HRM 3490 Chapter : Components of Compensation Strategy
Document Summary
In designing any compensation strategy, two key questions must be addressed: what role should each of the three compensation components (base pay, performance pay, indirect pay) play in the compensation mix, answered in chapter 5. The portion of an individual"s compensation that is based on time worked, not on output produced or results achieved. For majority of canadians, serves as the largest component of compensation package. When calculated hourly (wage), weekly, monthly or annually (salary) Disadvantages of base pay: linked to variability in an employer"s ability to pay, does not directly motivate task behaviour, does not directly contribute to citizenship behaviour. Advantages of market pricing: simplicity and cost, keeps jobs aligned with market conditions. Disadvantages of market pricing: going rate not always easy to identify, job definitions may vary from the market data, does not address internal equity, lack of control of compensation strategy, may violate pay equity legislation.