal of information about what the organization
values
Southwest Airlines
WestJet
Strategic Considerations
1. What criteria should determine pay?
The job, individual KSAOs, performance, organizational profitability,
what other organizations are paying…?
2. What pay mix should be used?
Base, benefits, stock, performance rewards?
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3. Should performance rewards be used?
If so, based on individual, team, organizational performance?
The optional strategy is one that adds the most value to the firm
This may not be the lowest cost
Total Compensation
Benefits can be up to 50% of the total cost
If you are not working, you are not getting paid
Wage is paid per hour, salaries are paid per longer period or per year
Changing Compensation Systems
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find more resources at oneclass.com

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Designing a Compensation System
Considerations in Developing a Compensation Plan
o Internal vs. External Equity
o Below-Market vs. Above-Market Pay
o Fixed vs. Variable Pay
o Job vs. Individual Pay
o Egalitarianism vs. Elitism
o Performance vs. Membership
o Monetary vs. Non-monetary Rewards
o Open vs. Secret Pay
o Centralization vs. Decentralization of Pay Decisions
Internal vs. External Equity
Fair pay is pay that employees generally view as equitable
o 2 concerns
Internal: perceived fairness of pay structure within organization
Distributive Justice model compare inputs & outputs
External: perceived fairness relative to other employers (i.e.,
external to the organization)
Labour Market model
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find more resources at oneclass.com
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