MGTO 231 Human Resources Management Compensation II Dr. Kin Fai Ellick WONG.
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Transcript of MGTO 231 Human Resources Management Compensation II Dr. Kin Fai Ellick WONG.
MGTO 231Human Resources ManagementCompensation II
Dr. Kin Fai Ellick WONG
Outline
Designing a compensation system Egalitarianism vs. elitism Below market vs. above market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decision
Compensation tools Job-based compensation plans Skill-based compensation plans
Outline
Designing a compensation system Egalitarianism vs. elitism Below market vs. above market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decision
Compensation tools Job-based compensation plans Skill-based compensation plans
Nine criteria for developing a compensation system
Internal vs. external equity Fixed vs. variable pay Performance vs. membership Job vs. individual pay Egalitarianism vs. elitism Below-market vs. above-market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decisions
Nine criteria for developing a compensation system Internal vs. external equity Fixed vs. variable pay Performance vs. membership Job vs. individual pay Egalitarianism vs. elitism Below-market vs. above-market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decisions
Egalitarianism vs. Elitism
Egalitarian pay systemA pay plan in which most employees are
part of the same compensation systemReduces barriers between people as the
hierarchy is relatively fuzzy
Elitist pay systemA pay plan in which different
compensations are established for employees or groups at different organizational levels
Different pay systems may create a sense of hierarchy
Encourage employees to move upward
Nine criteria for developing a compensation system Internal vs. external equity Fixed vs. variable pay Performance vs. membership Job vs. individual pay Egalitarianism vs. elitism Below-market vs. above-market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decisions
Below-market vs. above-market compensation
Below market Less expensive Low job satisfaction and high turnover Employees with high ability will not stay long, or even
will not apply
Above market More expensive Employees are relatively stable Can attract competent candidates
Trade-off between attractiveness and costs A possible solution
Above-market compensation for important posts
Below-market compensation for less important posts
拉下補上 (make an average)
Nine criteria for developing a compensation system Internal vs. external equity Fixed vs. variable pay Performance vs. membership Job vs. individual pay Egalitarianism vs. elitism Below-market vs. above-market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decisions
Monetary vs. non-monetary rewards
Monetary rewardsMoney, cash, or payment that can be
converted into cash in the future (stocks, retirement plan)
Non-monetary rewards Interesting work, challenging assignments,
public recognition, degree of freedom
Extrinsic vs. intrinsic motivation Extrinsic motivation
Behaviors are motivated in order to get external rewards, e.g., cash
Low in job satisfaction Intrinsic motivation
Behaviors are motivated in order to get self-fulfillment High in job satisfaction
A story about a professor vs. a band
Nine criteria for developing a compensation system Internal vs. external equity Fixed vs. variable pay Performance vs. membership Job vs. individual pay Egalitarianism vs. elitism Below-market vs. above-market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decisions
Open vs. secret pay
Open paySalary can be accessed by public (or most of
the employees in the same firm)Civil servants, professors, etc.
Secret paySalary of each employee should not be
disclosedThose who break this rule may be fired
Advantages of open pay
Increase employees’ satisfaction as they tend to overestimate others’ salaries
Open pay is perceived to be more fair as it is perceived that no hidden decision occurs
Disadvantages of open pay
It forces the managers or supervisors to expend more resources (time, writing report) to justify their decisions
The cost of mistake in decision increases This system tends to minimize salary differences
across employees increases turnover rate and decreases job satisfaction for those who have best performances
Nine criteria for developing a compensation system Internal vs. external equity Fixed vs. variable pay Performance vs. membership Job vs. individual pay Egalitarianism vs. elitism Below-market vs. above-market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decisions
Centralized vs. decentralized
Centralized systemPay decisions are tightly controlled in a
central location, normally the HR department Decentralized system
Pay decisions are delegated deep down into the firm, normally to managers of each unit
Centralized system is more appropriate when
It is cost effective and efficient to hire compensation specialists, who are responsible for salary surveys, benefits administration, and recordkeeping.
There are frequent legal challenges The company wants to have more control
on expenses
Disadvantages of centralized
The issue of external equity (that’s why a specialist is so important)
It lacks flexibility, department cannot offer a more attractive package for an excellent candidate
Outline
Designing a compensation system Egalitarianism vs. elitism Below market vs. above market compensation Monetary vs. non-monetary rewards Open vs. secret pay Centralized vs. decentralized of pay decision
Compensation tools Job-based compensation plans Skill-based compensation plans
Job-based compensation plans
Achieving internal equity Achieving external equity Achieving individual equity
Achieving internal equity
Job evaluation by job analysisJob description and job specifications
Rate worth of all jobsUsing a predetermined systemCompensable factors: work-related criteria
that an organization considers most important in assessing the relative value of different jobs
Knowledge, effort, responsibility, job conditions
Create a job hierarchy Classify jobs by grade levels
Achieving external equity
Do market survey薪酬調查趨勢報告 (salary trend index)
Identifying benchmark or key jobsJobs that are similar or comparable in content
across firms Establishing a pay policy
A firm’s decision to pay above, below, or the market rate for its jobs
Achieving individual equity
Individual equity The perceived fairness of individual pay decisions
Simply assign each employee a pay rate within the range established for his or her job
Assuming that this job’s salary has achieved both internal and external equity, then individual equity will also be achieved
Skill-based compensation plans
It is more costly and more limited in use Three dimensions are paid
淵 Depth of skills (learning more about a specialized area)
博 horizontal or breadth of skills (learning more about more areas)
自身 vertical skills (self-management)
Depth of skillsTypist
100 wpm vs. 120 wpm
Basketball player Field goal percentage
45% vs. 20%
Programmer Knowledge in C++
Breadth of skillsTypist
Typing + accounting + photocopy machine maintenance
Basketball player Free-throw + 3-point + assistant …
Programmer C++ + Java + Visual Basic + Pascal…