1. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-1 Managing Human Resources Managing Human Resources Bohlander  Snell  Sherman Chapter 9 Managing Compensation Chapter 9 Managing Compensation

2. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-2 Learning Objectives  Explain employer concerns in developing a strategic compensation program.  Identify the various factors that influence the setting of wages.  Discuss the mechanics of each of the major job evaluation systems.  Explain the purpose of a wage survey.

3. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-3 Learning Objectives, cont.  Define the wage curve, pay grades, and rate ranges as parts of the compensation structure.  Identify the major provisions of the federal laws affecting compensation.  Discuss the current issues of equal pay for comparable worth, pay compression, and low wage budgets.

4. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-4 Presentation Slide 9-1 Total Compensation  Wages  Salaries  Commissions  Bonuses  Gainsharing  Pay for Time Not Worked Vacations Breaks Holidays  Insurance Plans Medical Dental Life  Security Plans Pension Disability Insurance  Employee Services Educational Assistance Recreational programs

5. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-5 Presentation Slide 9-2 Compensation Management and other HRM Functions

6. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-6 Goals of Strategic Compensation Policies Motivating Value of Compensation Pay-for- Performance Standard Linking Compensation to Organizational Objectives

7. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-7 Value-Added Compensation Evaluating the individual components of the compensation program to see if they advance the needs of employees and the goals of the organization

8. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-8 Pay-for-Performance Standard Standard by which managers tie compensation to employee effort and performance

9. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-9 Pay Equity An employee’s perception that compensation received is equal to the value of the work performed

10. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-10 Hourly Work Work paid on an hourly basis

11. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-11 Piecework Work paid according to the number of units produced

12. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-12 Nonexempt Employees Employees covered by the overtime provisions of the Fair Labor Standards Act

13. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-13 Exempt Employees Employees not covered by the overtime provisions of the Fair Labor Standards Act

14. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-14 Presentation Slide 9-3 Components of the Wage Mix WAGE MIX Conditions of Labor Market Area Wage Rates Cost of Living Collective Bargaining Legal Requirements Compensation Policy of Organization Worth of Job Employee’s Relative Worth Employer’s Ability to Pay

15. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-15 Consumer Price Index (CPI) Measure of the average change in prices over time in a fixed “market basket” of goods and service

16. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-16 Escalator Clauses Clauses in labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index

17. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-17 Real Wages Wage increases larger than rises in the consumer price index; that is, the real earning power of wages

18. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-18 Job Ranking Job Evaluation Systems Point System Job Classification Factor Comparison Common Methods of Job Comparison

19. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-19 Job Evaluation Systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization

20. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-20 Job Ranking System Simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth

21. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-21 Job Classification System System of job evaluation by which jobs are classified and grouped according to a series of predetermined wage grades

22. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-22 Point System Quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it

23. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-23 Factor Comparison System Job evaluation system that permits the evaluation process to be accomplished on a factor-by-factor basis by developing a factor comparison scale

24. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-24 Presentation Slide 9-4 Characteristics of Key Jobs n Have importance to employees and organizations n Vary in terms of job requirements n Possess relatively stable job content n Are used as important jobs in salary surveys

25. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-25 Hay Profile Method Job evaluation technique using three factors – knowledge, mental activity, and accountability – to evaluate executive and managerial positions

26. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-26 The Compensation Structure Wage and Salary Surveys Wage Curve Rate Ranges Pay Grades Issues Involved in Setting Compensation Structures

27. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-27 Wage and Salary Surveys s Select key jobs. s Determine relevant labor market. s Select organizations. s Decide on information to collect: wages/benefits/pay policies. s Compile data received. s Determine wages and benefits to pay.

28. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-28 Wage and Salary Survey Survey of the wages paid to employees of other employers in the surveying organization’s relevant labor market

29. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-29 Wage Curve Curve in a scattergram representing the relationship between relative worth of jobs and wage rates

30. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-30 Pay Grades Groups of jobs within a particular class that are paid the same rate or rate range

31. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-31 Presentation Slide 9-5 Components of the Wage Structure

32. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-32 Presentation Slide 9-6 Elements of the Rate Range

33. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-33 Red Circle Rates Payment rates above the maximum of the pay range

34. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-34 Skill-Based Pay Pay based on how many skills employees have or how many jobs they can perform

35. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-35 Presentation Slide 9-7 Federal Wage Laws Davis-Bacon Act of 1931 Walsh-Healy Act of 1936 Fair Labor Standards Act of 1938

36. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-36 Significant Compensation Issues Equal PayPay Compression Low Wage Budgets

37. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-37 Comparable Worth The concept that male and female jobs that are dissimilar, but equal in terms of value or worth to the employer, should be paid the same

38. Managing Human Resources,12e, by Bohlander/Snell/Sherman (c) 2001 South-Western/Thomson Learning 9-38 Wage-Rate Compression Compression of differentials between job classes, particularly the differential between hourly workers and their managers