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2. Describe the basic issues involved in developing a compensation strategy
Discuss how organizations develop a wage and salary structure
Identify and describe the basic issues involved in wage and salary administration
Discuss the basic considerations in understanding benefit programs
Identify and describe mandated benefits
Identify and describe nonmandated benefits
Discuss contemporary issues in compensation and benefits

3. Compensation
Set of rewards that organizations provide to individuals for willingness on tasks performed
Benefits: Various items of value beyond wages that employees receive from the organization
Rewards
Incentives

4. Basic Purposes of Compensation
To provide appropriate and equitable rewards to employees
To help employees focus on activities that the organization considers important
To increase employee efforts along desired lines
Internal equity: Comparisons made by employees to other employees within the same organization

5. Basic Purposes of Compensation
External equity: Comparisons made by employees to others employed by different organizations performing similar jobs
Pay surveys: Survey of compensation paid to employees by other employers in a particular geographic area, industry, or occupational group

6. 9.2 Strategic Options for Compensation

7. Determining what to Pay
Job evaluation methods: Determines the relative value of a job to the organization
Classification system: Attempts to group sets of jobs together into clusters
Point system: Requires managers to quantify the value of various elements of specific jobs in objective terms

8. Determining what to Pay
Point manual: Carefully and specifically defines the degrees of points from first to fifth
Factor-comparison method: Assesses jobs on a factor-by-factor basis using a factor-comparison scale as a benchmark

9. Determining what to Pay
Pay for knowledge: Involves compensating employees for learning specific information
Skill-based pay: Rewards employees for acquiring new skills

10. Wage and Salary Administration
Ongoing process of managing a wage and salary structure
Pay secrecy: Extent to which the compensation of any individual in an organization is secret

11. Wage and Salary Administration
Pay compression: Occurs when individuals with substantially different levels of experience, or performance abilities, are paid relatively equal salaries
Pay inversion: New employees are paid more than experienced employees
Occurs due to rapid external market changes

12. The Nature of Benefits Programs
Most organizations provide their employees with an array of benefits
The cost of benefits programs
Organizations spend huge amounts on benefits
Employees are asked to bear more of the costs
Purposes of benefits programs
Attracts better qualified people
Affects job satisfaction

13. Mandated Benefits
Unemployment insurance: Intended to provide a basic subsistence payment to employees who are between jobs
Social security: Designed to provide limited income to retired individuals
Worker’s compensation: Insurance covering individuals who suffer a job-related illness or accident

14. Private pension plans: Provides income at retirement
Nonmandated Benefits
Private pension plans: Provides income at retirement
Defined benefit plans
Defined contribution plans
Paid time off
Other benefits
Wellness programs
Cafeteria-style benefits

15. Contemporary Issues in Compensation and Benefits
Executive compensation
Growing legal issues
Evaluating compensation and benefit programs

16. Compensation: Set of rewards an organization provides to individuals in return for their willingness to perform various jobs and tasks within the organization
Benefits: Various rewards, incentives, and other things of value an organization provides to its employees

17. Pay compression
Pay for knowledge
Pay inversion
Pay secrecy
Pay surveys
Point manual
Point system
Private pension plans
Salary
Skill-based pay
Social security
Benefits
Cafeteria-style benefits plans
Classification system
Compensation
Defined benefit plans
Defined contribution plans
External equity
Factor-comparison method
Internal equity
Job evaluation
Maturity curve

18. Unemployment insurance
Vesting rights
Wage and salary
Wages
Wellness programs
Workers’ compensation