1. © 2010 McGraw Hill Ryerson 12-1 COMPENSATION Third Canadian Edition Milkovich, Newman, Cole

2. © 2010 McGraw Hill Ryerson 12-2 STRATEGIC POLICIES TECHNIQUES STRATEGIC OBJECTIVES EFFICIENCY  Performance  Quality  Customers  Stockholders  Costs FAIRNESS COMPLIANCE ALIGNMENT COMPETITIVENESS CONTRIBUTORS MANAGEMENT INTERNAL STRUCTURE PAY STRUCTURE INCENTIVE PROGRAMS EVALUATION THE PAY MODEL

3. © 2010 McGraw Hill Ryerson 12-3 Government as Part of the Employment Relationship  government is a key stakeholder in compensation decision making.  governments’ usual interests are whether: procedures for determining pay are fair (pay discrimination) safety nets for the unemployed and disadvantaged are sufficient (minimum wage, employment insurance) employees are protected from exploitation (human rights, pay equity)

4. © 2010 McGraw Hill Ryerson 12-4 Employment Standards Acts  minimum wage  paid vacation  paid holidays  standard hours of work and overtime pay  pay on termination of employment  minimum age of employment  equal pay for equal work by men and women

5. © 2010 McGraw Hill Ryerson 12-5 Human Rights Laws  based on Charter of Human Rights and Freedoms in Canadian Constitution  equal treatment in employment and opportunity for employment regardless of race, colour, religion, sex…  prohibit harassment in the workplace

6. © 2010 McGraw Hill Ryerson 12-6 Pay Equity  issue relating to the gender wage gap  gender wage gap is the amount by which the average pay for female workers is less than the average pay for male workers

7. © 2010 McGraw Hill Ryerson 12-7 Reasons for Gender Wage Gap  differences in occupational attainment; women historically segregated in small number of occupations e.g., sales, nursing  differences in number of hours worked  differences in industries and firms  differences in union membership  presence of discrimination

8. © 2010 McGraw Hill Ryerson 12-8 Pay Equity Legislation  intended to redress the portion of the wage gap assumed to be due to discrimination, through comparison of male- and female-dominated jobs  four job evaluation factors required: Skill Effort Responsibility working conditions  compare male and female job classes: job to job method proportional value/wage line method proxy comparison method

9. © 2010 McGraw Hill Ryerson 12-9 The Impact of Unions in Wage Determination  impact on general wage and benefit levels  impact on the structure of wage packages  impact on non-union firms (spillover)  impact on wage and salary policies and practices in unionized firms

10. © 2010 McGraw Hill Ryerson 12-10 Union Impact on General Wage Levels  union workers earn about 10 percent more than non-union workers  size of the gap varies from year to year union impact higher during periods of higher unemployment and slow economy union impact smaller during strong economy  union benefits 20 to 30 percent higher than non-union

11. © 2010 McGraw Hill Ryerson 12-11 Union Impact on Structure of Wage Packages  Division between wages and benefits Union benefits 20 to 30 percent higher than non-union  Two-tier wage plans Lower wages for lower seniority workers

12. © 2010 McGraw Hill Ryerson 12-12 Union Impact: The Spillover Effect  employers seek to avoid unionization by offering workers the wages, benefits, and working conditions won in rival unionized firms e.g., Dofasco  non-union management continues to enjoy the freedom from union “interference” in decision making  non-union workers receive the “spillover” of rewards obtained by unionized counterparts

13. © 2010 McGraw Hill Ryerson 12-13 Role of Unions in Pay Policies and Practices  collective agreement/contract specifies: basis of pay (regular, overtime) occupation - wage differentials experience / merit differentials vacations and holidays wage adjustment provisions (COLA)

14. © 2010 McGraw Hill Ryerson 12-14 Unions and Alternative Reward Systems  some collective agreements include alternative rewards: lump sum awards piece rates gain-sharing profit sharing pay-for-knowledge (skill/competency- based pay)

15. © 2010 McGraw Hill Ryerson 12-15 Conclusion  governments assess fairness and legislate employment standards, human rights, and pay equity rules that affect compensation management  unions affect compensation management directly through collective agreements, and are facing the need to adjust compensation due to international competition