MHR 749 Lecture Notes - Lecture 12: Financial Plan, Outsourcing

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The cost implications of decision such as updating the pay structure are critical for making sound decisions. Financial planning requires understanding the potential returns gained from its allocation. Most companies have not tried to analyze the returns from their compensation decisions. Compensation strategy influences effectiveness by its influence in helping increase revenues or returns as well. Organizations often reduce their workforce to cut labour costs. A major advantage of this is that it also reduces benefits costs, something that a pay cut or reduction in hours does not achieve. Two different groups of employees: core employees: strong, long-term relationship is desired, contingent workers: cover short, specific time periods (ex. Top-down budgeting requires top management of each organization unit to estimate the pay-increase budget for that unit. Once the total budget is determined, it is then allocated to each manager who plans how to distribute it among employees.

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