HRM200 Lecture Notes - Lecture 7: Truck Driver, Subfactor, Total Rewards

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Chapter 11: Strategic Pay Plans
Learning Outcomes
EXPLAIN the strategic importance of total rewards.
DESCRIBE four basic considerations an organization needs to make when determining
compensation decisions.
EXPLAIN in detail each of the three stages in establishing pay rates.
DISCUSS competency-based pay.
DESCRIBE the elements of compensation for special positions: executive, managers and
professionals.
DEFINE pay equity and EXPLAIN its importance today.
Strategic Importance of Total Employment Rewards
Employee compensation includes all forms of pay going to employees and arising from their
employment.
o It has two main components, direct financial payments (wages, salaries, incentives,
commissions, and bonuses) and indirect financial payments (financial benefits like
employer-paid insurance and vacations).
Aligning Total Rewards with Strategy
o The compensation plan should first advance the fir’s strategic aimsmanagement
should produce an aligned reward strategy.
o This means creating a compensation package (including wages, incentives, and benefits)
that produces the employee behaviours the firm needs to achieve its competitive
strategy.
Five Components of Total Rewards (know for test)
1. Compensation
2. Benefits
3. Work-life programs
4. Performance and recognition
5. Development and career opportunities
Impact of Rewards
o The purposes of rewards are to attract, retain, motivate, and engage employees.
o Engagement refers to a positive emotional connection to the employer and a clear
understanding of the strategic significance of the job, which results in discretionary
effort on the part of the employee.
Basic Considerations in Determining Pay Rates
o legal considerations in compensation
Employment/Labour Standards Act
Ex. Minimum wage, overtime pay, vacation pay, termination and
severance pay are outlined in the ESA
Pay Equity Acts
Ensures a gender-neutral system, and both females and males are
receiving equal pay for equal work
Human Rights Acts
Canada/Quebec Pension Plan
other legislation (orker’s comp., EI)
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o union influences
o compensation policies
equity and its impact on pay rates
Establishing Pay Rates
o Stage 1: Preparation for Job Evaluation
o A systematic comparison to determine relative worth of jobs within a firm.
Benchmark job
critical to operations or commonly found in other organizations
Compensable factors
fundamental, compensable element of a job
skill, effort, responsibility, working conditions
o Job Evaluation Methods
Classification/Grading Method
categorizes jobs into groups
grade/group description: outlines level of compensable factors required
by each job
Point Method
identify compensable factors, which are important
determine the degree to which each factor is present in each job
Point Method Steps
1. Preliminary steps
2. Determine factor weights and degrees
3. Assign points for each degree of each sub-factor
4. Evaluate the jobs
- Check textbook for examples of sub-factors and job-evaluation plan sample
- Sample Comparison (sub factors)
o Truck Driver vs. Secretary
o Truck driver skills: know how to drive, navigation skills, licence
o Truck driver effort- physical/mental: vision, motor functions
required for disability, focus on the road, long hours
o Truck driver responsibility: efficiency, timeliness, safety
o Truck driver working conditions: long hours, out of home, on the
road, weather, exposure to chemicals, fumes, working alone
o Secretary skills: organization, computing skills, customer service,
interpersonal skills, motivational skills, positive attitude
o Secretary effort: emphasis on mental effort, focus in a busy working
environment
o Secretary responsibility: daily decisions, unique problem solving,
financial accountability,
o Secretary Working conditions: in office conditions, sensory
attention, sitting for long periods of time, relied on by many people
- Based on this, decide on pay
- Should a truck driver or a secretary get paid more?
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o Stage 2: Conduct a Wage/Salary Survey
aimed at determining prevailing wage rates
determine rates for benchmark jobs
determine market rates for jobs
collect data on benefits, recognition programs, etc.
avoid upward bias
informal surveys good for easily recognized jobs
formal surveys are most comprehensive
o Stage 3: Combine Job Evaluation and Salary Survey Information
Wage Curve: a graphic description of the relationship between the value of the
job and the average wage paid for this job
Pay Ranges: a series of steps or levels within a pay grade, usually based on years
of service
Broad banding: Reducing the number of salary grades and ranges into just a few
wide levels or ads, each of which then contains a relatively wide range of
jobs and salary levels.
Advantage:
o greater flexibility in employee compensation
Pay for Knowledge
competency-based pay (managers, professionals)
skill-based pay (manufacturing employees)
pay-for-knowledge program should include:
competencies/skills directly important to job performance
new competencies that replace competencies that are no longer
important
on-the-job training, not i the lassroo.
Pay for Executive, Managerial and Professional Jobs
Developing a compensation plan to pay executive, managerial, and professional employees is
similar in many respects to developing a plan for other employees.
The basic aims of the plan are the same in that the goal is to attract good employees and
maintain their commitment.
Executives, managers, and professionals are almost always paid based on their performance as
well as based on static job demands, like working conditions.
Compensating Executives and Managers
o Five elements:
1. Salary
2. Benefits
3. Short-term incentives
4. Long-term incentives
5. Perquisites
Compensating Professional Employees
o engineers, scientists, accountants, lawyers, etc.
o compensable factors not easily measured: creativity, problem solving
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