Textbook Notes (363,019)
Canada (158,147)
MGHB12H3 (73)
Chapter 009

Human Resource Management - Chapter 009

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University of Toronto Scarborough
Management (MGH)
Joanna Heathcote

CHAPTER 9 MANAGING COMPENSATION 20 November 2013 Employees desire compensation systems that they perceive as being fair and commensurate with their skills and expectations Compensation is a way to increase employee loyalty way to decrease likelihood employees will be hired away by competitors Compensation is directly linked to employees livelihood Compensation consists of 3 main componentsDIRECT COMPENSATION encompasses employee wages and salaries incentives bonuses and commissionINDIRECT COMPENSATION comprises the many benefits supplied by employersNONFINANCIAL COMPENSATION includes employee recognition programs rewarding jobs organizational support work environment flexible work hoursSTRATEGIC COMPENSATION STRATEGIC COMPENSATION is the compensation of employees in ways that enhance motivation and growth while at the same time aligning their efforts with the objectives philosophies and culture of the organization Goes beyond simply market rates an element of compensation planning linking compensation to organizations mission and general business objectives Strategic compensation also helps with functions of HR program can increase or limit supply of applicants 3 important aspects of compensation planning linking compensation to organizational objectives pay for performance standard motivating employeesLINKING COMPENSATION TO ORGANIZATIONAL OBJECTIVES Companies are heavily scrutinized by shareholders government and public for how much they pay their people Because of the financial crisis there is pressure on private and public sector organizations to make their pay systems more performance based Compensation has been revolutionized by heightened domestic competition globalization increased employee skill requirements and new technology Managers have changed their pay philosophies from paying for a specific position or job title to rewarding employees on the basis of their individual competencies or work contributions to organizational success Common goals of strategic compensation policy includeReward employees past performanceRemain competitive in the labor marketMaintain salary equity among employeesMesh employees future performance with organizational goals Control compensation budgetAttract new employeesReduce unnecessary turnoverMOTIVATING EMPLOYEES THROUGH COMPENSATION THEORETICAL EXPLANATIONS Two popular theories of potential motivating effects of organizations compensation systems equity theory and expectancy theory Equity Theory pays constitutes a quantitative measure of an employees relative worth Pay represents a reward received in exchange for an employees contribution it is essential according to the equity theory
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