Chapter 9 - Developing A Compensation Plan PDF
Chapter 9 - Developing A Compensation Plan PDF
Chapter 9 - Developing A Compensation Plan PDF
Direct Indirect
Time Not Worked
Wages / Salaries • Vacations
• Breaks
• Holidays
Commissions
Insurance Plans
• Medical
Bonuses • Dental
• Life
Gainsharing
Security Plans
• Pensions
Employee Services
• Educational assistance
• Recreational programs
Supply of applicants affects
Aid or impair recruitment Recruitment wage rates
benefits) to see if they advance the needs of employees and the goals of the
organization.
2. The ability of the pay program to gain employee acceptance while motivating employees
to perform to the best of their abilities.
3. The pay level at which employees may be recruited and the pay differential between new
and more senior employees.
4. The intervals at which pay raises are to be granted and the extent to which merit and/or
seniority will influence the raises.
5. The pay levels needed to facilitate the achievement of a sound financial position in
relation to the products or services offered.
Pay-for-Performance Standard
• The standard by which managers tie compensation to employee effort and performance.
Establishes the internal wage relationship among jobs and skill levels
Employer’s Ability-to-Pay
Unions bargain for real wage increases that raise the standard of living for
their members.
Real wages are increases larger than rises in the consumer price index; that
Oldest system of job evaluation by which jobs are arrayed on the basis
of their relative worth.
Disadvantages
Final job rankings indicate the relative importance of jobs, not the
extent of differences between jobs.
Method can used to consider only a reasonably small number of jobs.
b) Job Classification system
A job evaluation system that seeks to measure a job’s worth through its value to the
organization.
the organization.
Considers that work should be valued relative to the business goals of the organization
Work valuation serves to direct compensation dollars to the type of work pivotal to
organizational goals.
e) Job Evaluation for Management Positions (Hay Profile Method)
accountability
—to evaluate executive and managerial positions.
(A) Wage and Salary Survey
A curve in a scatter gram representing the relationship between relative worth of jobs and
wage rates.
Pay Grades
Groups of jobs within a particular class that are paid the same rate.
Rate Ranges
A range of rates for each pay grade that may be the same for each grade or proportionately
greater for each successive grade.
Competence-based Pay, (also skill-based pay or knowledge-based pay)
Compensation for the different skills or increased knowledge employees
possess rather than for the job they hold in a designated job category.
Greater productivity, increased employee learning and commitment to
work, improved staffing flexibility to meet production or service
demands, and the reduced effects of absenteeism and turnover,
Broadbanding
Collapses many traditional salary grades into a few wide salary bands.
• Assessing the effectiveness of your compensation system is vitally important
to linking compensation with strategy.
• Measures: