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Chapter 11 & 13.docx

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Wilfrid Laurier University
Steve Risavy

Compensation & Benefits Chapter 11: Strategic Pay Plans Total Rewards – an integrated package of all rewards (monetary and nonmonetary, extrinsic and intrinsic) gained by employees arising from their employment Five Components of Total Rewards 1. Compensation - includes direct financial payments (wages, salaries, incentives etc.) 2. Benefits - includes indirect payments in form of financial benefits (insurance/vacation) 3. Work/Life Programs - programs that help employees do their jobs effectively (ex. flexible scheduling) 4. Performance and Recognition – includes pay-for-performance and recognition programs 5. Development and Career Opportunities – focuses on planning for the advancement and/or change in responsibilities to best suit individual skills, talents, and desires (tuition assistance, coaching/mentoring) Basic Considerations in Determining Pay Rates 1. Legal Requirements - Employment/Labour Standards Act (Canada Labour Code) - sets minimum standards regarding pay, including minimum wage, max hours of work, overtime - Pay Equity Acts - equal pay for work of equal value performed by men and women - Human Rights Acts - protects Canadians from discrimination on a number of grounds - Canada/Quebec Pension Plan 2. Union Issues 3. Compensation Policy 4. Equity Establishing Pay Rates 1. Determine the worth of jobs within the organization through job evaluation (to ensure internal equity), and group jobs with similar worth into pay grades 2. Conduct a wage/salary survey of what other employers are paying for comparable jobs (to ensure external equity) 3. Combine the job evaluation (internal) and salary survey (external) information to determine pay rates for the jobs in the organization Stage 1: Job Evaluation Job Evaluation – a systematic comparison to determine the relative worth of jobs within a firm Job evaluation usually focuses on benchmark jobs that are critical to the firm’s operations. Benchmark Job – a job that is critical to the firm’s operations or commonly found in other organizations Compensable Factors – a fundamental, compensable element of a job, such as skill, effort, responsibility, and working conditions Ex. Most of the pay equity acts in Canada focus on four compensable factors: skill, effort, responsibility, and working conditions. The job evaluation method popularized by a consulting firm may be focused on four compensable factors: know-how, problem solving, accountability, and working conditions. Job Evaluation Committee is established to ensure the representation of the points of view of various people who are familiar with the jobs in question, each of whom may have a different perspective regarding the nature of the jobs. This committee may include employees, HR staff, managers, and union representatives. Classification/Grading Method – a method for categorizing jobs into groups Classes – groups of jobs based on a set of rules for each class, such as amount of independent judgement, skill, physical effort, and so forth - classes usually contain similar jobs – such as all secretaries Grades – groups of jobs based on a set of rules for each grade, where jobs are similar in difficulty but otherwise different -grades often contain dissimilar jobs, such as secretaries, mechanics, and fire fighters Grade/Group Description – a written description of the level of compensable factors required by jobs in each grade - used to combine similar jobs into grades or classes Point Method is a the job evaluation method in which a number of compensable factors are identified, the degree to which each of these factors is present in the job is determined, and an overall point value is calculated 1. Preliminary Steps - necessary to have current job descriptions and job specifications based on a thorough job analysis - foundation of the job evaluation plan is a number of compensable factors which must be agreed upon - each sub factor must be carefully defined to ensure that the evaluation committee members will apply them consistently 2. Determine Factor Weights and Degrees 3. Assign Points for Each Degree of Each Sub-Factor 4. Evaluate the Jobs Pay Grade – comprises jobs of approximately equal value Stage 2: Conduct a Wage/Salary Survey Wage/Salary Survey – a survey aimed at determining prevailing wage rates - a good salary survey provides specific wage rates for comparable jobs - formal written questionnaire surveys are the most comprehensive There are many ways to conduct a salary survey: - informal communication with other employers - reviewing newspaper and Internet job ads - surveying employment agencies - buying commercial or professional surveys - reviewing online compensation surveys - conducting formal questionnaire-type surveys with other employers Stage 3: Combine the Job Evaluation and Salary Survey Information to Determine Pay for Jobs 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 Broadbanding – reducing the number of salary grades and ranges into just a few wide levels or “bands,” each of which then contains a relatively wide range of jobs and salary levels The a
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