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York University (12,360)
HRM 3490 (10)
Ping Peng (10)

Formulating the Reward and Compensation Strategy

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York University
Human Resources Management
HRM 3490
Ping Peng

Chapter 5 Four Major Issues when Formulating Reward and Compensation Strategy 1) Understand Your Organizational Context in which the reward system will be applied 2) Understand your people – behaviours, factors that drive human behaviour 3) Understand Your compensation options – base, performance, indirect 4) Understand your compensation constraints  Legislated constraints  Labour market constraints  Product/service market constraints  Financial constraints of the organization Legislated Constraints Employment Standards Act  Every province has one  Contractors and Agents are exempted from employment standards  Sets minimum standards for: o Pay o Hours of work o Vacation o Statutory Holiday o Leave Entitlement o Termination Benefits o Minimum Age Levels for Employment o Overtime Pay – exempts supervisors Human Rights Legislation  Prohibits employment discrimination based on factors such as: o Gender o Race o Age  The Canadian Human Rights Act – male and female employees must receive equal pay for work of EQUAL VALUE, even if the work is not substantially similar – PAY EQUITY. Trade Union Legislation  Defines the rights of parties involved in a collective bargaining relationship. Labour Market Constraints  Constraints on compensation strategy flowing from the relative levels of demand and supply for particular occupational groups.  The available pool of labour from which employers choose their employees .  Demand is high but supply is low = tight labour market (difficult to attract)  Demand is low but supply is high = loose labour market (easier to attract) Product/Service Market Constraints  The nature of the market for a firm’s product or services  If demand is low and supply is high it results in a highly competitive business environment  Firms that experience volatility for their product/service need to be able to adjust their organizational systems to deal with this fluctuation. Financial Constraints Private  Financial performance of organization causes financial restraints  Unprofitable firms are much more limited to their compensation options than profitable firms.  New firms or fast growing firms often have a shortage of cash. Public  Financial constraints usually result from funding limitations placed on them by those providing the funds (government) Formulating the Compensation Strategy Define Required Behaviour 1) Membership behaviour 2) Task behaviour – vary in complexity, skill, performance level, material 3) Organizational citizenship behaviour  Classical Organizations o Minimal membership behaviour o Adequate task behaviour o No Citizenship behaviour  Human Relations Organizations o High membership behaviour o Adequate task behaviour o Some citizenship behaviour  High involvement Organizations o High membership behaviour o High task behaviour o High citizenship behaviour Dimensions of Task Behaviour • Are tasks simple or complex? • Procedural or creative? • Low or high skill requirements? • Narrow tasks or broad? • Low or high interdependence? • Individual or team-based outputs? • Low or high cost of errors? • Adequat
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