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MANAGING COMPENSATION (NUR SYAHIRAH NATASYHA, NORSYAMMIMI, NOOR AISHA…
MANAGING COMPENSATION
(NUR SYAHIRAH NATASYHA, NORSYAMMIMI, NOOR AISHA UMAIRA, SITI NURIDAYU)
9.1 What is Compensation?
There are 3 components
Direct compensations : employee wages, salaries, commission
Indirect compensations : benefits
Nonfinancial compensations : rewarding works, flexibility
9.2 Strategic compensation
9.2.1 Linking compensation to organization
Compensation of employees in ways that enhance motivation and growth.
To reward employees’ past performance
To attract new employees
To reduce unnecessary turnover
To maintain salary equity among employees
9.2.2 The pay performance standard
Managers tie compensation to employee effort and performance.
Most employee believe that the compensation should be directly linked to relative performance
Include the bonus, commission.
9.2.3 The bases for compensations
Hourly work
Salaried employee
Piecework
Non-exempt employees
Exempt employees
9.3 Compensation Design
9.3.1 internal factors
Compensation strategy of organization
Worth of job
Employee’s relative worth
Employer’s ability to pay
9.3.2 external factors
Condition of the market labor market
Area pay
Cost of living
Collective bargaining
Legal requirement
9.4: Job Evaluation Systems
What is Job Evaluation System?
The systematic process of determining the relative worth of jobs to establish and should be paid more than others within organization.
Helps to establish internal equity between various jobs
Methods of comparison
Rank the value of jobs from highest to lowest
Classify jobs so they can be benchmarked internally and externally
Award points to each job based on how much they are linked to organizational objectives
Method of Job Evaluation
Job Ranking System
Oldest system of job evaluation which arrays jobs on the basis of their relative worth
Having the raters arrange cards listing duties and responsibilities of each job
Does not provide very precise measure of each job’s worth
Can be used only with a small number of jobs not more than 15
Ideal for small businesses
Job Classification System
Jobs classified and grouped according to a series of predetermined grades
Evaluate jobs by comparing job description with the different wage grades to ‘slot’ the job into the appropriate grade
Less precise than the point system because job evaluated as a whole
Widely used by municipal and state government
Point System
A quantitative job evaluation procedure
Determines a job’s relative value by calculating the total points assigned to it
Provides more refined basis for making judgements than either ranking or classification systems
Use of point manual – handbook that contain description of the compensable factors and degrees to these factors may exist in the jobs
Work Valuation
Seeks to measure a job’s worth through its value to the organization
Serves to direct compensation dollars to the type of work pivotal to organization goals
Ends with a work hierarchy that is an array of work by value to the organization to determine individual pay rates
Job Evaluation for Management Positions
Hay profile method – using 3 factors (knowledge, mental activity, accountability) to evaluate executive and managerial position
Determining the percentage value to be assigned to each of the factors
9.5 Compensation Implementation- Pay Tools
Wage and salary surveys
Survey of the wages paid to employees of other employers in the surveying organization’s relevant labor market
Labor market- area from which employers obtain certain types of workers
Collecting survey data- satisfy the requirements of most public and not-for-profit or private employers
HRIS and salary surveys- wage and benefits survey data can be found on numerous websites
Employer-initiated surveys- employers wishing to conduct their own wage and salary; first select the job, identify the organizations with whom they compete for employees
Wage curve
Curve in a scattergram representing the relationship between relative worth of jobs and pay rates
Indicate the rates currently paid for jobs within an organization, new rates from job evaluation or rates for similar job
Pay grades
Groups of jobs within a particular class that are paid the same rate
Jobs are grouped into grades as part of the evaluation process
Rate ranges
Range of rates for each pay grade that may be the same for each grade or proportionately greater for each successive grade
Red circle rates: payment rates above the maximum of the pay range
Competence-based pay
Competence-based pay
Pay based on an employee’s skill level, variety of skills possessed or increased job knowledge
Systems represent fundamental change in the attitude of management regarding; how work should be organized, how employees should be paid for their work efforts
Encourages employees to acquire training when new or updated skills are needed by an organization
9.6 Government Regulation of Compensation
DavisBacon Act of 1931
Walsh-Healy Act of 1936
Fair Labor Standards Act of 1938 (as amended)
Wage and hour provisions
Minimum wage and pay compression
Child labor provision
Pay equity provision
9.7 Compensation Assessment
Compensation scorecard
Display the result for all the measures that a company uses to monitor an compare compenstion