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Human Resources Management
HRM 200
Katrina Di Gravio

CHAPTER ELEVEN Strategic Importance of Total Rewards Total Rewards  an integrated package of all rewards (monetary and non- monetary, extrinsic and intrinsic) gained by employees arising from their employment  aligned with business strategy  provide employee value within cost constraints Five Components of Total Rewards 1. compensation i.e. wages, bonuses 2. benefits i.e. insurance, vacations 3. work-life programs i.e. childcare 4. performance and recognition i.e. pay-for-performance 5. development and career opportunities i.e. tuition assistance Basic Considerations in Determining Pay Rates  Legal-Employment/Labour Standards o Pay Equity o Human Rights o Canada/Quebec Pension Plan o Workers’ Compensation o Employment Insurance  Union - collective bargaining  Compensation policies - leader or follower in pay  Equity - internal and external Establishing Pay Rates  Step 1. conduct job evaluation – for internal equity  Step 2. group similar jobs into pay grades  Step 3. conduct salary survey – for external equity  Step 4. price each pay grade using wage curves  Step 5. fine-tune pay rates Step 1. Job Evaluation Job Evaluation  systematic comparison of jobs to determine their relative worth Benchmark Job  job commonly found in organizations  critical to firm’s operations Compensable Factor  fundamental compensable aspect of a job  e.g. skill, effort, responsibility, working conditions Job Evaluation Methods  Ranking method  Classification/grading method  Point method  Factor comparison method Ranking Method 1. obtain job information 2. group jobs to be rated 3. select compensable factors 4. rank jobs 5. combine ratings Ranking Method Example  Ranking Order Annual Pay  Office manager $60,000  Chief nurse 54,000  Bookkeeper 50,000  Nurse 40,000  Cook 26,000  Nurse’s aid 24,000  Maid 20,000 Classification/Grading Method  categorize jobs into groups (classes or grades)  classes contain similar jobs  grades contain dissimilar jobs of equal difficulty Point Method Overview  identify compensable factors  determine the degree to which each factor is present in each job Point Method Steps 1. determine clusters of jobs to be evaluated 2. collect job information 3. select and define compensable factors 4. define factor degrees 5. determine factor weights 6. assign point values to factors and degrees 7. write the job evaluation manual 8. rate the jobs Point Method – Factor Degrees First- Second- Third- Fourth- Fifth- degree degree degree degree degree points points points points points Factor Decision Making 40 80 120 160 200 Problem Solving 35 70 105 140 175 Knowledge 25 50 75 100 125 Factor Comparison Method  rank jobs according to skill/difficulty factors  sum rankings for overall numerical ranking for each job  incorporate wage rates Step 2. Group Similar Jobs Into Pay Grades Pay Grade  jobs of approximately equal value, e.g.: o point: jobs falling within a range of points o ranking: all jobs falling within 2-3 ranks o classification: jobs already in classes/grades  factor comparison: specified range of pay rates Step 3. Conduct a Wage/Salary Survey  formal or informal survey by employer  commercial, professional, and government salary surveys Step 4. Price Each Pay Grade – Wage Curves  find average pay for each pay grade  plot pay rates for each pay grade  fit a wage line through points (regression)  price jobs Wage Curve Example Job Evaluation Points Wage Rates Step 5. Fine-Tune Pay Rates I II III IV Wage age ge * * * * * * * * * * * * * Broadbanding Wage Structur e  Red circle pay rate: rate of pay that is above the pay range max. Competency-Based Pay Competencies  individual knowledge, skills and behaviours that are critical to successful individual or corporate performance  pay for range, depth and types of knowledge that employees are capable of using, rather than current job duties Pay for Managerial and Professional Jobs  Salary (market pricing) *reduced emphasis  Benefits  Short-term incentives *increased  Long-term incentives *emphasis  Perquisites Pay Equity  Wage gap: average pay for males is 30% higher than average pay for females  pay equity intended to eliminate systemic pay discrimination by providing equal pay to: o male-dominated job classes o female-dominated job classes  of equal value  must ensure no gender bias in job evaluation Pay Equity Results  pay equity has narrowed the wage gap, but not eliminated it  no explanation other than systemic discrimination for much of 30% remaining gap  long-term solution is women and men equally represented in all jobs, i.e. no male or female- dominated jobs (occupational segregation) CHAPTER TWELVE Money and Motivation Variable Pay  plan that links pay to productivity, profitability, or some other measure of organizational performance  accurate performance appraisal or measurable outcomes is a precondition for effective pay-for-performance plans Types of Incentive Plans  individual incentive programs i.e. spot bonus – spontaneous incentive award for accomplishments  group incentive programs-production standard is set for specific work group, and members are paid if group exceeds production standard o profit sharing plans-organization wide incentive program offering employees with a share of organizations profits in a specific period. o gainsharing plans-organization-wide pay plans designed to reward employees for improvement in organizational productivity Incentives for Operations Employees  Piecework plans - paid based on number of items processed by each individual worker in a unit of time  Straight piecework: payment for each piece  Guaranteed piecework: minimum hourly wage plus incentive for each piece produced above a set number  Advantages: simple to calculate and easily understood by employees, powerful incentive value since rewards are directly tied to performance  Disadvantages: employers’ habits of arbitrarily raising production standards whenever they find their workers earning “excessive” wages, in a new hourly wage rate, piece rate must also be revised=big clerical chore, since piece rate is tied to money earned in workers’ mind, increase in production standards are resisted by workers not matter the justification, workers focus only on production where machinery maintenance is neglected.  Standard hour plan – paid basic h
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