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Chapter 11

Chapter 11 BU354.docx

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John Coffey

BU354 Chapter 11 – Strategic Pay Plans Week 9 The Strategic Importance of Total Employment Rewards -Total employee rewards- an integrated package of all rewards (monetary and non-monetary, extrinsic and intrinsic) gained by employees arising from their employment -Compensation is extrinsic, benefits are extrinsic, and non-monetary rewards are intrinsic -A total rewards approach considers individual reward components as part of an integrated whole to determine the best mix of rewards that are aligned with business strategy and that provide employee value, all within the cost constraints of the organization The Five Components of Total Rewards 1. Compensation – includes direct financial payments – 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 4. Performance and recognition – includes pay-for-performance and recognition programs 5. Development and career opportunities – focuses on planning for the advancement or change in responsibilities to best suit individual skills, talents, and desired – Ex. Tuition assistance Impact of Rewards -The purpose of rewards is to attract, retain, motivate and engage employees / -Engagement refers to a positive emotional connection to the employer and a clear understanding of the strategic significance of the job -Competitive base pay was the number one factor in attracting employees to an organization, having excellent career opportunities was the most important factor in retaining employees and senior management’s interest in employee well-being was the top factor influencing employee engagement Basic Considerations in Determining Pay Rates Legal Considerations in Compensation -All 14 jurisdictions in Canada have laws regulating compensation Employment/Labour Standards Act (Canada Labour Code) -Set minimum standards regarding pay, including minimum wage, maximum hours of work, overtime, paid vacation, paid stat holidays, termination pay, record keeping of pay information and more Pay Equity Acts -Provide equal pay for equal work -Not all Canadian jurisdictions have pay equity laws Human Rights Acts -Protects Canadians from discrimination on a number of grounds in employment and other areas Canada/Quebec Pension Plan -Based on the employee’s average earnings are paid during retirement Other Legislation Affecting Compensation -Each province and territory has its own workers’ compensation laws -The objective of these laws is to provide a prompt, sure, and reasonable income to victims of work- related accidents and illnesses BU354 Chapter 11 – Strategic Pay Plans Week 9 -Includes maternity leave, parental leave, and compassionate care leave benefits provided under the Employment Insurance Act Union Influence on Compensation Decisions -The Canada Industrial Relations Board and similar bodies in each province and territory oversee employer practices and ensure that employees are treated in accordance with their legal rights Union Attitudes toward Compensation Decisions -Many union leaders fear that any system used to evaluate the worth of a job can become a tool for management malpractice -The best way in which to gain the cooperation of union members in evaluating the worth of jobs is to get their active involvement in this process and in assigning fair rates of pay to these jobs Compensation Policies -An employer’s compensation 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, etc. Equity and its Impact on Pay Rates -External equity- employees perceives his or her pay as fair given the pay rates in other organizations -Internal equity – employees perceives his or her pay as fair given the pay rates of others in the organization Establishing Pay Rates 1. Determine the worth of jobs within the organization through job evaluation, and group jobs with similar worth into pay grades 2. Conduct a wage/salary survey of what other employers are paying for comparable jobs 3. Combine the job evaluation and salary survey information to determine pay rates for the jobs in the organization Stage 1: Job Evaluation -Job evaluation- a systematic comparison to determine the relative worth of jobs within a firm -Eventually results in a job hierarchy -Compare the content of jobs in relation to one another -Benchmark job – a job that is critical to the firm’s operations or that is commonly found in other organizations Compensable Factors -Compensable factor- a fundamental, compensational element of a job, such as skill, effort, responsibility and working conditions Job Evaluation Committee -Job evaluation committee- a diverse group (including employees, HR staff, managers, and union representatives) established to ensure the fair and comprehensive representation of the nature and requirements of the jobs in question Classification Method -Classification/grading method – a 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, BU354 Chapter 11 – Strategic Pay Plans Week 9 skill, physical effort, and so forth. Classes usually contain similar jobs – such as all secretaries -Grades- groups of jobs based on a set of rules for each grade, where jobs are similarly in difficulty but otherwise different. Grades often contain dissimilar jobs, such as secretaries, mechanics, and firefighters -Grade/group description – a written description of the level of compensable factors required by jobs in each grade; said to combine similar jobs into grades or classes Point Method -Point method- a job evaluation method in which a number of compensable factors are identified, the degree to which each of these factors is present in the job is determined, and an overall point value is calculated 1. Preliminary steps – have current job descriptions and job specifications based on a thorough job analysis 2. Determine factors weights and degrees – decide on the maximum number of points to assign to each factor See p. 303 3. Assign points for each degree of each sub-factor – points are then assigned to each factor 4. Evaluate the jobs – once the manual is complete, the actual evaluations can begin -Point systems involve a quantitative technique that is easily explained to and used by employees -Pay grade- comprises jobs of approximate
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