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ADMS 2600 - 9.docx

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Administrative Studies
ADMS 2600
Ron Alexandrowich

Managing Compensation Chapter 9 Compensation - Pay is a statement of an employee’s worth by an employer - Pay is a perception of worth by an employee Total Compensation Direct - Wages/salaries - Commissions - Bonuses - Gainsharing Indirect - Time not worked – vacations, breaks, holidays (statutory holiday) – maximum is 30 days off - Insurance plans – medical, dental, life (average age of Ontario employee 48/49) - Security Plans – pensions (benefits of employee) - Employees Services – educational assistance, recreational programs Gaols of Compensation 1) To motivate employees (make sure employees are satisfied) 2) To retain employees (keeping employees based on pay) 3) To attract employees (landing on positions instead of seeking work) Compensation management and other HRM functions 1) Recruitment - Aid or impair recruitment - Supply of applicants affects wage rates 2) Selection - Pay rates affect selectivity - Selection standards affect level of pay required 3) Training and development - Pay can motivate training - Increased knowledge leads to higher pay 4) Compensation Management - Training and development may lead to higher pay - A basis for determining employee’s rate of pay 5) Labour relations - Low pay encourages unionization - Pay rates determine through negotiation Strategic Compensation Planning - Links the compensation of employees to the mission, objectives, philosophies, and culture of the organization - Serves to mesh the monetary payments made to employees with specific functions of the HR program in establishing a pay-for-performance standard. - Seeks to motivate employees through compensation. Linking Compensation to Organizational Objective - Alignment between business strategy requires change in compensation strategy - Change in business strategy requires change in compensation strategy Common Strategic Compensation Goals 1. To reward employee’s past performance 2. To remain competitive in the labour market 3. To maintain salary equity among employees 4. To mesh employee’s future performance with organizational goals 5. To control the compensation budget 6. To attract new employees 7. To reduce unnecessary turnover Pay for Performance Standard - Standard by which managers tie compensation to employee effort and performance - Refers to a wide range of compensation options, including merit-based pay, bonuses, salary commission etc. Gainsharing programs – for the employees and employers to figure out what gainsharing is; it has to do with how much profit can the organization gain?; gain in the profit of the organization and split it with the employee and employer How does pay outs occur? - Not all employees have commission - Not all employees share bonuses - Within every category of jobs there are some kind of benefits to keep employees there - Different employees gets paid differently and get paid different bonus systems – except for gainsharing because everyone gets the same pay - Yearly bonuses pay is in April or May – it is better than no pay Motivating Employees through Compensation - Pay Equity – an employee’s perception of equal values for equal work Expectancy Theory and Pay - A theory of motivation that holds that employees should exert greater work effort if they have reason to expect that it will result in a rewards that they value - Employees also must believe that good performance is valued by their employer and will result in their receiving the expected reward Pay Secrecy – an organizational policy prohibiting employees from revealing their compensation information to anyone – creates misperceptions and distrust of compensation fairness and pay-for-
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