Different views on compensation
Reason for wage difference between men and women
- human capital (work experience, education, and tenure)
- demographic characteristics (marital status, having children living at home)
- job characteristics (industry, size of establishment, and type of work)
- Higer compensation could lead to increases in price
- stock (shares of company) to pay employees creates a sense of ownership t
- improve performance in turn increase stockholder wealth
- Compensation should supposedly be tied to performance (executives )
- expense ( that needs to be minimized or optimized)
- influence employee behaviours and to improve organizational performance
- financial security
- return on exchange, entitlement, reward for job well done
Global Compensation refers to all forms of financial returns and tangible services and benefits that
employees receive as part of an employment relationship.
Forms of pay
- relational return- Psychological return (ie learning opportunities, recognition and status, challenging
- Total compensation transactional , cash (e.g., base pay, merit increases, incentives, cost-of-living
- indirectly as benefits (e.g., pensions, healthcare and life insurance, programs to help balance work and
- total rewards- include cash compensation, benefits, and relational returns.
Cash Compensation: Base Pay
- Base pay wage or salary- cash
- reflect the value of the work or skills and generally ignores differences attributable to individual
- paid more bases on performance skill or education
- salary, the latter referring to pay expressed at an annual or monthly rate rather than hourly.
Cash Compensation: Merit Increases and Cost-of-LivingAdjustments (PAST)
- given as increments to the base pay in recognition of past work behaviour
- cost-of-living adjustment gives the same percentage increase to everyone regardless of performance
Cash Compensation: Incentives/ variable pay (FUTURE)
- increases directly to performance.
- do not increase the base wage, and so must be reearned each pay period
- size of the incentive will be known beforehand. (merit pay programs evaluate the past performance)
Long-Term Incentives - intended to focus employee efforts on multiyear results.
- stock ownership or options to buy stock at specified, advantageous prices
Benefits: Insurance and Pensions
- life/health/disability insurance and pension, work/life programs, and allowances
Benefits: Work/Life Programs
- integrate their work and life responsibilities
- time away from work (e.g., vacations, jury duty
- services to meet specific needs (e.g., drug counselling, financial planning, referrals for child and elder
- flexible work arrangements (e.g., telecommuting, non-traditional schedules, non-paid time off).
- often grow out of whatever is in short supply. – housing, transport, car
Total Earnings Opportunities: Present Value of a Stream of Earnings
-Apresent value perspective shifts the choice from comparing today's initial offers to consideration of
future bonuses, merit increases, and promotions.
- low starting offers will be overcome by larger future pay increases.
Relational Returns from Work
non-financial returns fro