1. Strategic Human resource Management compensation

2. Compensation Key strategic area Impact an employer’s ability to – Attract applicants – Retain employees In meeting organization objectives – It’s a key economic issue which attracts, motivates and retains employees; at the same time compensation should allow the organization to maintain a cost structure that enables it to compete effectively and efficiently in it s markets

3. Compensation Compensation system Indirect Incentive pay Bonus Commission Profit sharing Stock options Base pay Direct Legally required Social security Unemployment compensation insurance Worker’s compensation Stock options Optimal Paid time off (holidays, vacations, sick days) Health insurance Retirement Disability insurance Life insurance Dependent care Flexible working hours

4. Compensation Equity: equity and work related outcomes Internal Equity External Equity Individual Equity Perceptions of Fairness Performance Motivation Commitment

5. Compensation Equity theory: Perceived equity or fairness of the system for employees All employees should feel that they are compensated fairly relative to others Equity theory holds that; – Workers assess their perceived inputs to their work and their outcomes to those of others If they are being treated inequitably relative to others; it may have several negative impact

6. Compensation Internet can provide a wealth of information to employees about comparable salary data. A recent Google search turned up more than 28,000 hits for the search “salary comparison” sites Salary.com Careerjournal.com Most visited sites

7. Compensation Types of equity: – Internal equity – External equity – Individual equity These perceptions of equity directly impact – Motivation – Commitment – Performance

8. Compensation Internal equity: – Perceived fairness of pay differentials among different jobs within an organization – It should be fair according to the difference in job responsibilities – In attempting to establish internal equity, employers can evaluate jobs by using four techniques: – Job ranking – Job classification – Point systems – Factor comparison

9. Compensation Job ranking: – Relatively simple – Most challenging job receive higher compensation – Random and non scientific; concerned with the hierarchical position of jobs – It is used in infrequent and usually only in small, informal organization Job classification; – Group jobs requirement similar effort, ability, training, and responsibility into predetermined grades or classes and compensates each job within a grade similarly. – Organization must force each job into specific category,

10. Compensation Point system: – Easy to understand – Difficult to design – Easy to implement once they are operational – Create the list of compensable factors Things that the organization is willing to pay its employees for such as education, experience, specific skills, working conditions, and responsibility.

11. Compensation Hay plan; – A special type of point system is often used for administrative and managerial positions – It utilizes three factors called universal factors which are common to all managerial and administrative jobs: – Know-how Technical knowledge required to do a job – Problem solving Assess the amount of independent thinking and decision making required in the job – Accountability Direct responsibility for people, resources and results.

12. compensation External Equity: – External equity involves employee perception of the fairness of their compensation relative to those outside the organization – Employees look at the salary structure of other organizations – Determine market wage rate – When making assessment of external equity, it is important to consider not only salaries but also other forms of compensation, such as bonus and incentive plans – Competitors level???

13. compensation External Equity: – Organization has determine has its own pay strategy relative to market – A lead policy – A lag policy – A Market policy

14. Compensation Individual Equity: – Consider employee receptions of pay differentials among individuals who hold identical jobs in the same organization. – Basic pay on seniority – Seniority based systems – Merit pay system – Performance based pay system – Skilled based pay system – Team based pay system

15. Compensation Legal issues in compensation: – Discrimination (Men n women) – Different jobs – Same jobs – Equal pay act – Worth of the work (loading or office work)

16. Compensation Executive compensation: – Important and controversial area of compensation – No standard for executive compensation – Different industries – Recent corporate accounting scandals in which executives reaped millions of dollars in compensation while organizations were going bankrupt has drawn even more attention to executive compensation – Stock option

17. Compensation Conclusion; – Number of strategic issues: Compensation relative to the market Balance between fixed and variable compensation Utilization of individual versus team based pay Appropriate mix of financial and non financial compensation Over all cost effective program that results in high performance