1. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Compensation and Benefits Human Resource Management

2. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Introduction People do what they do to satisfy some need and they look for a payoff or reward. The most obvious reward is pay, but there are many others, including: –promotions –desirable work assignments –peer recognition –work freedom

3. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Introduction

4. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Types of Reward Plans Intrinsic versus Extrinsic Rewards Intrinsic rewards (personal satisfactions) come from the job itself, such as: –pride in one’s work –feelings of accomplishment –being part of a work team

5. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Types of Reward Plans Intrinsic versus Extrinsic Rewards Extrinsic rewards come from a source outside the job –include rewards offered mainly by management –Money –Promotions –Benefits

6. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Types of Reward Plans Financial versus Nonfinancial Rewards Financial rewards include: –wages –bonuses –profit sharing –pension plans –paid leaves –purchase discounts Nonfinancial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find desirable.

7. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Types of Reward Plans Performance-based versus Membership- Based Rewards Performance-based rewards are tied to specific job performance criteria. –commissions –piecework pay plans –incentive systems –group bonuses –merit pay Membership-based rewards such as cost-of- living increases, benefits, and salary increases are offered to all employees.

8. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Compensation Administration The process of managing a compensation program so that the organization can attract, motivate and retain competent employees who perceive that the program is fair.

9. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Compensation Administration Job evaluation – the process used to determine each job’s appropriate worth within the organization. Based on job analysis information.

10. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Compensation Administration Government Influence on Compensation Administration Labor Act: –minimum wage –overtime pay –record-keeping –child labor restrictions

11. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Job Evaluation and the Pay Structure Job Evaluation Use of job analysis information to determine the relative value of each job in relation to all jobs within the organization. –The ranking of jobs –Labor market conditions –Collective bargaining –Individual skill differences

12. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Job Evaluation and the Pay Structure Job Evaluation Methods Ordering method: A committee places jobs in a simple rank order from highest (worth highest pay) to lowest.

13. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Job Evaluation and the Pay Structure Job Evaluation Methods Classification method: –Jobs are placed in classification grades –Compare their descriptions to the classification description and benchmarked jobs –Look for a common denominator such as skills, knowledge, or responsibility

14. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Job Evaluation and the Pay Structure Job Evaluation Methods Point method: –Jobs are rated and allocated points on several identifiable criteria, using clearly defined rating scales. –Jobs with similar point totals are placed in similar pay grades. –Offers the greatest stability.

15. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Job Evaluation and the Pay Structure Establishing the Pay Structure Compensation surveys –Used to gather factual data on pay rates for other organizations –Information is often collected on associated employee benefits as well

16. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Job Evaluation and the Pay Structure Establishing the Pay Structure Wage curves –Drawn by plotting job evaluation data (such as job points or grades) against pay rates (actual or from survey data). –Indicate whether the pay structure is logical

17. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Special Cases of Compensation Incentive Compensation Plans Incentives can be added to the basic pay structure to provide rewards for performance.

18. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Special Cases of Compensation Incentive Compensation Plans Individual Incentives include –merit pay plans (annual increase, based on performance) –piecework plans (pay based on number of units produced typically in a specified time period.) –time-savings bonuses and commissions

19. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Special Cases of Compensation Incentive Compensation Plans Individual Incentives: –Work best where clear objectives can be set and tasks are independent. –Many organizations today require employees to place a percentage of their salary “at risk” so that merit pay does not become a substitute for automatic cost-of- living raises.

20. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Special Cases of Compensation Incentive Compensation Plans Group Incentives –Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation.

21. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Executive Compensation Programs Salaries of Top Managers –Executive salaries, bonuses and stock options may seem high. –Top twenty CEOs average more than $100 million in total compensation. –Competition for executive talent raises the price of hiring an executive. –High salaries can be a motivator for executives and lower-level managers

22. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Executive Compensation Programs Supplemental Financial Compensation –Deferred bonuses – paid to executives over extended time periods, to encourage them to stay with the company. –Stock options – allow executives to purchase stock in the future at a fixed price. –Hiring bonuses – compensate for the deferred compensation lost when leaving a former company.

23. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Executive Compensation Programs Supplemental Nonfinancial Compensation: Perquisites Perks may include: –paid life insurance –club memberships –company cars –expense accounts –interest-free loans –legal and tax counseling –mortgage assistance

24. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Executive Compensation Programs Supplemental Nonfinancial Compensation: Perquisites –Golden parachutes protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position.

25. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins International Compensation Important to understand the statutory requirements of each country. International compensation packages generally utilize the “balance-sheet approach,” using the four factors below: –Base Pay –Differentials –Incentives –Assistance Programs

26. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins International Compensation Base Pay: The pay of employees in comparable jobs at home. Differentials: Compensation given to offset higher costs of living abroad.

27. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins International Compensation Incentives: Inducements given to encourage employees to accept overseas assignments. Assistance Programs: Payment for expenses involved in moving a family abroad and in providing some services overseas.

28. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Employee Benefits

29. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Introduction Employee benefits Have grown in importance and variety Typically membership-based rewards offered to attract and keep employees Do not directly affect a worker’s performance, but inadequate benefits lead to employee dissatisfaction.

30. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Introduction Costs of Providing Employee Benefits –Benefit and service offerings add about 40% to an organization’s payroll cost. –Benefits become the focus of negotiations with employees when large wage and salary increases are not feasible.

31. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Introduction Contemporary Benefits Offerings –Benefits today reflect the diversity of the work force. –Challenge -- designing a benefits package which is attractive to applicants and current workers, and provides all the legally required benefits.

32. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Legally Required Benefits Social Security –Financed by equal employee and employer contributions, based on a percentage of earnings. –Provides income for retirees, disabled workers and surviving dependents. –Provides some health insurance coverage through Medicare.

33. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Legally Required Benefits Family and Medical Leave Act –1993 Act requires employers with 50 or more employees to allow up to 12 weeks of unpaid leave for family or medical reasons. –Specifies record-keeping and communication requirements

34. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Voluntary Benefits Traditional health insurance Typically has the fewest coverage limitations for the employee Usually the most expensive

35. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Voluntary Benefits Health Maintenance Organizations (HMOs) Alternative benefit required by Health Maintenance Act of 1973. Broad comprehensive care provided by designated service centers for fixed fees. Promotes preventive care. Health care choices significantly limited.

36. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Retirement Benefits Defined Benefit Plans Plan specifies the dollar benefit workers receive at retirement. Usually based on some formula of years of service and average final compensation.

37. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Retirement Benefits Defined Contribution Plans: Employee and employer may contribute to account based on rules established for contributions Amount of benefits depends on success of account investments.

38. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Paid Time Off Vacation and Holiday Leave –Vacation time is usually related to the length of time on the job. –Some companies also allow personal days that can be used for any reason.

39. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Paid Time Off Disability Insurance Programs Provides salary continuation for: –Short-term disabilities (sick leave) –Long-term disabilities (coverage usually effective after 6 months). Some companies provide financial incentives to employees to not use their sick leave. Long-term disability plans usually replace a portion of the employee’s salary, often 60 percent.

40. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Survivor Benefits Usually are two types: –contributory –non-contributory In non-contributory the employer pays the total cost of the benefit.

41. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Survivor Benefits The service side of benefits –social and recreational events –employee assistance programs –credit unions –housing –tuition reimbursement –uniforms –company-paid transportation –parking Employers often can provide services at no cost or at a significant reduction from the usual cost.

42. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins An Integrative Perspective on Employee Benefits Flexible benefits programs allow employees to choose which benefits they want and help to keep costs down.

43. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins An Integrative Perspective on Employee Benefits Flexible spending accounts –Under Section I25 of the Internal Revenue Code employees can set aside a designated dollar amount before taxes for specified services health-care premiums medical expenses dependent child-care group legal services –IRS requires that accounts for different purposes be separate and that all money be spent during the year or forfeited. –Not subject to federal, state, and social security taxes.

44. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins An Integrative Perspective on Employee Benefits Modular plans: Employees choose a pre-designed package of benefits from several options. Core-Plus Options Plans Employees given core coverage (e.g. medical, life, disability) with option to select other benefits.