Professional Documents
Culture Documents
COMPENSATION MANAGEMENT
CHAPTER NO. 8
Understand and differentiate between performance management and performance appraisal. Identify the factors that effect performance. Narrate performance management cycle. Describe two major purposes of performance management. Understand three job criteria and information types. Discuss the pros and cons of using different raters to appraise a persons performance . Develop , evaluate, and administer at least four appraisal methods to measure performance
WHAT IS COMPENSATION
COMPENSATION
Compensation is what employee receives in exchange for their contribution to the organization.
Compensation management help the organization to obtain, maintain and retain a productive Workforce.
Ensure Equity
Control Cost
Efficiency
Rewards once receives from job itself such as pride in Ones work, a feeling of accomplishment, or being a part of a team.
2. EXTRINSIC COMPENSATION
Individual
Financial Rewards
Fringe Benefits
INDIVIDUAL
ORGANIZATION WIDE
GROUP
Profit Sharing
Gain Sharing
Position Description
Phase 2 Internal Equity
Job Ranking
Phase 3 External Equity
Job Grading
Factor Comparison
Point System
Dept. Of Labor
Job Evaluation Worth Match Rate & Range for Each Job
Job Analysis
Position Description Job Description Job Standard
JOB ANALYSIS
JOB ANALYSIS
A Systematic way of gathering and analyzing information about the Content, Context, and the Human Requirements of jobs for the purpose of developing Job description, Job specification & Job evaluation.
Job Evaluation
Job Ranking
Job Grading
Factor Comparison Point System
JOB EVALUATION
Systematically determining the relative worth of the jobs to create job structure.
Or
Determining the worth of job for reward, benefits & compensation system.
4. Point System
Arrangement of job in a simple rank order form highest to lowest or form lowest to highest.
Raters examine the JD of the each job. Arrange in order according to value. e.g. starting from lowest to highest Janitor ranked 1 Secretary gets 2 Office manager gets 3
Step 1 Step 2
These classification are created by identifying a number of job related factors such as, education, experience and responsibilities with the goal to determine classes or grades of Job.
After classifications, jobs are ranked in an overall order of importance according to criteria chosen and each job is placed in its appropriate grade The standard description that most nearly matches the JD determines the jobs grading/classification.
Step 3
Determine the Critical factor Determine Sub-factor Determine the levels of factors
Allocate points to factor under each level
2
Steps Of Point System Method 3
4
5 6
Factors
SKILL
1st Degree 15 20 15 10
2nd Degree 30 40 30 20
3rd Degree 45 60 45 30
4th Degree 60 80 60 40
5th Degree
Education
Experience
75 100 75 50
EFFORT
Physical demand
Mental or visual demand
5 5
5
10 10
10
15 15
15
20 20
20
25 25
25
RESPONSIBILITY
Equipment or process Material or product Safety of others Work of other job conditions
5
5
10
10
15
15
20
20
25
25
JOB CONDITIONS
Working conditions Unavoidable hazards
10
5
20
10
30
15
40
20
50
25
b.
Equipment and materials: each employee is responsible for conserving the companys equipment and material. This includes reporting mal functioning, equipment or defected material, keeping equipment and material clean or in proper order, and maintaining , repairing, or modifying equipment and materials according to individual job duty. The company recognizes that the degree of responsibility for equipment and material varies widely through out the organization
Level1: Employee reports mal functioning equipment or defective materials to immediate superior. Level 2: Employee maintain the appearance of equipment or order of materials and has responsibilities for the security of such equipments and materials Level 3: Employee performs preventive maintenance and minor repairs on equipment or corrects minor defects in materials Level 4: Employee performs major maintenance or overhauls of equipment or is responsible for deciding type, quantity, and quality of material to be used.
Employee Associations
Professional Association Self-Conducted Surveys
PRICING JOB
Allocate the Value to the job After matching the job evaluation worth with the market worth.
The line on a graph showing the relationship between job value, as determined by job evaluation points, and pay survey rates.
A grouping of individual jobs having approximately the same job worth. It involves collapsing multiple salary grades and ranges into a few wide levels known as bands.
Using the market line as a starting point, the employer can determine maximum and minimum pay levels for each pay grade by making the market line the midpoint line of the new pay structure.
Broad Banding
Pay Ranges
Gain SHARING
Matches an improvement (gain) in performance with a distribution (sharing) of the benefits with employees.
Production Bonuses
Commissions Merit Raises Pay for knowledge/pay for Skills Compensation Non Monetary Incentive Executive Incentive
e.g. recognition programs in which employee receives certificates, time off, vacations etc Stock option: the right to purchase the companys stock at a predetermined price. Weighted incentive systems: reward executives on the basis of improvements in the multiple areas of business
Employee Ownership
Production Sharing Plans Profit Sharing Plans Cost Reduction plans
Scanlon Plan: Employees aim to reduce costs and then share in the savings that result. Bonuses on improvements in quality of labor costs compared with the historical norms
PERSON
Others Rewards
Other's Contributions
My Rewards My Contributions
My Rewards My Contributions
PROCEDURAL JUSTICE
The perceived fairness of the process used to determine the distribution of rewards.
DISTRIBUTIVE JUSTICE
Perceived fairness of the amount and allocation of rewards among individuals.
Pricing Job
Pay above the Market Rate Pay Market Rate Pay below the Market Rate
Phase 4
Matching Internal and External Work
MARKET RATE & COMPENSATION PLANS 1. Pay Above the Market Rate Advantages
Attracts better employees. Minimize voluntary turnover. Fosters Strong culture & competitive Superiority
Disadvantages
Additional Compensation Cost Sense of entitlement
Disadvantages
Resource at midrange of market- forever driven Compensation. Turnover will vary with labor demand of competitively firms.
MARKET RATE & COMPENSATION PLANS 1. Pay Below Market Rate Advantages
Lower Compensation Costs Useful in labor Market where Unemployment rate large High Turnover, Especially wage
Disadvantages
Lower Quality Employee Low Moral / Job Satisfaction
Ensure Equity
Facilitate Understanding
Control Cost
Intrinsic Compensation
Types of Compensation
Extrinsic compensation
Financial Rewards Non Financial Rewards
Wages & Salaries Fringe Benefits Incentives Gain Sharing
COMPENSATION MANAGEMENT
PHASE 1 Scientific Job Analysis Management
Scientific
Department of Labor Management Employee Associations Professional Associations Self Conducted Survey
Scientific
Job Evaluation Worth Management Match Rate & Range for each Job Labor Market Worth
Scientific
Pay Above the Market Rate Pay Market Rate Pay Below the Market Rate
CHAPTER 8