1. Copyright © 1999 Harcourt Brace & Company Canada, Ltd. Chapter 12 Compensation Falkenberg, Stone, and Meltz Human Resource Management in Canada Fourth Edition

2. 12.1 Chapter Overview n n Compensation: A definition n n Compensation and organizational effectiveness n n Compensation responsibilities n n Relation to other HRM functions n n Major laws affecting compensation n n Pay surveys

3. 12.2 Chapter Overview (contd.) n Job evaluation systems n Pricing the pay structure: Assigning pay to jobs n Using pay to motivate employees n Controlling compensation costs n Pay equity n Compensation issues and innovations

4. 12.3 Major Laws Affecting Compensation n n Employment standards and human rights legislation n n Income tax laws

5. 12.4 Characteristics of Key Jobs n n They are representative of the organizations pay structure n n Their responsibilities are relatively stable and well-known n n They include substantial numbers of employees n n They have not recently undergone large changes in pay level

6. 12.5 Six Steps of a Pay Survey n n Specify the purpose of the survey n n Specify the jobs to be surveyed, their descriptions or specifications, and the information needed from survey participants n n Select comparison employers for inclusion in the survey n n Select a survey method and design a survey instrument n n Administer the survey n n Analyze and display survey data

7. 12.6 The Job Evaluation Process n n Collect job analysis data n n Prepare job descriptions and job specifications n n Choose compensable factors n n Develop or choose a job evaluation method n n Evaluate jobs

8. 12.7 A Compensable Factor Must Meet Four Conditions n n It must be present in different amounts among jobs n n There must be no overlap in meaning between factors n n Some degree of the factors must be present in all jobs n n Management, employees, and the union must be involved in choosing the factors that will affect pay

9. 12.8 Job Evaluation Methods n n Ranking n n Level description n n Factor comparison n n Point method n n Market pricing

10. 12.9 Policy Issues Involved in Pricing the Pay Structure n n How the organizations pay levels relate to the market n n What the organization pays for n n How it pays n n What steps the organization takes to ensure the pay is administered in a bias-free manner

11. 12.10 Types of Person-Based Pay Systems n n Skill-based pay systems compensation is based on the knowledge and skills individuals have developed on the job n n Competency-based pay systems compensation is based on the individual traits, attitudes, and/or behaviours individuals bring and apply to the job

12. 12.11 Pay for Performance When linking pay to performance to motivate employees, the work situation must meet the following conditions: 1. The jobs must have the potential for meaningful performance variation 2. Employees must have and believe they have the ability to perform at higher levels 3. Employees must be motivated by money 4. Employees must perceive an equitable pay-effort bargain 5. Employees must perceive that the system is fairly administered

13. 12.12 Pay for Performance Systems Level of PerformanceTypes of Plans Measurement IndividualMerit Promotion Straight piece rate Standard hour plan GroupGroup piece rate or group standard hour plans CompanyProductivity sharing plans Profit-sharing plans - current distribution - deferred payment - combination Cost-saving plan

14. 12.13 Factors Affecting the Allocation of Compensation Funds n n Laws and regulations affecting compensation n n Job evaluation systems n n Unions n n Human resource policies

15. 12.14 Monitoring Compensation Administration n n The compa-ratio and other indices n n Budget n n Periodic audit of wages

16. 12.15 Preparing a Pay Equity Plan n n Identify female and male jobs or job classes n n Compare jobs in terms of skill, effort, responsibility, and working conditions n n Provide the same compensation to female job classes that are equal or comparable