Professional Documents
Culture Documents
10th Edition
Chapter 9
DIRECT FINANCIAL
COMPENSATION
• Compensation
Policies
• Organizational Level
• Ability to Pay
Organization’s
assessment of
ability to pay is
important factor in
determining pay
levels
III Performs work where only general methods are available. Independent 85
action and judgment are required regularly to analyze fact, evaluate
situations, draw conclusions, make decision, and take or recommend action.
II Performs duties working from standard procedures or generally 51
understood methods. Some independent action and judgment are required
to decide what to do, determine permissible variations from standard
procedures, review facts in situations, and determine action to be taken,
within limits prescribed.
I Little or no independent action or judgment. Duties are so standardized 17
and simple as to involve little choice as to how to do them.
Degree of Factor
Job Factor 1 2 3 4
Experience Required 1 year 3 years 5 years 7 years
(-------------------- Arithmetic Progression---------------------)
Degree of Factor
Job Factor 1 2 3 4
Experience Required 1 year 2 years 4 years 8 years
(-------------------- Geometric Progression---------------------)
$19.80
5
18.50 4
17.20 3
Grade 5
Average Pay Per Hour
Grade 4
Grade 3
Grade 2 Band B
Grade 1
Band A
Low High
Job Worth
© 2008 by Prentice Hall 9-47
Employee as Determinant of
Direct Financial Compensation
• Performance—Performance-based Pay
• Skills—Skilled-based Pay
• Competencies—Competency-based Pay
• Seniority
• Experience
• Membership in the organization
• Potential
• Political Influence
• Luck
© 2008 by Prentice Hall 9-48
Performance-Based Pay
• Merit pay - Pay increase given to employees based on
level of performance as indicated in appraisal
• Variable Pay - Compensation based on performance
• Bonus - Most common type of variable pay for
performance. One-time financial award based on
productivity
• Spot bonuses - Relatively small, gifts to employees for
outstanding work or effort
• Piecework - Employees paid for each unit they produce
If team is to
function effectively,
firms should
provide reward
based on overall
team performance
Critical factor in
attracting and
retaining best
managers
• Payment of
bonuses reflects a
managerial belief in
their incentive value
• 90% of executives
receive bonuses