Allowances

compensation to provide what is in short supply

“workers as commodity”

Low Cash Compensation/High Relational Returns

Cost Cutter

Focuses on operational efficiency; a supporting compensation systgem focuses on competitors labour costs, increasing variable pay and emphasizing prductivity

Strategy

the fundamental business decisions that an organization has made in order to achieve its strategic objectives, such as what business to be in and how to obtain competitive advantage

Reliability

consistency of results from repeated applications of a measure

 Usefulness

 If job analysis does this in a reliable, valid, and acceptable way, then the technique is of practical use

Competencies

underlying, broadly applicable knowledge, skills, and behaviours that form the foundation for successful work performance

Marginal Product of Labour

 the additional output associated with the employment of one additional human resources unit, with other production factors held constant

Benefit Maximums

Limitations on benefit payable

Top-Down Budgeting

Top Management of each organizational unit estimates the pay-increase budget for that unit

1. Strategic objectives
2. Strategic Policies
3. Pay Techniques

1. Efficiency
2. Fairness
3. Compliance

1. Internal Alignment
2. External Competitiveness
3. Employee Contributions
4. Management

1. Innovator Business Strategy
2. Cost Cutter Business Strategy
3. Customer-Focused Busines Strategy

                                                               i.      At the corporate level: what business should we be in?

                                                             ii.      At the business unit level: how do we win (gain and sustain competitive advantage) in those business?

                                                            iii.      At the human resources level: how does HR support competitive advantage

                                                           iv.      At the compensation level: how should our total compensation help gain and sustain competitive advantage?

1. Assess Total Compensation Implicattions
2. Map a Total Compensation Strategy
3. Implement the Strategy
4. Reassess and Realign

1.       Set objectives

2.       Specify policy on alignment

3.       Specify policy on competitiveness

4.       Specify policy on contributions

5.       Specify policy on management

1. Does it align?
2. Does it differentiate?
3. Does it add value?

                                          i.    Consistently applied to all employees

                                        ii.    If there is employee participation in the process

                                       iii.    If there is an appeals process

                                       iv.    The data underlying the decision is accurate

1. Supports Workflow
2. Supports Fairness
3. Directs behavior towards organizational objectives

1. number of levels of work
2. pay differentials among the job levels
3. criteria used to determine levels and differentials

1. Economic Pressures
2. Government polciies, Laws and Regulations
3. External Stakeholders
4. Culture and Customs

1. Strategy
2. Human Capital
3. Work Design
4. Human Resources Policies

relatively flat pay structure with a small number of levels relatively samll difference between the top pay rate and the bottom pay rate

1. thought to promote teamwork
2. levels of responsibility and supervision are removed
3. imply a belief that more equal treatment improves employee satisfaction and supports cooperation

                                          i.    Thought to improve command-and-control performance usually through an extensive bureaucracy

                                        ii.    The multiple levels typically include detailed descriptions of work done at each level and delineate who is responsible for what

                                       iii.    Value the differences in individual employee skills, responsibilities and contributions to the organization

                                       iv.    Consistent with a belief in the motivational effects of frequent promotions

1. Competitive Advantage
2. Fairness
3. Legal Compliance

• The achievement of alignment is thought to improve efficiency through reduced turnover (retention), performance gains from increased training and experience, improvement in motivation, and reductions in pay grievances and work stoppages

• Some view small differentials and egalitarian structures as inherently fair while others argue that hierarchical structures with large differentials better reflect the relative contribution of individuals to the organization’s success

• Organization’s will adapt their pay structures to comply with the relevant laws and regulations of the jurisdictions in which they employ staff

1. why are we collecting job information
2. what information do we need
3. how should we collect it
4. who should be involved
5. how useful are the results

1. develop preliminary job information
2. conduct initial tour of worksite
3. conduct interviews
4. conduct second tour of work site
5. consolidate job information
6. verify job description

1. It describes the tasks or elements required to fulfill the mission or responsibilities of the role

the basic tasks or units of work with emphasis on the purpose or outcome of each task

1. The section of a job description that are concerned with the characteristics of the incumbent – skills, aptitudes, and other characteristics
2. Can include professional/technical knowledge and manual, verbal, written, quantitative, mechanical, conceptual, managerial, leadership and interpersonal skills

1. Job descriptions often try to capture information on how a particular role will communicate with other roles within the organization.  The level of communication and the nature of the communication are important factors in understanding the interrelationships of roles
2. Involve behavior between the employee and their supervisors, peers, and direct reports

1. Job descriptions often try to capture information on how a particular role will communicate with individuals outside of the organization (customers, suppliers, regulators, etc).  The level of communication and the nature of the communication are important factors in understanding the interrelationships of roles
2. Involve behavior between the employee and their suppliers, customers, regulatory personnel, professional/industry personnel, the community at large and union/employee groups

• simplest, fastest, easiest to understand and explain to employees,and initially the cheapest
• doesn't tell employees what in their jobs is important
• criteria on which jobs are ranked is poorly defined
• evaluations become more subjective opinions

• can group a wide range of work togehter in one system
• descriptions may leave too much room for manipulation
• can be difficult when jobs from several different job familes are covered by a single plan

• most common method of job evaluation

• compensable factors explain the basis for comparisions; make explicit the criteria for evaluating jobs and communicate what is valued
• it can become bureaucratic and rule bound
• compensable factors are defined on the basis of the strategic directions of the organization and how te work contributes to that strategy

1. Conduct job analysis
2. determine the compensable factors
3. scale the factors
4. weight the factors
5. communicate the plan
6. apply to non benchmark jobs

1. Skills required
2. effort required
3. responsibility
4. working conditions

1. Inconsisten construct format
2. Factor Overlaps
3. Hierarchical Grouping
4. Gender Bias

• earn pay increases by acquiring new knowledge specific to a range of related jobs
• pay increases come with certification of new skills, rather than with new job assignments

1. method for predicting employee performance without the bias of intelligence and aptitude testing.  When applied to developing a pay structure it involves gathering information about a job but then describing the job by:

                                          i.    Identifying the success factors or competencies required of incumbents

                                        ii.    Defining a behavioral description of each one

                                       iii.    Ranking the behavioral description by its criticality (importance)

                                       iv.    Establish a proficiency level for each factor

• Job Based
• Person Based
• Competency Based

• pay increases are gained by promotions to more responsible jobs
• focus is on placing the right people in the right jobs
• controls costs by paying only as much as the work performed is worth

• pay increases are gained by acquring more valued sills/competencies
• managers must assign the right work to the right people
• flexibilty is maximized, but can also enoucrage all employees to become certified at the top rate

1. pay level relative to that of competitors
2. mix of pay forms relative to that of competitiors

1. Competition in the labour market for people with various skills
2. competition in the product and service markets, which affect the financial condition of the organization
3. characteristics unique to each organization and its employees

                                          i.    Adjust the pay level is response to changing competitor pay rates

                                        ii.    Set the mix of pay forms relative to those paid by competitors

                                       iii.    Establish of price its pay structure

                                       iv.    Analyze pay-related problems

                                        v.    Estimate the labour costs of product market competitors

                                          i.    Who should be involved in the survey design

                                        ii.    How many employers should be included (sample size)

                                       iii.    Which jobs should be included

                                       iv.    What information should be collected

                                          i.    Who should receive the benefit?

                                        ii.    How much choice/input should employees have in the benefit program?

                                       iii.    How should the benefit be financed?

                                          i.    Employees choose a package that best satisfies their unique needs

                                        ii.    They help organizations meet the changing needs of a changing workforce

                                       iii.    Increased employee involvement in making choices improves their understanding of benefits

                                       iv.    They may the introduction of new benefits less costly.  The new option is added as one among a wide variety of elements from which an employee can choose

                                        v.    They can be used as a cost-containment strategy.  Organizations set dollar maximums and employees choose their benefits from within those constraints

                                          i.    Employees may make uninformed choices and find themselves not covered for predictable emergencies

                                        ii.    There is an increase in administrative expenses

                                       iii.    Employees select only the benefits they needs.  The subsequent high benefit utilization increases costs (also known as adverse selection)

• probationary periods
• benefit maximums
• coinsurance
• deductibles
• coordination of benefits
• administrative cost containment i.e. competitive bids
• outsourcing

                                          i.    The unknown benefit level is difficult to communicate to employees

                                        ii.    Employees assume the risks associated with changes in inflation and interest rate that affects pension plan costs

                                       iii.    It is more favorable to short-service employees

                                       iv.    Employer costs are known up front

                                        v.    There is no surplus or deficit in the pension fund to manage

                                          i.    Provides an explicit benefit that is easily communicated to employees

                                        ii.    Employer absorbs risks associated with changes in inflation and interest rate that affect pension plan costs

                                       iii.    Is more favorable to long-service employees

                                       iv.    Employer costs are unknown

                                        v.    A pension fund surplus, but not deficit, must be shared with employees if the plan is wound up

                                          i.    Hygiene needs – as basic needs of food, shelter, safety

                                        ii.    Satisfiers – roughly correlate to Maslow’s higher psycho-social needs

• Straight Piecework plans
• Standard Hour Plan
• Taylor Differential Piecerate System
• Merrick multiple piece rate system
• Halsey 50-50 method

• Scanlon
• Rucker
• Halsey50/50
• Improshare

1. Advantages:

                                          i.    Clear performance/reward link

                                        ii.    Can result in productivity and quality improvements

                                       iii.    Employees’ knowledge of business increases

                                       iv.    Fosters teamwork, cooperation

2. Disadvantages:

                                          i.    Can be administratively complicated

                                        ii.    Unintended effects, such as a decline in quality

                                       iii.    Management must “open the books”

                                       iv.    Payouts can occur even if organization’s financial performance is poor

1. A gain-sharing plan at the group or organizational level that provides incentives based on the ratio between output described as the sales volume of production (SVOP) and the labour costs.  25% is distributed to employees monthly, 50% goes to the company, and the remaining 25% is held in reserve to offset bad months – the remaining balance is distributed to employees at year end

1. A gain-sharing plan based on the labour contribution to the cost of production.  If employees produce more than expected for the labour costs then the amount is distributed in the same manner as the Scanlon Plan.  A little more precise than the Scanlon Plan in that raw material and other supply costs are factored out
2. involves a somewhat more complex formula than a Scanlon plan for determining employee incentive bonuses.  Essentially, a ratio is calculated that expresses the value of production required for each dollar of the total wage bill

• productivity norm
• development of effective worker committees

1. AKA as ‘Team Incentive Plans’ these are incentive pay plans for meeting or exceeding team performance standards
2. Award determined based on group performance goals or objectives
3. Payout can be more frequent than annually and can also extend beyond the life of the team
4. Payout may be uniform for group members

1. Advantages:

                                          i.    Reinforces teamwork and team identity/results

                                        ii.    Effective in stimulating ideas and problem solving

                                       iii.    Minimizes distinctions between team members

                                       iv.    May better reflect how work is performed

                                        v.    Positive impact on organization and individual performance

                                       vi.    Easier to develop performance measures than for individual plans

                                      vii.    Signals that cooperation, both within and across groups, is a desired behavior

                                    viii.    Teamwork meets with enthusiastic support from most employees

                                       ix.    May increase participation of employees in the decision-making process

2. Disadvantages:

                                          i.    May be difficult to isolate impact of team

                                        ii.    Not all employees work on a team

                                       iii.    Can be administratively complex

                                       iv.    May create team competition

                                        v.    Difficult to set equitable targets for all teams

                                       vi.    Employees may find it more difficult to see how their individual performance affects their incentive payouts

                                      vii.    May lead to increased turnover among top individual performers who are discouraged because they must share with lesser contributors

                                    viii.    Increases compensation risk to employees because of lower income stability.  It may influence some applicants to apply for jobs in organizations where based pay is the larger compensation component

• New Year's Day
• Good Friday
• Canada Day
• Labour Day
• Christmas Day

                                          i.    Differences in occupational attainment and the jobs held by men and women, such as level of responsibility, working conditions, skills and effort required

                                        ii.    Differences in personal work-related characteristics, such as performance and absenteeism

                                       iii.    Differences among industries and firms, for example, organizational objectives, organizational size, and organization’s ability to pay

                                       iv.    Differences in union membership

                                        v.    Differences in labour market conditions

                                       vi.    The presence of discrimination

                                          i.    Identify the organizational unit for the plan

                                        ii.    Identity job classes (job descriptions)

                                       iii.    Identify males, female, neutral job classes

Assess the value of the job to the organization using a gender-bias free method of evaluation

• earn approximately 10% more than their non union counterparts
• prefer a fixed rate that are not based on individual performance
• adds 20-30% to employee benefits
• two-tier pay plans

• the current year's rise
• ability to pay
• competitive market
• turnover effects
• changes in cost of living

1. Various factors that influence the average pay increase budget decision in an organization include:

·         % rise = 100 * (avg pay at year end – avg pay at year beg.)/Avg pay at year beginning

                                          i.    Power distance (respect for status and hierarchy)

                                        ii.    Individualism vs. collectivism

                                       iii.    Uncertainty avoidance (risk tolerance)

                                       iv.    Masculinity vs. femininity (degree to which aggressiveness and standing out from the crowd is valued or tolerated)

1. An approach to expat compensation that considers the cost of living in the host country and attempts to compensate the employee for the differences through a variety of allowances so that the employee can purchase what they require to maintain parity with the peers back home.  Particularly useful when the intent is to repatriate the employee in their home country after the assignment; approach to setting expatriate pay is based on the premise that employees on overseas assignments should have the same spending power as they would in their home country.  Therefore, the home country is the standard for all payments

                                          i.    To ensure mobility of expat talent to global assignments as cost effectively as is feasible

                                        ii.    To ensure that expats neither gain nor lose financially

                                       iii.    To minimize adjustments required of expats and their dependents