Chap01-1st Comp & Pay Model

7/30/2019 Chap01-1st Comp & Pay Model

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COMPENSATION MANAGEMENT


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Please elaborate on following ..

Compensation is the major motivator while attracting?

Compensation is also one of the major motivator in retaining andmotivating existing talent?

Research shows that compensation represents 50% to 60% of allexpenses in most of the service organizations?

The War for Talent Is Still Here This category of worker is alwaysscarce And in demand?

If Performance Levels Differ, Why Shouldnt Compensation?

Two to Three Important Points on Future of Compensation?


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COMPENSATION

What is Compensation ?

What Importance it has ?

Who all are the Stake holders in Compensation?

What Do you suggest as Various forms of

Compensation ?


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VARIOUS PERSPECTIVESOF COMPENSATION

SocietysViews

StockholdersViews

Employees

Views

Managers

Views


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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


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COMPENSATION: DEFINITION (CONT.)

Employees Major source of financial security Return in an exchangebetween employer and

themselves Entitlementfor being an employee of the

company Rewardfor a job well done

Global ViewsVive la diffrence China: Traditional meaning of compensation

providing necessities of life replaced with dai yu Japan: Traditional word kyuyoreplaced with hou-

syu;very recently the phrase used is teate


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Compensation refers to allforms of financial returns

and tangible services and

benefits employees

receive as part of an

employment relationship

DEFINATION WHAT IS COMPENSATION ?


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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 employeessalary for a year.

Turnover further erodes morale among those who stay

and harms customer retention.

Changing workforce challenges , with Millennial being

majority.


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CHANGING REWARD TRENDS

From Narrowly-defined jobs

and job standards

Inflexible job-evaluation

systems sizing tasks,

rewarding non-adaptive

behaviour and empire-building, encouraging

point-grabbing

To

Broad, generic roles -

emphasis on competence

and continuous

development

Flexible job evaluation

processes assessing the

value added by people in

roles, often within jobfamilies


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REWARD TRENDS (CONT.)

From Hierarchical and rigid pay

structures - only way to geton, is to move up. Focus onnext promotion.

Emphasis on individualperformance-related pay(PRP)

Consolidation of rewards intobase pay

To Broad-banded and job family

pay structures emphasisingflexibility, career developmentpay and continuousimprovement. Focus on nextchallenge.

More focus on teamperformance, team-basedpay; contribution-related pay

More emphasis on at riskpay


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Discussion

Transactional Returns

Relational Returns


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What are the Kind of Returns , Employee Gets fromthe Organization

-Total Compensation

- Cash Compensation

- Benefits

-Relational Returns


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FRAMEWORKFOR ANALYZING

DIFFERENT DEALS

HIGH PAY LOW COMMITMENT

Hired Guns(Stockbrokers)

HIGH PAY HIGH COMMITMENT

Cult - like(Microsoft)

LOW PAY LOW COMMITMENT

Workers as Commodity(Employers of Migrant

Farm Workers)

LOW PAY HIGH COMMITMENT

Family(Starbucks)

Low High

RELATIONAL

Low

TRANSACTIONA

L


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: TOTAL RETURNSFOR WORK


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FORMS OF PAY

Relational returns Psychological in nature

Total compensation Cash Compensation/ transactional

Base wages

Difference between wage and salary

Merit pay/cost-of-living adjustments

Merit increases given in recognition of past work behavior

Cost-of-living adjustmentssame increases to everyone,regardless of performance


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FORMS OF PAY (CONT.)

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 (stockoptions), and short-term

Benefits

Income protection

Work/life balance

Allowances


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FORMS OF PAY (CONT.)

Total earnings opportunities: Present value of astream of earnings

Shifts comparison of today's initial offers toconsideration of future bonuses, merit increases, andpromotions

Relational returns from work Nonfinancial returns

Organization as a network of returns

Created by different forms of pay, including totalcompensation and relational returns


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A PAY MODEL

Three basic building blocks:

Compensation objectives

Policies that form the foundation of the compensation

system

Techniques that make up the compensation system


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: THE PAY MODEL


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COMPENSATION OBJECTIVES (CONT.)

Efficiency

Improving performance, increasing quality, delightingcustomers and stockholders

Controlling labor costs

Fairness

Fundamental objective of pay systems Fair treatment by recognizing both employee

contributions, and employee needs

Procedural fairness


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COMPENSATION OBJECTIVES (CONT.)

Compliance Conformance to Government and State

compensation laws and regulations

Ethics Organizations care about how its results are

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 reachobjectives


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Suggest . Your Thoughts on .

Objectives of Compensation System


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Internal alignment

Focus - Comparisons among jobs or skill levels inside asingle organization

Pay relationships within an organization affect employeedecisions to: Stay with the organization Become more flexible by investing in additional training Seek greater responsibility

External competitiveness

Focus - Compensation relationships external to theorganization: comparison with competitors

Pay is market driven

FOUR POLICY CHOICES


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FOUR POLICY CHOICES (CONT.)

External competitiveness (cont.) Effects of decisions regarding how much and what

forms: To ensure that pay is sufficient to attract and retain

employees

To control labor costs to ensure competitive pricing ofproducts/ services

Employee contributions Focus- Relation emphasis placed on employee

performance Performance based pay affects fairness

Management Focus- Policies ensuring the right people get the

right pay for achieving the right objectives in the rightway


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REWARD MANAGEMENT

Definition: RM is concerned with the formulation andimplementation of strategies and policies that aim toreward employees fairly, equitably and consistently inaccordance with their value to the organisation(Armstrong, 2003).

Strategic aims: to develop and implement the rewardpolicies, processes and practices required to supportthe achievement of the organisations goals by helping

to ensure that it has the skilled, competent, wellmotivated and committed people it needs.

total reward defined Michael Armstrong


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total reward defined- Michael Armstrong

Total reward includes all types of reward

non-financial as well as financial, indirectas well as direct, intrinsic as well asintrinsic. It is a value proposition whichembraces everything that people value inthe employment relationship and isdeveloped and implemented as anintegrated and coherent whole.

ti l f t t l d


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rationale for total reward

Creating a fun, challenging, and

empowered work environment in whichindividuals are able to use their abilities todo meaningful jobs for which they areshown appreciation is likely to be a morecertain way to enhance motivation andperformance even though creating such

an environment may be more difficult andtake more time than simply turning thereward lever.Jeffrey Pfeffer Stanford University

Characteristics of a total reward strategy (CIPD)


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Holistic- focuses on how organisations attract, retain andmotivate employees to contribute to success using an array

of financial and non-financial rewards.

Best fittailored to the organisations culture and workprocesses.

Integrativethe reward system is integrated with HRpolicies and practices.

Strategicaligns reward and business strategies.

People centred- focuses on employee needs and wants.

Customisedprovides a flexible mix of reward that offerschoice.

Distinctive- uses rewards to create a distinctive employer

brand.

Characteristics of a total reward strategy (CIPD)


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models of total reward

total reward (engaged performance) model Hay Group


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total reward (engaged performance) model Hay Group

quality of work

work/life balance

inspiration/values

enablingenvironment

tangible rewards

futuregrowth/opportunity

engagedperformance

total reward model - WorldatWork


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organisationalculture

business strategy

HR strategy

total

rewards strategy compensation

benefits work/life

performance andrecognition

development andcareer opportunities

attractmotivate

retain

employeesatisfaction

andengagement

businessperformanceand results

total reward model - WorldatWork

Total rewards are all the tools available to the employer that may be used toattract, motivate and retain employees. Total rewards include everything the

employee perceives to be of value resulting from the employment relationship

total reward model Watson Wyatt


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total reward model Watson Wyatt

business strategy

human capital strategy

total reward strategy

fixed reward costs performance-based rewards environment-based rewards

fixed costs of employment

value of role to organization

variable costs of employment

contribution made by individual

intrinsic rewards

employment deal

effective delivery through focused communication, greater flexibility and use of technology

total reward model - Towers Perrin


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PAY/REWARD

base pay

contribution pay

shares/profit sharing

recognition

TRANSACTIONAL(TANGIBLE)

RELATIONAL(INTANGIBLE)

total reward model Towers Perrin

BENEFITS

pensions

health care

perks

flexible benefits

LEARNING AND DEVELOPMENT

workplace learning

training

performance management

career development

WORK ENVIRONMENT

core values

leadership

employee voice job/work design

total reward model - Michael Armstrong


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transactionalrewards

relationalrewards

base pay

contingent pay

employee benefits

learning and development

the work experience

totalremuneration

non-financialrewards

recognition, achievement, growth

total reward

total reward model Michael Armstrong


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conductdiagnostic

reviewdefine

objectives

developapproach

(involve)

design

prioritise

implementprogressively

(encourage/guide)

communicate

monitor andevaluate

making totalrewardhappen

Chap01-1st Comp & Pay Model

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