Chapter 11: Establishing Strategic Pay Plans
The Strategic Importance of Total Rewards
Total rewards refers to an integrated package of all rewards (monetary and non monetary, extrinsic and intrinsic) gained
by employees arising from their employment.
The five components of total rewards
1. compensation, direct financial payments
2. benefits, this category included indirect payments
3. work / life programs, rewards relates to programs that help employees do their jobs effectively, such as flexible
scheduling, telecommunication, childcare, and so on
4. performance and recognition, pay for performance and recognition programs
5. development and career opportunities, possibly tuition assistance, coaching, and mentoring
Impact of Rewards
purpose of rewards are to attract, retain, and motivate / engage employees. Engagements refers to a positive emotional
connection to an employer and a clear understanding of the strategic significance of the job.
Relational work experiences, such as work/life programs, performance and recognition are hard for other companies to
Basic Consideration in Determining Pay Rates
Legal Considerations in Compensation
Employment / Labor Standards Acts (Canada Labor Code)
labor code laws set minimum standards regarding pay, including minimum wage, maximum hours of work, overtime
pay, vacation, statutory holidays, termination, record keeping on termination.
these laws apply to public-sector of employees only, except Ontario, Quebec, BC, and federal crown corps.
Human Rights Acts
prohibit discrimination on the basis of age, sex, color, race, religion, martial, and physical and mental disability.
Canada / Quebec Pension Plan
All employees and their employers must contribute to the Canada / Quebec Pension Plan
Other Legislation Affecting Compensation
The employment insurance act is aimed to protecting Canadian workers from the total economic destruction in the
event of employment termination that is beyond their control.
Union influences on Compensation Decisions
The Canada Labor Relations Board and similar bodies in each province and territory oversee employer practices and
ensure that employees are treated in accordance with their legal rights.
Union Attitudes toward compensation decisions
management has to ensure that its prerogatives – such as the right to use the appropriate job evaluation technique to
assess the relative worth of jobs – are not surrendered.
basis for salary increases, promotion and demotion policies, overtime pay policies, probationary pay, miliary service,
jury duty, and holidays.
Equity and Its impact on Pay Rates
Externally, pay must compare favorablt with rates in other organizations or an employer will find it hard to atract and
retain qualified employees. Pay rates must also be equitable internally, each employee should view his or her pay as a
“What the fuck...10 Chapters between HR and Marketing.....really annoyed ATM” equitable given other pay rates in the organization.
Establishing Pay Rates
Step 1: Determine the Worth of each job through job evaluation
job evaluation, is aimed at determining a job relative worth. It is a formal and systematic comparison of jobs within a
firm to determine the worth of one job relative to another, and it eventually results in a job hierarchy.
Benchmark jobs is a critical to the firms operation or commonly found in other organizations that is used to anchor the
employers pay scale and that acts as a reference point around which other jobs are arranged in order of worth.
compensable factor, is a fundamental, compensable element of a job, such as skill, effort, responsibility, and working
conditions. Different job evaluation systems are used for different departments, employee groups, or business units.
Preparation for Job evaluation
The main steps involved include identifying the need for the program, getting cooperation, and choosing an evaluation
committee. The committee is usually made up of about five members, pick benchmark jobs, pick compensable factors,
and value each job.
Ranking method of Job Evaluation
1. obtain job information
2. group the jobs to be rated
3. select compensable factors
4. rank jobs
5. combine rankings
legislation requires that jobs be ranked across cluster or departments, not separately.
Classification (or grading) Evaluation Method
jobs are categorized into groups called classes, if they contain jobs or grades that are similar in difficulty but
classes, groups of jobs based on a set of rules for each class, such as amount of independent judgment, skill, physical
effort, and so forth.
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 telemarketers, mechanics, and firefighters.
Job classification, disadvantages is that employers usually classify jobs anyways, and jobs are already classified. And
that it's difficult to write the class or grade descriptions and that considerable judgment is requires in apply them.
However, many employers use this method with success.
Point Method of Job evaluation
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 the overall point value is calculated.
1. determine clusters of jobs to be evaluated
2. collect job information
3. select and define compensable factors
4. define factor degrees, a office worker versus miner would have two degrees of working conditions, less is better.
5. Determine factor weights, how much is physical requirements worth to