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Human Resource Management Lecture-28. Job Pricing.

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Presentation on theme: "Human Resource Management Lecture-28. Job Pricing."— Presentation transcript:

1 Human Resource Management Lecture-28

2 Job Pricing


4 Developing a Base Pay System

5 Job Analysis Job Evaluation Pay Surveys Pay Structure Pay Policie s Individual Pay Implementation, Communication, Monitoring Performance Appraisal

6 Compensation system

7  Pay is a statement of an employee’s worth by an employer.  Pay is a perception of worth by an employee.

8 HR Management Strategy Model Rewards HR Strategy Desired Results

9 Employee Compensation

10  Employee compensation refers to all forms of pay or rewards going to employees and arising from their employment.  It consists of 2 parts  Direct financial payments  Indirect financial payments

11  Direct or Indirect compensation is given based on

12  Increments of time  Hourly  Salaried  Performance  Piecework  Commission

13  Piecework - Pay is tied directly to what the worker produces

14 Wages versus Salaries

15  Wages – generally refer to hourly compensation paid to operating employees; the basis for wages is time.  Salary – is income that is paid an individual not on the basis of time, but on the basis of performance.

16 Total Compensation

17 Compensation of Employees Extrinsic Rewards Hourly Wages Salary Monetary Bonuses Rewards Commissions Pay Incentives Insurance Retirement Paid Vacations BenefitsFood Services Credit Union Recreation Recognition IntrinsicPromotion Opportunities RewardsWorking Conditions Interesting Work

18 Consequences of Pay Dissatisfaction

19 Desire for more Pay Pay Dissatisfaction Performance Strikes Grievances Search for job Lower Attractiveness of job Absenteeism Turnover Job Dissatisfaction Absenteeism Psychological Withdrawal Dispensary Visits Poor Mental Health

20 Compensation System  A total reward system includes both monetary and nonmonetary compensation.

21 Phases of Compensation Management

22  Phase:-1. Evaluate every job to ensure internal equity based on each job’s relative worth.  Phase:-2. Conduct wage and salary surveys to find the rates paid in the labour market.  Phase:-3. Price each job to determine the rate of pay based.

23 Objectives of Effective Compensation Management

24  The “Big Three”  Attract qualified employment applicants  Retain qualified employees, while discouraging retention of low performing  Motivate employee behavior toward organization objectives

25  Ensure Equity  Reward Desired Behavior  Control Costs  Comply With Legal Regulations  Facilitate Understanding

26  Achieve external competitiveness  Support organization priorities  Strategy and goals  Culture and values  Easy to administer

27 Steps for Establishing Pay Rates

28  Conduct a salary survey of what other employers are paying for comparable jobs  Employee committee determines the worth of each job in your organization through job evaluation

29  Group similar jobs into pay grades  Price each pay grade by using wage curves  Fine-tune pay rates

30 Pay Grade Structure for Job-Based System Rs 10,000 Rs 30,000 Rs 50,000 Corporate Policy Line Midpoint 250 350 450 550 650 Job Evaluation Points Maximums Pay Grade Width Monthly Pay

31 What Determines How Much You Pay?

32  Prevailing Wages  Ability to Pay  Cost of Living  Productivity  Bargaining Power  Job Requirements  Government Laws

33  Equity factors

34 Equity Perceptions

35 Equity Theory  Description – Pay should be based upon contributions made by the Employees. Higher effort should be rewarded with higher pay.  Application to Compensation – Pay should be tied to the performance level of individual Employee

36 Equity Theory Predictions

37 Outputs Inputs < Outputs Inputs Outputs Inputs = Outputs Inputs Outputs Inputs > Outputs Inputs Under-reward Equity Over-reward Person BPerson A

38 Balancing Internal and External Equity InternalExternal Pay Equity Pay Differentials Market Pay Compression

39 Pay above Market Rate

40 Advantages  Attracts better employees  Minimizes voluntary turnover  Fosters strong culture and competitive superiority Disadvantages  Additional compensation costs  Sense of entitlement

41 Pay at Market Rate

42 Advantages  Higher quality of human resources at midrange of market- driven compensation costs Disadvantages  Does not attract higher performers  Turnover will vary with labor demands of competing firms

43 Pay below Market Rate

44 Advantages  Lower compensation costs  Useful in labor markets where unemployment is high Disadvantages  Lower-quality employees  Low morale/job satisfaction  Higher turnover; especially among high performers

45 Conditions Necessary for Perceptions of Pay Fairness  Internal consistency  External competitiveness  Employee contributions

46 Line Managers and Compensation

47  Evaluate the worth of jobs.  Negotiate starting salaries.  Recommend pay raises and promotions.  Notify HRM department of job changes.

48 The HRM Department and Compensation

49  Establish rates of pay.  Oversee job evaluation process.  Conduct salary surveys.

50  Establish procedures for administering pay plans.  Ensure compliance with antidiscrimination laws.  Communicate benefits information.

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