compensation+and+rewards (1)

7/30/2019 Compensation+and+Rewards (1)

1/25

COMPENSATION AND

REWARDS


2/25

Compensation

Is what employees receive inexchange for their contribution to

the organization. When managed correctly, it helps

the organization achieve its

objectives and obtain, maintain,and retain a productiveworkforce.


3/25

Compensation (Contd)

Without adequate compensation,current employees are likely to

leave and replacements will bedifficult to recruit.

The outcomes of paydissatisfaction harm productivity

and affect the quality of work life.


4/25

Forms of compensation

Direct Financial Compensation

pay received in forms of wages, salaries,

bonuses and commissions. Indirect Financial Compensation(benefits)

- All financial rewards not included in direct

compensation. For examples workerscompensation, Family & medical leave,Disability Protection,


5/25

Forms Of Compensation

(Contd) Nonfinancial Compensation

- Satisfaction person receives from

psychological & or physical environment inwhich person works. For examples, skillsvariety, experiences, good workingconditions, flextime


6/25

Objectives in compensationmanagement

To help the organization achieve strategic

success while ensuring internal and externalequity.

Internal equity- ensures that moredemanding positions or better qualifiedpeople within the organization are paid more.

External equity - assures that jobs are fairlycompensated in comparison with similar jobs

in other firms.


7/25

Objectives in compensation

management (Contd)

Acquire qualified personnel

Retain current employees Ensure equity

Reward desired behaviour

Control costs Facilitate understanding


8/25

Acquire qualified personnel

Compensation needs to be high enough toattract applicants. Pay levels must respond tothe supply and demand of workers in thelabour market since employers compete forworkers. Premium wages are sometimesneeded to attract applicants already working

for others.


9/25

Retain current employees Employees may quit when compensation

levels are not competitive, resulting in higherturnover.


10/25

Ensure equity Compensation management

strives(berjuang) for internal and externalequity. Internal equity requires that pay berelated to the relative worth of a job so thatsimilar jobs get similar pay. External equitymeans paying workers what comparable

workers are paid by other firms in the labormarket.


11/25

Reward desired behaviour Pay should reinforce desired behaviours and

act as an incentive for those behaviours tooccur in the future.

Effective compensation plans rewardperformance, loyalty, experience,responsibility, and other behaviours.


12/25

Control costs A rational compensation system helps the

organization obtain and retain workers at areasonable cost.

Without effective compensationmanagement, workers could be overpaid orunderpaid.

Comply with legal regulations.

A wage and salary system considers the legalchallenges imposed by the government andensures the employer's compliance.


13/25

Facilitate understanding The compensation management system

should be easily understood by humanresource specialists, operating managers, andemployees.


14/25

Organization As A Determinant

Of Direct Financial

Compensation


15/25

It is based on

- Compensation policies

- Organizational level

- Ability to pay


16/25

Compensation policies

Pay leaders- pay higher wages & salaries

Pay based on market rate- pay what most

employers pay for same job Pay followers- pay below market rate

because poor financial condition or believe donot require highly capable employees


17/25

Organizational level

Upper management often makes decisions toensure consistency

Having problems when pressure to retain topperformers may override desire to maintainconsistency in pay structure


18/25

Ability to pay

Organizations assessment of ability to pay isimportant factor in determining pay levels.


19/25

Labor Market As Determinant Of

Direct Financial Compensation


20/25

Employee will be pay based on

labor market conditions:

It includes:

Compensation surveys- what are other firmspaying?, geographic area of survey

Cost of living- when prices rise over a periodof time

Labor Unions- mandatory collective

bargaining management & unions as wages,hours & other terms and conditions ofemployment, cost of living (COLA) allowancehas been disappearing


21/25

Employee will be pay based on

labor market conditions

(Contd):

The economy- cost of living often rises as

economy expands.Compensation legislation- states in wages

council Act 1947, government has generallyresisted any suggestions for a minimum wage

applicable throughout industry and region.


22/25

Job as determinant of direct

financial Compensation


23/25

Job itself continues to be factor.

Organizations pay for value they attach tocertain duties, responsibilities, and other job

related factors as working conditions.

E.g, professional positions different level ofsalary


24/25

Employee as determinant of

direct FinancialCompensation


25/25

Employees may demands for

their salaries based on:

Performance

Competencies Skills

Experiences

Seniority

compensation+and+rewards (1)

Documents