8/10/2019 Session 17 and 18 - Compensation, Incentives
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Compensation, Incentives
& Benefits
HRM Sessions 17 & 18
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Profits
Performance
Processes
People Philosophy
The Compensation Ecosystem
Compensation
Philosophy
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To Revise a Few Basics
Area of Satisfaction
Area of Dissatisfaction
Motivators
influence level
of satisfaction.
Hygiene factorsinfluence level
of dissatisfaction.
Motivators
Hygiene Factors
Achievement
Recognition
Responsibility
Work itself
Personal growth
Working conditionsPay and security
Company policies
Supervisors
Interpersonal
relationships
Two-
Factor
Theory
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Compensation System
Direct
Base Pay
Incentive Pay
- Bonus- Commission
- Profit-sharing
- Stock options
Proportion depends on nature of industry, job
level, and type of job
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Compensation System
Indirect
Legally Required
EOBI
Group Life
SESSI
Medical
Union bonus
Elements of Optionaldepend on nature of
industry, job level and type of job
Optional
Loans
Cars
Fuel allowance
Flexi-time
Family medical
Paid vacations
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Job
Evaluations
Comparator
Pool
Job
Matching
Salary
Surveys
Policy
Decision
Performance
Appraisals
PayOutcomes
Components of Annual Pay Process
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Job Evaluations - Why
Relative value and contribution within the organization
Basis for external benchmarking and data collection
Basis for creating salary scales and benefits by levels
Hay System most well-established and commonly used
Know-How Problem Solving Accountability
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Job Matching - Why
Matches content, size, and contribution, not titles
Takes into consideration a wide variety of factors
Best done with Data Collection
Keep senior management informed
Internal,
External equity
Involve
department
heads
Go for best fit
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Data Gathering
Recommended to use an external consultant
Base pay + Allowances + Bonus + Other cash elements
Benefits
Perquisites
Total
Guaranteed PayTotal Cash
Total
Compensation
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Performance Appraisals
Critical link in reward systems
Clear criteria for Merit and Bonus distribution
Strict deadlines for completion and submission
Employees ranked within their pools
What was
achieved?
How was it
achieved?
Contribution to
company?
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Pricing Jobs
All jobs have a value in relation to other jobs/market
Companies chose a position amongst comparator group
Company philosophy to cap salaries at maximum
A Salary Scale is used to determine the Min/Max base pay
Salary Scales overlap and form a progression to the top
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Base
Pay
Grades/Evaluated Points
Maximum Rate
Minimum Rate
Wage Curve
Wage Structure
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Merit Increment Process
How soon would your wage bill double if you increased pay
by 10% every year?
Resources are limited; how do you distribute?
Merit increments are linked to the Appraisal Process
Some companies combine Merit with Inflation/COLA
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The Infamous Bell Curve
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Equity and Workplace Outcomes
Perceptions ofFairnessExternal Equity
Internal Equity
Individual Equity
Commitment
Motivation
Performance
Strategic question: What
is your positioning
amongst comparators?
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Pay-related
Variable Pay or
Pay-at-Risk or
Performance Bonus
Percentage of salary that
is subject to individual
and company
performance
Greater risk at higher
levels due to greater
impact on results
Incentives
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Allowances
Position-related
Usually fixed as
reimbursements
Usually market-driven
Allowances
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Benefits
Legally Required
Vacation/Sick
Retirement
Group LifeSESSI
Medical
Union bonus
Elements of Optionaldepend on nature of
industry, job level and type of job
Optional
Loans
Cars
Fuel allowanceFlexi-time
Family medical
Paid vacations
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Retirement Benefits
Provident Fund: matching contributions
Gratuity: Defined Benefit paid at end of service
Pension: may be Defined Benefit or D Contribution
Various conditions exist around eligibility/vesting
Medical: some companies provide
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Current Trends
Concept of lifetime employment has disappeared
Monetize benefits to reduce admin costs
New hires want cash not long-term benefits
Funding long-term benefits is a huge liability
Challenge: how to stay competitive and low-cost
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Some Market Practices
Job-related or Perquisite Cars
Fuel or Transport Allowance
Vehicle, Personal or Housing-Assistance Loans
Medical and Hospitalization
Stock Options
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