MGHB12H3 Chapter Notes - Chapter 9-11: Canada Labour Code, Equal Pay For Equal Work, Collective Bargaining

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21 Dec 2016
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MGHB12 Week 10 & 11: Compensation:
Chapter 9: Managing Compensation:
- Compensation systems
o Attract and retain top talent
o Motivate employees
o “igals og’s alues
o Increase employee loyalty
- Compensation 3 components
o Direct compensation employee wages and salaries, incentives, bonuses, and commissions
o Indirect compensation benefits supplied by employers
o Non-financial compensation employee recognition programs rewarding jobs, org support, work
environment, flexible work hours
Strategic compensation
- Strategic compensation compensation of employees in ways that enhance motivation and growth while
aligning their efforts with the objectives, philosophies, and culture of the org
- Strategic compensation planning purposefully link opesatio to og’s issio ad geeal usiess
objectives
o Mesh $ payments made to employees with specific functions of the HR program
- 3 parts of strategic compensation planning
o Linking compensation to organizational objectives
o Pay-for-performance standard
o Motivating employees through compensation
Linking compensation to organizational objectives
- Pressure for private & public sector orgs to make their pay systems more performance based
- Change from paying for a specific position/job title to also rewarding employees
o Individual competencies
o Work contributions to org success
- Common goals of a strategic compensation policy
o Read eploees’ past pefoae
o Remain competitive in the labour market
o Maintain salary equity among employees
o Mesh eploees’ future performance with org goals
o Control the compensation budget
o Attract new employees
o Reduce unnecessary turnover
Motivating employees through compensation: theoretical explanations
- Equity theory (concept of fairness) how people respond to situations in which they feel they have received
less/more than they deserve
o Pay be equitable in terms of the contributions that an employee provides
o Pay be equitable in terms of what other employees are receiving for their contributions
o Ratio of their inputs to their outcomes compare it with others in a similar class internal/external to
the org
o Strength of their motivation is proportional to the magnitude of the perceived inequity
o Equity achieved when perceived input/output ratio = input/output ratio of referent others
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o Internally equitable eploees eliee that the age ates of thei jos appo. the jo’s oth to
the org
o Externally equitable org is paying wages that are relatively equal to what other employers are paying
for similar types of work
- Expectancy theory oe’s leel of otiatio depeds o the attatieess of the eads sought ad the
probability of obtaining those rewards
o Employees should exert greater work effort if they have reason to expect that it will result in a reward
that is valued
o Value of any $ reward should be attractive
o Must also believe that good performance is valued and will result in receiving the expected reward
o 3 conditions must be met for a reward to be motivational
Must have high valence must be valued by employees
Must have high instrumentality must believe that the attainment of goals and objectives set
by the org must result in the promised rewards
Must have an expectancy that they can do the required tasks must be attainable
The basis for compensation
- Hourly work work paid on an hourly basis
- Piecework work paid according to the # of units produced
- Compensated on hourly basis hourly employees or wage earners
- Compensated on basis of weekly, biweekly, or monthly pay periods salaried employees
- Employment practices provincial jurisdiction provincial employment standards act
o OT 1.5x the base hourly wage
Determining compensation the wage mix
Internal factors
- Eploye’s opesatio stategy
o Internal wage relationship among jobs and skill
levels
o Eteal opetitio o a eploe’s pa positie
relative to what competitors are paying
o Policy of rewarding employee performance
o Administrative decisions concerning elements of the pay system
- Worth of a job
o Without formal compensation program ay rates influenced by labour market or collective bargaining
o With formal compensation program job evaluation
Establishing wage structures
Cover clerical, technical, various blue-collar groups
o Based on total value delivered to the org provide insight into how job relates to overall org success
- Eployee’s elatie oth i eetig jo euieets
o Employee performance recognized and rewarded through promotion and various incentive systems
o Merit raises based on steps within a rate range established for a job class
Must provide visible & credible relationship between performance and any raises received
- Eploye’s aility to pay
o Limited to earned profits and financial resources available to employers
o Determined also  eploee’s podutiit capital investment in labour-saving equipment
o Economic conditions & competition
External factors
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- Labour market conditions
o Reflects forces of supply and demand for qualified labour within an area
o Counterforces can reduce full impact of supply and demand
Power of unions prevent employers from lowering wage rates even when unemployment is
high among union members
Go’t egulatios min. wage set by each province
- Area wage rates
o Should provide rates that are in line with comparable jobs within the area
o Info may be obtained from local wage surveys or other sources at a cost or for free
o Wage surveys providing external wage equity between surveying org and other orgs competing for
labour in the surrounding labour market
Can prevent rates from drifting too far above/below those of other employers in the region
Need to take into account of indirect wages (benefits)
- Cost of living
o Consumer price index (CPI) easue of the ag. hage i pies oe tie i a fied aket asket
of goods and services
o Monitor CPI as a basis for compensation decisions
o Consequences with CPIs organizational morale and productivity
Not linked to performance discouragement
Cost-of-living increases be discounted frustrated employees
o Escalator clause clauses in collective agreements that provide for quarterly cost-of-living adjustments
(COLAs) in wages, basing the adjustments on changes in CPI
- Collective bargaining
o Labour unions bargain collectively over conditions of employment compensation
o Real wages wage increases larger than rises in CPI, that is, the real earning power of wages
Increasing purchasing power and standard of living
o Goal gaining wage settlements equal or > pattern established by other unions within the area
o Rate patterns within labour market higher wages in areas where organized labour is strong
Job evaluation systems
- Job evaluation systematic process of determining the relative worth of jobs to establish which jobs should be
paid more than others within an org
o Establish internal equity between various jobs
- 3 traditional methods of comparison
o Job ranking system simplest and oldest system of job evaluation by which jobs are arrayed on the
basis of their relative worth
Raters arrange cards listing the duties & responsibilities of each job in order of the importance
of the job
Disadvantages
Does’t poide peise easue of eah jo’s oth
Ignores differences in degree of importance that may exist between jobs
Can only be used with a small # of jobs (max. 15)
o Job classification system system of job evaluation in which jobs are classified and grouped according
to a series of predetermined wage grades
Successive grades require increasing amounts of job responsibility, skill, knowledge, ability, etc.
Less precise than point system job evaluated as a whole
o Point system quantitative job evaluation procedure that determines the relative value of a job by the
total points assigned to it
Difficult to establish, but simple to understand and use
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Document Summary

Compensation systems: attract and retain top talent, motivate employees, ig(cid:374)als o(cid:396)g"s (cid:448)alues. Compensation 3 components: direct compensation employee wages and salaries, incentives, bonuses, and commissions, non-financial compensation employee recognition programs rewarding jobs, org support, work. Indirect compensation benefits supplied by employers environment, flexible work hours. Strategic compensation compensation of employees in ways that enhance motivation and growth while aligning their efforts with the objectives, philosophies, and culture of the org. Strategic compensation planning purposefully link (cid:272)o(cid:373)pe(cid:374)satio(cid:374) to o(cid:396)g"s (cid:373)issio(cid:374) a(cid:374)d ge(cid:374)e(cid:396)al (cid:271)usi(cid:374)ess objectives: mesh $ payments made to employees with specific functions of the hr program. 3 parts of strategic compensation planning: linking compensation to organizational objectives, pay-for-performance standard, motivating employees through compensation. Pressure for private & public sector orgs to make their pay systems more performance based. Change from paying for a specific position/job title to also rewarding employees. Individual competencies: work contributions to org success. Must have high valence must be valued by employees.

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