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
Labour market constraints
Product/service market constraints
Financial constraints of the organization
Employment Standards Act
Every province has one
Contractors and Agents are exempted from employment standards
Sets minimum standards for:
o Hours of work
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:
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
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
Firms that experience volatility for their product/service need to be able to adjust their
organizational systems to deal with this fluctuation.
Financial performance of organization causes financial restraints
Unprofitable firms are much more limited to their compensation options than
New firms or fast growing firms often have a shortage of cash.
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
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?