Study Notes: Chapter 11.docx

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17 Apr 2012
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Chapter Eleven: Strategic Pay Plans
MHR Notes
Total rewards an integrated package of all rewards (monetary and nonmonetary) gained by employees
arising from their employment
The five components of total rewards are:
1. Compensation direct financial payments in the form of wages, salaries, incentives, bonuses, etc.
2. Benefits indirect payments in the form of financial benefits like vacations and employer paid insurance
3. Work/life programs programs that help employees do their job effectively
4. Performance and recognition includes pay-for-performance and recognition programs
5. Development and career opportunities - focuses on planning and the advancement and/or change in
responsibilities to best suit individual skills, talents and desires
The purpose of rewards is to attract, retain and motivate/engage employees. Engagement refers to the
positive emotional connection to the employers and a clear understanding of the strategic significance of the
job which results in discretionary effort on the part of the employee.
There are four basic considerations in determining pay rates:
1. Legal Considerations in Compensation
(includes Employment/Labour Standards Acts, Pay Equity Acts, Human Rights Acts, Canada/Quebec
Pension Plan, Workers’ Compensation Laws, Employment Insurance Act)
2. Union Influences on Compensation Decisions
3. Compensation Policies
4. Equity and its Impact on Pay Rates
There are three steps to establish pay rates:
1. Determine the worth of jobs within the organization through job evaluations
2. Conduct a wage/salary survey of what other employers are paying for comparable jobs
3. Combine job evaluations and salary survey information to determine pay for jobs
Step One: Job Evaluation
Job Evaluation a systematic comparison to determine the relative worth of jobs within a firm
Benchmark Job a job that is critical to the firm’s operations or commonly found in other organizations
Compensable factor a fundamental, compensable element of a job, such as skill, effort, responsibility and
working conditions
Job evaluation committee group of employees, HR staff, managers and union representatives
Job Evaluation Methods
1. Classification/grading method method for categorizing jobs into groups
Classes groups of jobs based on a set of rules for each class, such as amount of independent judgment, skill,
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Grades groups of jobs based on a set of rules for each grade, where job are similar in difficulty but otherwise
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