ESTABLISHING REWARDS AND PAY PLANS

ESTABLISHING REWARDS AND PAY PLANS INTRODUCTION TYPES OF EMPLOYEE REWARDS WHAT IS COMPENSATION ADMINISTRATION? JOB EVALUTION AND THE PAY STRUCTURE SOME SPECIAL CASES OF COMPENSATION EXECUTIVE COMPENSATION PROGRAMS INTERNATIONAL COMPENSATION SUMMARY / QUESTION ANSWER

TYPES OF EMPLOYEE REWARDS Intrinsic versus Extrinsic Rewards. Financial versus Non-financial Rewards. Performance-based versus Membership-based Rewards.

WHAT IS COMPENSATION ADMINISTRATION? Job Evaluation Rewards Goals of Compensation Administration Government Influence on Compensation Administration - Fair Labour Standards Act - The Civil Rights and Equal Pay Acts

JOB EVALUTION AND THE PAY STRUCTURE What is Job Evaluation? Isolating Job Evaluation Criteria Methods of Job Evaluation - Ordering Method - Classification Method - point Method Establishing the Pay Structure - Compensation Surveys - Wage Curves - The Wage Structure

SOME SPECIAL CASES OF COMPENSATION Incentive Compensation Plans - Individual Incentives - Group Incentives - Plant-wide Incentive Paying for Performance Team-based Compensation

EXECUTIVE COMPENSATION PROGRAMS Salaries of Top Managers Supplemental Financial Compensation Supplemental Non-financial Compensation: Perquisites

INTERNATIONAL COMPENSATION Base Pay Differentials Incentives Assistance Programs

JOB EVALUTION Job Evaluation is the process whereby an organization systematically establishes its compensation program. In this process, jobs are compared in order to arrive at each job’s appropriate worth within the organization.

Employees exchange work for rewards. Probably the most important rewards, and indeed the most obvious, is money. But all employees don’t earn the same amount of money.

THE GOALS OF COMPENSATION ADMINISTRATION The goals of compensation administration are to design a cost-effective pay structure that will attract, motivate, and retain competent employees. It should also be one that will be perceived as fair by employees. Fairness is a term that frequently arises in the administration of an organization's compensation program. Organizations generally seek to pay the least that they have to in order to minimize costs, so fairness means a wage or salary that is adequate for the demands and requirements of the job. Fairness is a two-way street.

WHAT IS JOB EVALUTION? Job analysis is the process of describing the duties of a job, authority relationship, skills required, conditions of work, and additional relevant information. Data generated from job analysis could be used to develop job descriptions and specifications, as well as to do job evaluations. By Job evaluation, we mean using the information in job analysis to systematically determine the value of each job in relation to all jobs within the organization. Job evaluation seeks to rank all the jobs in the organization and place them in a hierarchy that reflects the relative worth of each. Job evaluation assumes normal performance of the job by a typical worker. So, in effect, the process ignores individual abilities or the performance of the jobholder. The ranking that results from job evaluation is the means to an end, not an end in itself. It should be used to determine the organization's pay structure.

PAYING FOR PERFRORMANCE Pay-for-performance programs are compensation plans that pay employees on the basis of some performance measure. Piecework plans, gain sharing, wage incentive plans, profit sharing, and lump sum bonuses are examples of pay-for-performance programs. What differentiates these forms of pay from the more traditional compensation plans is that instead of paying an employee for time on the job, pay is adjusted to reflect some performance measure. These performance measures might include such things as individual productivity, team or work group productivity, departmental productivity, or the overall organization's profits for a given period. Performance-based compensation is probably most compatible with demonstrating to employees that a strong relationship exists between their performance and the rewards they receive.

TEAM -BASED COMPENASATION In today’s dynamic organization, much more emphasis has been placed on involving employees in most aspects of the job that affect them. When organizations group employees into teams and empower them to meet their goals, teams reap the benefits of their productive effort. The is, team-based compensation plans are tied to team-based performance. If goals were achieved, then all shared in the “Glory”. If any of the managers failed, the entire team would not receive a dime of bonus money. The concept is now being driven down to the employee population! Under a team-based compensation plan, team members who have worked on achieving and in many cases, exceeding established goals often share equally in the rewards (although, in the truest sense, teams allocate their own rewards). Providing for fair treatment of each team member, group cohesiveness is encouraged.

SUMMARY Explain the various classifications of rewards. Discuss why some rewards are considered membership based. Define the goal of compensation administration. Discuss job evaluation and its three basic approaches. Explain the evaluation of the final wage structure. Describe competency-based compensation programs. Discuss why executives are paid significantly higher salaries than other employees in an organization. Identify what is meant by the balance sheet approach to international compensation.

PAY-FOR-PERFORMANCE Employees should have a clear understanding of what they’re attempting to accomplish. Manager needs to see that this task is achieved by helping employees set their work goals. While this appears to be common sense, it’s not always the case. Setting pay-for-performance objectives is a skill that every manager needs to perfect. You can better facilitate this process by following these guidelines. - Identify an employee’s key job tasks. - Establish specific and challenging goals for each key task. - Allow the employee to actively participate. - Prioritize goals. - Built in feedback mechanisms to assess goal. - Link rewards to goal attainment.

FACTOR 1ST 2ND 3RD 4TH 5TH DEGREE DEGREE DEGREE DEGREE DEGREE Skill 1. Education 22 44 66 88 110 2. Problem Solving 14 28 42 56 70 Responsibility 1. Safety of others 5 44 66 88 25 2. Work of others 14 28 42 56 70 2. Problem Solving: This factor examination the types of problem dealt with in your job. Indicate the one level that is most representative of the majority of your job responsibilities. Degree 1: Actions are performed in a set order per written or verbal instruction. Problems are referred to supervisor. Degree 2: Solves routine problems and makes various choices regarding the order in which the work is performed within standard practices. May obtain information from varied sources.. Degree 3: Solves varied problems that require general knowledge of company policies and procedures applicable with in area of responsibility. Decisions made based on a choice from established alternatives. Expected to act within standards and established procedures. Degree 4: Requires analytical judgment, initiative, or innovation in dealing with complex problems or situations. Evaluation not easy because there is little precedent or information may be incomplete. Degree 5: Plans, delegates, coordinates, and/or implements complex tasks involving new or constantly changing problems or situations involves the origination of new technologies or policies for programs or projects. Actions limited only by company policies and budgets. Source: Material reprinted with permission of The Dartnell Corporation, Chicago, IL 60640.

A WAGE CURVE 9.75 9.50 9.25 9.00 8.75 8.50 8.25 8.00 7.75 7.50 7.25 7.00 6.75 6.50 6.25 6.00 . . 100 200 300 400 500 600

A SAMPLE WAGE STRUCTURE 9.50 9.25 9.00 8.75 8.50 8.25 8.00 7.75 7.50 7.25 7.00 6.75 6.50 6.25 6.00 5.75 5.50 5.25 5.00 4.75 Grade 6 Grade 5 Grade 4 Grade 3 Grade 2 Grade 1 100 200 300 400 500 600

EMPLOYEE BENEFITS INTRODUCTION LEGALLY REQUIRED BENEFITS VOULNTARY BENEFITS PAID TIME OFF SURVIVOR BENEFITS FAMILY-FRIEND BENEFITS AN INTEGRATIVE PERESPECTIVE ON EMPLOYEE BENEFITS RETIRMENT PROGRAMS SUMMARY / QUESTION ANSWER The Costs of Providing Employee Benefit Contemporary Benefits Offerings Social Security Unemployment Compensation Worker’s Compensation Health Insurance - Traditional Insurance - Health Maintenance Organization - Preferred Provider Organizations - Employer-Operated Coverage - Health Insurance Continuation Vacation and Holiday Leave Disability Insurance Group Term Life Insurance Travel Insurance The Service Side of Benefit Flexible Spending Accounts Modular Plans Core-Plus Options Plans Defined benefit Plans Defined Contribution Plans - Money Purchase Pension Plan - Profit-Sharing Plans - Individuals Retirement Accounts - Roth IRAs - 401(K)s

The Costs of Providing Employee Benefits INTRODUCTION The Costs of Providing Employee Benefits Contemporary Benefits Offerings

LEGALLY REQUIRED BENEFITS Social Security Unemployment Compensation Workers’ Compensation

- Traditional Health Insurance VOLUNTARY BENEFITS Health Insurance - Traditional Health Insurance - Health Maintenance Organizations - Preferred Provider Organizations - Employer-Operated Coverage - Health Insurance Continuation

Defined Contribution Plans - Money Purchase Pension Plan RETIREMENT PROGRAMS Defined Benefit Plans Defined Contribution Plans - Money Purchase Pension Plan - Profit-Sharing Plans - Individuals Retirement Accounts - Roth IRAs - 401(k)s

Vacation and Holiday Leave Disability Insurance Programs PAID TIME OFF Vacation and Holiday Leave Disability Insurance Programs

SURVIVOR BENEFITS Group Term Life Insurance Travel Insurance

FAMILY-FRIENDLY BENEFITS The Service Side of Benefits

AN INTEGRATIVE PRESPECTIVE ON EMPLOYEE BENEFITS Flexible Spending Accounts Modular Plans Core-Plus Options Plans

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