Compensation

Dr Mahmoud Alkhateeb

COMPENSATION
Compensation

and its components Importance of Compensation Payment systems Fair Compensation 1- Externally ( salary survey) 2-Internally ( job evaluation) Work incentives

Compensation is a HRM function

M.P Planning

Recruit.

Selection

Payment

Training

Performance Appraisal

1-Compensation & its components

It

refers to give & take relationship between the employer ( org.) and the employee. All forms of pay or rewards going to employees from their employment.
Components:

a- Monitory Form b- Fringe benefits c- employee-paid insurance What are goals of cmpensation system? P. 218

What are the outcomes when the employee feels that he/she is not treated fairly?
Leaving the job (higher LTR) Less Job satisfaction (demoralization) Lower performance Complaints and conflicts Absenteeism Lower quality Decrease job inputs Increase job outcome HRM should make its best to make employees feel that they are treated fairly.

2- Importance of Payment
For

the Employee 1- It determines standard of living 2- It determines how fair the individual is treated by the employer.
For the Employer ( organization) 1- a considerable share in total cost 2- a means of attracting skilled manpower

3- Payment Systems

Two traditional payment systems:

1- Time-rate system
According to this system employees are paid according to time spent on the job regardless of performance.

2- Piece-rate system ( piecework)

employees are paid according to their performance not on time. How can we calculate payment?

4- Fair payment
A Fair payment as perceived by the employee means the individual feels that : job inputs = job outputs what are the main consequences of employees feel that they are treated unfairly? Fair Payment can be attained through: 1- Salary surveys ( external fairness) 2- Job evaluation ( internal fairness)

Salary survey

It is a way for pricing jobs and determining the job rates among various organizations.

good salary survey provides a specific wage rates for specific jobs.

A- Formal Surveys: systematic written questionnaires. B- Informal survey: quick casual way to get information on jobs via telephone.

How the internet can be used to do SS?

 It

is a formal and systematic way to determine the worth of one job relative to another and then results in a wage hierarchy. Methods of job evaluation
a-Qualitative methods ( ranking method ) what are the steps of the ranking method? b-Quantitative methods ( point method)

Job Evaluation

Point method system

1-Identify the jobs to be evaluated 2- Determine the compensable factors( education- skill, experience- responsibilityrisk and decision making..) 3-Give a value or weight ( points ) to each factor according to its relative importance education ( 20) skill (40) experience (10) responsibility(10) risk (5) decision making (15)

4- analyze each

factor to its elements ex: education (20) - first degree ( 20) - post-secondary ( 15) - secondary ( 10) - High school (5)
5- Evaluate jobs using these values as follows:

continue

Example on some jobs

Ed Sk Ex Rs Rk DM Total Manager Engineer Technician Clerk 20 20 15 10 35 25 20 10 8 10 4 6 6 3 6 5 3 5 5 2 12 8 5 3 89 68 54 35

Q:Why Job Evaluation is still widely used?

Learning Moments

End of thought and a new beginning