Professional Documents
Culture Documents
COMPENSATION
What is Compensation ? What Importance it has ? Stake holders Various forms of Compensation
COMPENSATION: DEFINITION
Society
Pay
as a measure of justice Benefits as a reflection of justice in society Job losses (or gains) attributed to differences in compensation Belief that pay increases lead to price increases
Stockholders
Using
stock to pay employees creates a sense of ownership Linking executive pay to company performance supposedly increases stockholders' returns
Managers
A
major expense Used to influence employee behaviors and to improve the organization's performance
and themselves Entitlement for being an employee of the company Reward for a job well done
compensation providing necessities of life replaced with dai yu Japan: Traditional word kyuyo replaced with hou-syu; very recently the phrase used is teate
WHAT IS COMPENSATION?
Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship
CURRENT CHALLENGES
One of the greatest challenges companies facing today is retaining top talent. The expense to an organisation of replacing an employee (including separation, replacement, training and lost performance costs) can be as much as that employees salary for a year. Turnover further erodes morale among those who stay and harms customer retention.
REWARD TRENDS
From Narrowly-defined jobs and job standards Inflexible jobevaluation systems sizing tasks, rewarding nonadaptive behaviour and empire-building, encouraging pointgrabbing
To
Broad, generic roles -emphasis on competence and continuous development Flexible job evaluation processes assessing the value added by people in roles, often within job families
From Hierarchical and rigid pay structures - only way to get on, is to move up. Focus on next promotion.
Emphasis on individual performance-related pay (PRP) Consolidation of rewards into base pay
To Broad-banded and job family pay structures emphasising flexibility, career development pay and continuous improvement. Focus on next challenge.
More focus on team performance, team-based pay; contribution-related pay More emphasis on at risk pay
iscussion
What are the Kind of Returns , Employee Gets from the Organization -Total Compensation - Cash Compensation - Benefits
-Relational Returns
TRANSACTIONAL
High
LOW PAY LOW COMMITMENT Workers as Commodity (Employers of Migrant Farm Workers)
Low
Low
RELATIONAL
High
FORMS OF PAY
Relational returns
Psychological
in nature
Total compensation
Cash
Compensation/ transactional
Base wages
Merit increases given in recognition of past work behavior Cost-of-living adjustments same increases to everyone, regardless of performance
Cash Compensation/ transactional (cont.) Incentives/ Variable pay tie pay increases directly to performance Does not increase base wage; must be re earned each pay period Potential size generally known beforehand Long-term (stock options), and short-term
comparison of today's initial offers to consideration of future bonuses, merit increases, and promotions returns
A PAY MODEL
objectives
that form the foundation of the compensation system that make up the compensation
Techniques
system
Efficiency
Improving
performance, increasing quality, delighting customers and stockholders Controlling labor costs
Fairness
Fundamental objective of pay systems Fair treatment by recognizing both employee
Procedural fairness
Ethics
Organizations
achieved
Objectives
Guide
the design of the pay system Serve as the standards for judging success of the pay system Policies and techniques are means to reach objectives
alignment
- Comparisons among jobs or skill levels inside a single organization relationships within an organization affect employee decisions to:
Stay with the organization Become more flexible by investing in additional training Seek greater responsibility
competitiveness
- Compensation relationships external to the organization: comparison with competitors is market driven
competitiveness (cont.)
Employee
Focus
To ensure that pay is sufficient to attract and retain employees To control labor costs to ensure competitive pricing of products/ services
contributions
Management
Focus
- Policies ensuring the right people get the right pay for achieving the right objectives in the right way
REWARD MANAGEMENT
Definition:
RM is concerned with the formulation and implementation of strategies and policies that aim to reward employees fairly, equitably and consistently in accordance with their value to the organisation (Armstrong, 2003). aims: to develop and implement the reward policies, processes and practices required to support the achievement of the organisations goals by helping to ensure that it has the skilled, competent, well motivated and committed people it needs.
Strategic
Total reward includes all types of reward non-financial as well as financial, indirect as well as direct, intrinsic as well as intrinsic. It is a value proposition which embraces everything that people value in the employment relationship and is developed and implemented as an integrated and coherent whole.
Creating a fun, challenging, and empowered work environment in which individuals are able to use their abilities to do meaningful jobs for which they are shown appreciation is likely to be a more certain way to enhance motivation and performance even though creating such an environment may be more difficult and take more time than simply turning the reward lever. Jeffrey Pfeffer Stanford University
Holistic - focuses on how organisations attract, retain and motivate employees to contribute to success using an array of financial and non-financial rewards. Best fit tailored to the organisations culture and work processes. Integrative the reward system is integrated with HR policies and practices. Strategic aligns reward and business strategies. People centred - focuses on employee needs and wants. Customised provides a flexible mix of reward that offers choice. Distinctive - uses rewards to create a distinctive
future growth/opportunit y
inspiration/values
enabling environment
total rewards strategy compensation benefits work/life performance and recognition development and career opportunities
effective delivery through focused communication, greater flexibility and use of technology
PAY/REWARD
base pay
BENEFITS pensions perks flexible benefits WORK ENVIRONMENT core values leadership employee voice job/work design health care
contribution pay shares/profit sharing recognition LEARNING AND DEVELOPMENT workplace learning training performance management career development
RELATIONAL (INTANGIBLE)
COMMUNAL
INDIVIDUAL
- Michael Armstrong
base pay transactional rewards contingent pay employee benefits total reward learning and development relational rewards the work experience recognition, achievement, growth non-financial rewards total remuneration
conduct diagnostic review monitor and evaluate making total reward happen
define objectives
communica te
develop approach
(involve)
(encourage/guide)
implement progressively
prioritise design