Managing Compensation

Topics: Employment, Wage, Employment compensation Pages: 9 (1349 words) Published: March 14, 2013

Mr. Noel Teves

Haycey Oliveros Showbe Enot
Jhane Estremadora

Kevin Alfonso Cesar Valencia III (Not Available)

 


 A total amount of the monetary and

non-monetary pay provided to an employee by an employer in return of work performed as required.  Pay is a statement of an employee’s worth by an employer.  Pay is a perception of worth by an employee.

Total Compensation

Wages / Salaries

Time Not Worked
• Vacations • Breaks • Holidays

Commissions Bonuses

Insurance Plans
• Medical • Dental • Life

Security Plans
• Pensions

Employee Services

• Educational assistance • Recreational programs

Strategic Compensation Planning
 Strategic Compensation Planning
 Links the compensation of employees to the mission,

objectives, philosophies, and culture of the organization.  Serves to mesh the monetary payments made to employees with specific functions of the HR program in establishing a pay-for-performance standard.  Seeks to motivate employees through compensation.

 Value-added Compensation  Evaluating the individual components of the

compensation program (pay and benefits) to see if they advance the needs of employees and the goals of the organization.

Common Strategic Compensation Goals:
2. 3. 4.

To reward employees’ past performance
To remain competitive in the labor market To maintain salary equity among employees To mesh employees’ future performance with organizational goals

5. 6. 7.

To control the compensation budget To attract new employees To reduce unnecessary turnover

Pay-for-Performance Standard
 The standard by which managers tie compensation to

employee effort and performance.
 Refers to a wide range of compensation options,

including merit-based pay, bonuses, salary commissions, job and pay banding, team/group incentives, and various gain sharing programs.

Designing a Pay-for-Performance System
 How will performance be measured?
 How will monies to be allocated for compensation

increases.  Which employees will be eligible?  How will payouts be made?  How often will payouts occur?  How large will the payouts be?  Will employees perceive the rewards as valued?

 Pay Equity (also Distributive Fairness)
 An employee’s perception that compensation received is equal

to the value of the work performed.  A motivation theory that explains how people respond to situations in which they feel they have received less (or more) than they deserve.  Individuals form a ratio of their inputs to outcomes in their job and then

compare the value of that ratio with the value of the ratio for other individuals in similar jobs.

Expectancy Theory and Pay
 Expectancy Theory
 A theory of motivation that holds that employees

should exert greater work effort if they have reason to expect that it will result in a reward that they value.  Employees also must believe that good performance is valued by their employer and will result in their receiving the expected reward.

 Pay Secrecy
 An organizational policy prohibiting employees from revealing

their compensation information to anyone.  Creates misperceptions and distrust of compensation fairness and pay-for-performance standards.  Arguments against secrecy:  Knowledge of base pay is the strongest predictor of pay satisfaction, which is highly associated with work engagement  Knowledge of base pay more strongly predicts pay satisfaction than does the actual amount of pay received by employees.

The Bases for Compensation
 Hourly Work
 Work paid on an hourly basis.

 Piecework
 Work paid according to the number of units produced.

 Salary Workers
 Employees whose compensation is computed on the basis of weekly,

biweekly, or monthly pay...
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