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Human Resources and Organizational Behaviour
HROB 3010
Rhonda Gordon

Chapter 1: The Pay Model Compensation -people’s view of compensation affects their behavior at work (doesn’t mean same thing to everyone) -views differ on whether one looks at compensation from the same perspective of a member of: 1. Society- compensation is viewed by society as a measure of justice as well as a cause of increased taxes and price increases (ie. Wages for men and women) 2. Stockholders – concerned with executive pay relative to company performance 3. Managers – view compensation as major expense (paying labour wages) and a means to influence employee behavior (way people are paid affects quality of their work, attitude toward customers, willingness to be flexible or learn new skills or suggest innovators) 4. Employees – view compensation as a return in exchange with their employer, an entitlement, or a reward (usually big source of financial security - vital role in their economic and social wellbeing) Global Views -in English, compensation means to offset, counterbalance, and to make up for but in different languages it combines entitlement, return, and reward Compensation- refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship Forms of Pay Total rewards- all rewards received by employees (cash compensation, benefits and relational returns) 1. Relational returns- psychological returns employees believe they receive in the workplace (development opportunities, status, opportunity to belong, and challenging work) -include psychological aspects of work (recognition, status, challenging work, learning opportunities) 2. Total compensation- more transactional and includes pay received directly as cash ( base, merit increases, incentives, cost-of-living adjustmentsand indirectly as benefits (pensions, medical insurance, programs to help balance work and life demands) Total Rewards: Total Returns Total Relational Compenstaion Returns Employment Cash Benefits Security Compensation Merit/Cost of Work/Life Challenging Living Programs Work Life, Health and Learning Base Disability Opportunities Insurance Recognition & Long-term Allowances Status Incentives Cash Compensation: Base Wage- pay calculated at an hourly rate (tends to reflect value of work or skills; usually ignores differences attributable to individual employees) Salary- pay calculated at an annual or monthly rate Cash Compensation: Merit Increases and Cost-of-Living Adjustments Implicit contract- unwritten understanding between employers and employees over their reciprocal obligations and returns; employees contribute toward achieving the goals of the employer in exchange for returns given by the employer and valued by the employee Merit increase- increment to base pay in recognition of past work behavior (some assessment of past performance is made (with/without formal performance evaluation program) and size of increase is varied based on performance) Cost-of-Living adjustment- percentage of increment to base pay provided to all employees regarding Cash Compensation: Incentives Incentives (variable pay– one-time payments for meeting previously established performance objectives -tie pay increases directly to performance -don’t increase base wage so must be re-earned each pay period Long-Term Incentives -long-term incentives are intended to focus employee efforts on multi-year results (usually in form of stock ownership or options to buy a stock at a specified advantageous price) -goal
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