1. HUMAN RESOURCE MANAGEMENT Chapter 9 HUMAN RESOURCE MANAGEMENT Mathis R., Jackson J. 13 TH EDITION

2. WAGES AND SALARIES What is the difference?

3. Wages and Salaries Salary: Payment, usually paid monthly and usually expressed as an annual amount, made by employers to employees in return for work done. Paid to employees whose contribution cannot be measured easily. Wage: Payment for labor or services usually according to contract. An equivalent or a return for something done, suffered or given. Paid to jobs which can be measured in terms of money’s worth.

4. Compensation: a comparative term; includes wages and all other allowances and benefits. (e.g. allowances, leave facilities, housing, travel, and non-cost such as recognition, privileges, and symbols of status)

5. Wage and Salary Administration A group of activities involved in the development, implementation, and maintenance of a pay system. An ongoing process of managing a wage and salary structure. The overall goal of a wage and salary administration program is to attract, retain, and motivate employees and to help an organization achieve its management objectives.

6. WHY DO WE NEED TO STUDY WAGE AND SALARY ADMINISTRATION?

7. Why do we need to study Wage and Salary Administration? To have a scientific, rational, and balanced wage and salary structure. In a salary administration, the employer should not feel that the employees are paid more than they deserve and the employees should not feel that they are underpaid.

8. The role of Human Resources in the payment of salaries One of the most important functions of Human Resources is the payment of the proper salaries and the wages to all company employees. The pay that the employees receive from their employer is the very reason for their being in the job. The function of the payroll in a company is usually the wage and salary administration and it is carried out by the Human Resources Department.

9. Once the worth of a job has been established, using one of the job ratings systems, the actual salary to be paid for each job must be determined. A major factor in making the determination is the wage survey. Since salaries paid by other companies have an effect on employment, morale and turnover rate, close attention is paid to the salary that is prevailing in the community and industry for specific jobs. Wage and Salary Surveys

10. Wages and salary surveys A survey of employers in the same industry and the same area showing the wages and salaries they pay to their employees. Wage and salary surveys are useful because they show the usual compensation in a given city or other place, which may result in employers making upward or downward adjustments.

11. Wages and salary surveys The actual salary to be paid for each job must be determined. Wage survey is a major factor. Informal surveys may be conducted through telephones or informal interviews. Formal surveys use questionnaires based on standards jobs. The Human Resource Department are preparing sets of questionnaires.

12. Procedure in conducting wage and salary surveys

13. After the org. completes the salary survey and finds out, what the prevailing salaries are in the community for comparable jobs, it must then make several decision 1. Whether the company should pay salaries above, below, or the same level, as the others in the same industry in the community are paying for the same jobs. 2. Whether the company should pay a single rate for each job, or slot the jobs into ranges or grades. 3. How many pay grades or salary rages to use, and how wide each pay grade should be (from the minimum of the grade to the maximum). 4. What is the range of the amount in terms of money value that should be selected for each salary grade.

14. The following are the advantages of the wage and salary structure: It affects the workers’ earning and standard of living. It eases the recruitment and maintenance of an effective labor force. It develops employee morale and increases work efficiency. It represents cost and competitive advantage in the industry.

15. It helps in preparing budgetary allocations and eases computation of salary adjustments and as an aid in short term and a long range plans. It eliminates pay distortions and inequalities in employee compensation. It establishes an equitable salary range for various jobs.

16. INCENTIVE PLANS What are incentive plans? HUMAN RESOURCE MANAGEMENT Mathis R., Jackson J. 13 TH EDITION

17. Variable: Incentives for Performance Variable Pay Compensation linked to individual, group/ team, and/or organizational performance. © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

18. 12–18 Why Use Variable Pay? Variable Pay Assumptions Some people perform better and are more productive than others Better performing employees should receive more compensation Some jobs contribute more to organizational success than others Total compensation should be tied directly to performance and results © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

19. 12–19 FIGURE 12–1 Effective Variable Pay Plans © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

20. 12–20 Developing Successful Pay-for-Performance Plans Reasons for Pay-for-Performance Plans Enhance results and reward employees financially Link strategic goals and employee performance Reward and recognize employee performance Promote achievement of HR objectives © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

21. 12–21 Successful Variable Pay Plans Effective Incentive Plans Does the Plan Fit the Organization? Does the Plan Reward the Appropriate Actions? Is the Plan Administered Properly? © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

22. 12–22 Why Variable Pay Plans Fail Plan incentives are not seen as desirable Plan doesn’t reward doing a good job Plan doesn’t motivate Plan rewards teams/groups rather than individuals Plan doesn’t increase base pay Employees’ View of Variable Pay Plan © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

23. .12–23 Developing Successful Incentive Plans Develop clear, understandable plans that are continually communicated Use realistic performance measures Keep plans current and linked to organizational objectives Link results to payouts that recognize differences Identify variable pay incentives separately from base pay Successful Incentive Plans © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

24. 12–24 FIGURE 12–3 Categories of Variable Pay Plans © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

25. 12–25 Individual Incentives Piece-Rate Systems Straight piece-rate system Differential piece-rate system Bonus “Spot” Bonuses Special Incentive Programs Performance awards Recognition awards Service awards © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

26. 12–26 FIGURE 12–4 Purposes of Special Incentives © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

27. 12–27 Why Organizations Establish Variable Pay Plans for Groups/Teams Group/Team- Based Variable Pay Plans Improve productivity Tie pay to team performance Improve customer service or production quality Increase employee retention © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

28. 12–28 Design of Group/Team Incentive Plans Group/Team Incentive Plan Issues Distribution of Group/Team Incentives Timing of Group/Team Incentives Decisions About Group/Team Incentive Amounts © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

29. .12–29 Group/Team Incentives (cont’d) Distributing Rewards Same-size reward for each member Different-size reward for each member Problems with Group/Team Incentives Rewards in equal amounts may be perceived as “unfair” by employees who work harder, have more capabilities, or perform more difficult jobs. Group/team members may be unwilling to handle incentive decisions for co-workers. Many employees still expect to be paid according to individual performance. © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

30. 12–30 FIGURE 12–6 Conditions for Successful Group/Team Incentives © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

31. 12–31 Organizational Incentives Primary Objectives Increase productivity and organizational performance Attract or retain employees Improve product/service quality Enhance employee morale Drawbacks Disclosure of financial information Variability of profits from year to year Profit results not strongly tied to employee efforts Profit Sharing © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

32. 12–32 FIGURE 12–7 Framework Choices for a Profit-Sharing Plan © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

33. 12–33 Employee Stock Plans Stock Option Plan A plan that gives employees the right to purchase a fixed number of shares of company stock at a specified price for a limited period of time. If market price of the stock is above the specified option price, employees can purchase the stock and sell it for a profit. If the market price of the stock is below the specified option price, the stock option is “underwater” and is worthless to employees. © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

34. EMPLOYEE BENEFITS

35. .13–35 Employer- Provided Benefits Absorb social costs for health care and retirement Influence employee decisions about employers Are increasingly seen as entitlements Average over 40% of total payroll costs Benefits of employees Benefit An indirect reward given to an employee or group of employees for organizational membership. © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

36. 13–36 FIGURE 13–1 Employer Compensation and Benefits Costs per Hour Source: U.S. Bureau of Labor Statistics, 2008. © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

37. 13–37 FIGURE 13–2 Strategic Benefits Considerations © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

38. 13–38 Benefits Design Decisions Affecting Benefit Design: How much total compensation, including benefits, can be provided? What part of total compensation of individuals should benefits comprise? Which employees should get which benefits? What expense levels are acceptable for each benefit? What are we getting in return for the benefit? How flexible should the benefits package be? © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

39. 13–39 FIGURE 13–4 Typical Division of HR Responsibilities: Benefits Administration © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

40. 13–40 FIGURE 13–7 Types of Benefits

41. LABOUR UNIONS

42. Labour Unions Labour unions are certified organizations of workers that negotiate matters with employers such as: wages working conditions job security and other benefits An organization of workers that tries to improve working conditions, wages and benefits for its members.

43. Decrease of Union Membership Unions rose to prominence in the 1930s, but several factors have led to declines in union membership since the 1950s: “Right to Work” Laws: Laws which ban mandatory union membership at the workplace. A union cannot force workers to join. Economic Trends: Unions have traditionally been strongest in the manufacturing sector, representing workers who have industrial jobs. These jobs have been declining in number as the American economy becomes more service oriented. Less manufacturing jobs, less union workers.

44. Decrease of Union Membership Fulfillment of Union Goals: With the government setting standards for workplace safety, and with more benefits being provided by both private and government sources, some claim that the union membership has decreased simply because their goals have been fulfilled.

45. Collective Bargaining The process in which union and company representatives meet to negotiate a new labor contract. The contract contains all the requirements of workers to the employer and the employer to the workers. They include; salary, benefits, working conditions, work day/hours, conditions for hiring/firing, etc.

46. Collective Bargaining In collective bargaining for a new contract, unions argue for: Better wages and benefits Safe working conditions Conditions under which an employee can be fired

47. Collective Bargaining When a contract needs to be renewed, union and employer representatives meet and discuss their demands. Compromises are made until a new contract is agreed upon by both sides. A vote by union members is held to approve a new contract. But, what if both sides cannot agree on a new contract?

48. If Collective Bargaining Fails… Mediation: A settlement technique in which a neutral mediator (usually a judge) meets with both sides and suggests a solution for both sides. The mediation is non-binding, i.e. the union or management can reject the mediation. Ex. The union wants a 5% raise, management offers a 1% raise. The mediator suggests a 3% raise. Both union and management can reject the offer!

49. If Collective Bargaining Fails… Arbitration: A settlement technique in which a third party (arbitrator) reviews the case and imposes a decision that both sides are required to accept. Ex. Union wants a 5% raise, management offers 1%. The arbitrator imposes a 3% raise. The union has to accept the arbitration without a vote

50. Union’s Ultimate Weapon! STRIKES! A strike is an organized work stoppage intended to force an employer to address union demands. Strikes can be harmful to both employer and union members. The employer loses money and business to competitors during a strike, union members do not get paid during a strike. It becomes a waiting game- who can last the longest.