1. Compensating Employees Definition Objective Bases Types Determining Reward Job Evaluation Compensation Structure

2. Compensation Definition: It is what employees receive in exchange for their work. In personnel management, compensation refers to the function of providing adequate and equitable remuneration of personnel for their contribution to organization objectives. Compensation Administration – process of managing a company’s compensation program. Strategic compensation – pattern of planned compensation program intended to enable an organization to achieve its goals. Pay for performance – system that rewards employees based on their performance.

3. Compensation Objective:  Attract and maintain employees of the right quality and mix  Continually motivate employees to attain the desired level of output.  It must be maintained at the desired competitive level.  Fair and equitable  Cost efficient  Comply with legal requirement  Acceptable to the employees  Support the organization’s corporate strategy.

4. Compensation Bases:  Time - paid according to time spent on the job, hourly or salaried, according to number of hours worked.  Productivity - paid according to output commission piece rate 3. Time and productivity – paid based on salary in addition to a percentage of the amount of output produced.

5. Compensation Types:  Pay – base salary/standard salary  Incentives – rewards given to employee for performing beyond standard requirements.  Benefits – rewards given to employee or group of employees for maintaining membership in the organization

6. Compensation Determining Rewards:  The External Factor 1)Labor market condition – price depends on supply and demand 2)Area wage rate – forces employers to adopt wage rates that are competitive 3)Cost of living – inflation erodes the purchasing power of employees, periodic adjustment in the compensation 4)Collective bargaining – done when labor union exist  The Internal Factor 1)Employer’s compensation policy - 2)Employee’s relative worth 3)Employer’s ability to pay

7. Compensation Components of compensation program:  Job analysis  Job evaluation  Salary survey  Performance evaluation  Pay for performance Job evaluation system: Job evaluation – is the process of determining the relative worth of jobs in an organization. 1. Ranking method 2. Classification method 3. Factor comparison method 4. Point method

8. Compensation Job evaluation: is the process of determining the relative worth of jobs in an organization. Purpose: Job evaluation system is to establish a compensation structure. the compensation structure is set after certain decision is compensation are made;  pay-level decision (high, low, comparable)  Pay structure decision  Individual pay decision

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