1. Chapter 1
The Pay Model

2. Contrasting Perspectives of Compensation
Society’s Views
Stockholders’ Views
Employees’ Views
Managers’ Views

3. Exhibit 1.1: Hourly Compensation Costs for Production Workers (2005 data)
United States $23.65
Brazil
Canada
Mexico
Australia
Hong Kong
Japan
South Korea
($8.23 in 2000)
Singapore
Sri Lanka *
(2004 data, comparable to China)
Taiwan
Austria
Belgium
Czech Republic
($2.83 in 2000)
Denmark
Finland
France
Germany
Hungary
($2.79 in 2000)
Ireland
Italy
Netherlands
Norway
Poland
Portugal
Spain
Sweden
Switzerland
United Kingdom
Hourly compensation costs include (1) hourly direct pay and (2) employer social insurance expenditures and other labor taxes.

4. Exhibit 1.2: Labor Costs as a Percentage of Revenues, Airline Industry

5. What Is Compensation?
Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

6. Exhibit 1.3: Total Returns for Work

7. Exhibit 1.5: THE PAY MODEL EFFICIENCY Performance Quality Customers
POLICIES
TECHNIQUES
OBJECTIVES
ALIGNMENT
Work Descriptions Evaluation/ analysis certification
INTERNAL STRUCTURE
EFFICIENCY
Performance
Quality
Customers
Stockholders
Costs
FAIRNESS
COMPLIANCE
COMPETITIVENESS
Market Surveys Policy PAY definitions lines STRUCTURE
CONTRIBUTORS
Seniority Performance Merit INCENTIVE based based guidelines PROGRAMS
MANAGEMENT
Costs Communication Change EVALUATION

8. Caveat Emptor - Be An Informed Consumer
Does the research measure anything useful?
Does the study separate correlation from causation?
Are there alternative explanations?

9. Listening to HR’s Critics
Quantify people-management results into dollars
Productivity of workforce
Cost of vacant position
Cost of keeping bad manager
Dollar impact of hiring and keeping top performers vs. average ones in mission-critical jobs
Adopt “fact-based” decision-making
Not “I think” or “I believe” but “I know” re: cause and effect
Causes of turnover
What motivates workers to produce more
Which HR actions can turn business unit around
Source: Workforce Management, 7/31/06