Strategic Compensation

Chapter # 4 , 5 & 6

Human Resource
Societal Strategies Corporate Affecting Compensation Business Decision Making Functional
Governmental Decisions Organizational Management Decisions Function Level Decisions

Strategies

Total Compensation

Direct Wages / Salaries Commissions Bonuses Gainsharing

Indirect Time Not Worked

Vacations Breaks Holidays

Insurance Plans
Medical Dental Life

Security Plans
Pensions

Employee Services

Educational assistance Recreational programs

What Is the Strategic Compensation Perspective?

The strategic perspective involves thinking about how pay can assist in achieving organization success.

The Relationship between Business Unit Strategy to Compensation Goals

Strategy A fundamental pattern of present and past deployments and environmental interactions that indicates how an organization will achieve its objectives.

Compensation Goals Attract,

Retain, Motivate and Develop the Human Resources necessary to accomplish the Organization's goals

HR Strategy Acquiring the Quantity

and Quality of human resources the possess the necessary knowledge, skills and abilities within relevant time constraints, to achieve organization goals

Compensation Strategy Decisions

to Environmental Threats and Opportunities and linked or at least support the overall direction of the organization

Common Strategic Compensation Goals

1. To reward employees past performance 2. To remain competitive in the labor market

3. To maintain salary equity among employees

4. To mesh employees future performance with organizational goals 5. To control the compensation budget 6. To attract new employees 7. To reduce unnecessary turnover & motivate employees

Key Strategic Issues in Compensation

Determining compensation relative to market Balance between fixed and variable compensation Deciding whether or not to utilize team-based versus individual pay Creating appropriate mix of financial and non-financial compensation

Developing a cost-effective compensation program resulting in high performance

Compensation Policy Issues

Pay for performance Pay for seniority

Salary increases and promotions

Overtime and shift pay Probationary pay Paid and unpaid leaves Paid holidays Salary compression Geographic costs of living differences

Strategic Compensation Policy Concerns

1. The rate of pay within the organization and whether it is to be above, below, or at the prevailing community rate. 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.

QUESTIONS