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Strategic Pay Plans | 11-1
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Dessler, Chhinzer, ColeHuman Resources
Management in CanadaCanadian Twelfth Edition
Chapter 11: Strategic Pay Plans
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Strategic Pay Plans | 11-2
Learning Outcomes
• EXPLAIN the strategic importance of total rewards.
• EXPLAIN in detail each of the three stages in establishing pay rates.
•DISCUSS competency-based pay.
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Strategic Pay Plans | 11-3
Learning Outcomes
•DESCRIBE the five basic elements of compensation for managers.
•DEFINE pay equity and EXPLAIN its importance today.
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Strategic Pay Plans | 11-4
Strategic Importance of Total Rewards
• monetary (extrinsic)• compensation: cash payments and benefits
• non-monetary (intrinsic)• personal growth and interpersonal rewards
• total awards approach• rewards are part of integrated whole• aligns rewards with business strategies
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Strategic Pay Plans | 11-5
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Employment Rewards
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Strategic Pay Plans | 11-6
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Total Rewards
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Strategic Pay Plans | 11-7
Five Components of Total Rewards
1. Compensation
2. Benefits
3. Work-life programs
4. Performance and recognition
5. Development and career opportunities
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Strategic Pay Plans | 11-8
Basic Considerations in Determining Pay Rates
• legal considerations in compensation• Employment/Labour Standards Act • Pay Equity Acts• Human Rights Acts• Canada/Quebec Pension Plan• other legislation (worker’s comp., EI)
• union influences
• compensation policies
• equity and its impact on pay rates
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Strategic Pay Plans | 11-9
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Establishing Pay Rates
Stage 3: Combine job evaluation and salary survey to determine pay
Stage 1: Job evaluation
Stage 2: Conduct wage/salary survey
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Strategic Pay Plans | 11-10
Stage 1: Job Evaluation
A systematic comparison to determine relative worth of jobs within a firm.
• Benchmark job• critical to operations or commonly found in other
organizations
• Compensable factors• fundamental, compensable element of a job
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Strategic Pay Plans | 11-11
Job Evaluation Methods
• Classification/grading method• categorizes jobs into groups• grade/group description: outlines level of
compensable factors required by each job
• Point method• identify compensable factors• determine the degree to which each factor is present
in each job
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Strategic Pay Plans | 11-12
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Grade/Group Description Sample
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Strategic Pay Plans | 11-13
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Point Method Steps
Step 3: Assign points for each degree of each sub-factor
Step 1: Preliminary steps
Step 2: Determine factor weights and degrees
Step 4: Evaluate the jobs
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Strategic Pay Plans | 11-14
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Sub-Factor Sample
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Strategic Pay Plans | 11-15
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Point Method Job Evaluation Plan Sample
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Strategic Pay Plans | 11-16
Stage 2: Conduct a Wage/Salary Survey
• aimed at determining prevailing wage rates• determine rates for benchmark jobs• determine market rates for jobs• collect data on benefits, recognition programs, etc.
• avoid upward bias
• informal surveys good for easily recognized jobs
• formal surveys are most comprehensive
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Strategic Pay Plans | 11-17
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Earnings Data Sample
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Strategic Pay Plans | 11-18
Stage 3: Combine Job Evaluation and Salary Survey Information
Wage curve
• a graphic description of the relationship between the value of the job and the average wage paid for this job
Pay ranges
• a series of steps or levels within a pay grade, usually based on years of service
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Strategic Pay Plans | 11-19
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Wage Curve
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Strategic Pay Plans | 11-20
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Pay Ranges Sample
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Strategic Pay Plans | 11-21
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Pay Ranges Sample
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Strategic Pay Plans | 11-22
Broadbanding
Reducing the number of salary grades and ranges into just a few wide levels or “bands”, each of which then contains a relatively wide range of jobs and salary levels.
advantage
• greater flexibility in employee compensation
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Strategic Pay Plans | 11-23
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Broadbanding
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Strategic Pay Plans | 11-24
Pay for Knowledge
• competency-based pay (managers, professionals)
• skill-based pay (manufacturing employees)
• pay-for-knowledge program should include:• competencies/skills directly important to job
performance• new competencies that replace competencies that
are no longer important• on-the-job training, not “in the classroom.”
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Strategic Pay Plans | 11-25
Compensating Executives and Managers
Five elements:1. Salary
2. Benefits
3. Short-term incentives
4. Long-term incentives
5. Perquisites
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Strategic Pay Plans | 11-26
Compensating Professional Employees
• engineers, scientists, accountants, lawyers, etc.
• compensable factors not easily measured: creativity, problem solving
• difficult to measure economic impact to organization
• market pricing approach commonly used
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Strategic Pay Plans | 11-27
Pay Equity
• wage gap has narrowed but remains at 30%
• gap attributed to systemic discrimination
• aim is to provide equal pay to male and female-dominated job classes of equal value
• must ensure no gender bias in job evaluation
• long-term solution is to eliminate male and female- dominated jobs
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Strategic Pay Plans | 11-28
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Male-Female Wage Gap