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Chapter 11

MHR523 Human Resources- Chapters 11,12,13,14 and 17

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Human Resources
MHR 523
Rupa Banerjee

Chapter 11 - Strategic Pay Plans The Strategic Importance of Total Rewards Total rewards - an integrated package of all rewards (monetary and nonmonetary, extrinsic and intrinsic) gained by employees arising from their employment - alignment is the extent to which rewards support outcomes that are important to achieving the organization's strategic objectives The Five Components of Total Rewards 1. Compensation - includes direct financial payments in the form of wages, salaries, incentives, commissions and bonuses 2. Benefits - includes indirect payments in the form of financial benefits, like employer-paid insurance and vacations 3. Work/life programs - relates to programs that help employees do their jobs effectively such as flexible scheduling, telecommuting, childcare and so on 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, professional development, sabbaticals, apprenticeships etc. Impact of Rewards - to attract, retain and motivate/engage employees Engagement - refers to a positive emotional connection to the employer and a clear understanding of the strategic significance of the job which results in discretionary effort on the part of the employee Basic Considerations in Determining Pay Rates - four basic considerations include legal requirements, union issues, compensation policy and equity Legal Considerations Employment/Labour Standards Acts Pay Equity Acts Human Rights Acts Canada/Quebec Pension Plan Other Legislation Affecting Compensation - Workers Compensation Laws and Employment Insurance Act Union Issues - tend to believe that no one can judge the relative value of jobs better than the workers themselves Compensation Policies - compensations policies provide important guidelines regarding the wages and benefits that it pays - important policies include the basis for salary increases, promotion and demotion policies, overtime pay policy, holidays, probationary pay and leaves for military duty, jury duty etc Equity and its Impact on Pay Rates - external equity and internal equity plays a crucial factor - externally pay must compare favourably with rates in other organizations or an employer might find it hard to attract and retain qualifies employees - internally, each employee should view his or her pay as equitable given other pay rates in the organization Establishing Pay Rates It includes three stages: 1. Determine the worth of jobs within the organization through job evaluation and group jobs with similar worth into pay grades (internal equity) 2. Conduct a wage/salary survey of what other employers are paying for comparable jobs (external equity) 3. Combine the job evaluation and salary survey information to determine pay rates for the jobs in the organization (internal and external) Stage 1: Job Evaluation Job evaluation - systematic comparison of jobs within a firm to determine the worth of one job relative to another Benchmark jobs - 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 - they are the basic factors that determine the definition of job content, establish how jobs compare with one another and set the compensation paid for each job Job Evaluation Committee - 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 jobs There are two methods in evaluating the worth of the jobs: Classification method - involves categorizing jobs into groups - the groups are called classes if they contain similar jobs or grades if they contain jobs that are similar in difficulty but otherwise different - this method is widely used in the public sector - several ways to categorize jobs; one is to draw up class descriptions (similar to job descriptions) and place jobs into classes based on their correspondence to these descriptions, another way is to draw up a set of classifying rules for each class Grade/group description - a written description of the level of compensable factors required by jobs in each grade Advantages - jobs are already grouped into several classes Disadvantages - difficult to write the class or grade descriptions Point Method - method in which a number of compensable factors are identifies, the degree to which each of these factors is present in the job is determined and an overall point value is calculated - widely used in the private sector The stages in the point method: 1. Preliminary steps 2. Determine factor weights and degrees 3. Assign points for each degree of sub factor 4. Evaluate the jobs - can be very time consuming and difficult to develop a point plan and effectively train the job evaluation user group Pay grade - comprises jobs of approximately equal value Stage 2: Conduct a Wage/Salary Survey Wage/Salary 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. - surveys may be used in three ways: to determine pay rates for benchmark jobs increasing number of positions are paid solely based on the marketplace/economy rather than its relativity to the firm's benchmark jobs collect date on employee benefits, work life programs, pay for performance plans etc Stage 3: Combine Job Evaluation and Salary Survey Information to Determine Pay for Jobs Wage curve - graphic description of the relationship between the value of the job and the average wage paid for this job Steps in determining pay for pay grades using a wage curve: 1.) Find the average pay for each pay grade (to each job; consists of several jobs that are similar) 2.) Plot the pay rates for each pay grade 3.) Determine pay for jobs Developing Rate Ranges Pay ranges - a series of steps or levels within a pay grade, usually based on years of service - use of pay ranges has several benefits: employer can take a more flexible stance with respect to the labor market; makes it easier to attract experienced, higher-paid employees also allows employers to provide for performance differences between employees within the same grade or between those with differing seniority. 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 Red circle pay rate - a rate of pay that is above the pay range maximum Ways to cope with the red circle pay rate problem: freeze the rate paid to employees in this grade until general salary increases bring the other jobs into line with it transfer or promote some or all of the employees involved to jobs for which they can legitimately be paid their current pay rates freeze the rate for six months Pay For Knowledge - pay for knowledge systems are known as competency-based pay (for management and professional employees) and skill based pay (for manufacturing employees) - these plans pay employees for the range, depth and types of knowledge that they are capable of using - competencies are individual knowledge, skills and behaviours - core competencies describe knowledge and behaviours that employees throughout the organization must exhibit for the organization to succeed; customer service orientation for all hotel employees - functional competencies are associated with a particular organizational function such as negotiation skills for salespeople or safety orientation for pilots - behavioural competencies are expected behaviours A pay for knowledge program should include: competencies and skills directly important to job performance new and different competencies on the job training Pay for Executive, Managerial and Professional Jobs There are five elements in an executive/managerial compensation package: 1.) Salary 2.) Benefits 3.) Short-term incentives 4.) Long-term incentives 5.) Perquisites - the compensable factors here tend to focus on problem solving, creativity, job scope and technical knowledge and expertise Market pricing approach - employers price professional jobs in the marketplace to the best of their ability to establish the values for benchmark jobs; these benchmark jobs and the employer's other professional jobs are then slotted into a salary structure Pay Equity Providing equal pay to male-dominated job classes and female-dominated job classes of equal value to the employer Chapter 12 - Pay-for-Performance and Financial Incentives Variable pay - any plan that ties pay to productivity or profitability or some other measure of organizational performance Types of Incentive Plans individual incentive plans for employees informal incentives group incentive programs organization-wide incentive plans non-monetary recognition programs Incentives For Operations Employees Piecework Plans Piecework - a system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or items per day; earnings are directly tied to what the employee produces Straight piecework plan - a set of payment for each piece produced or processed in a factory or shop; there would be no guaranteed minimum wage Guaranteed piecework plan - the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour Advantages: - simple to calculate and easily understood by employees - appear
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