Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Part 6

Pay

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

What Constitutes Pay?

• Transaction

• Label

• Status symbol

• Determinant of standard of living

• Discriminator

Slide 26.1

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Importance of Pay

• Influence in employees’ lives

• Importance reflected in Trade Union interest in pay levels

• Legislation re minimum wage and pay bargain

Slide 26.2

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Terminology

• Compensation

• Reward

• Remuneration

• Pay

Slide 26.3

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Reward Strategy

• Aligning an organisation’s payment arrangements with its business objectives

• Developing payment systems that enhance employees contribution to business goals

• Experimentation stage with many new approaches being considered

Slide 26.4

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Employee Objectives for Contract of Payment

• Purchasing power• Fair• Rights• Relativities• Recognition• Composition

Slide 26.5

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Conventional Wisdom over Pay Composition (1 of 2)

• Younger employers more interested in high direct earnings

• Incentive or performance related payment of interest to those who see an opportunity to control own personal activities

Slide 26.6

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Conventional Wisdom over Pay Composition (2 of 2)

• Women with children are less interested in payment arrangements that depend on overtime

• Overtime used by many to produce acceptable purchasing power

Slide 26.7

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Employer Objectives For Contract For Payment

• Prestige• Competition• Control• Motivation and performance• Cost• Change management

Slide 26.8

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Factors That Can Influence The Setting of Base Pay Rates

• National minimum wage

• Equal pay law

• Nature of product markets

Slide 26.9

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Base Pay Rates Approaches

• External labour market comparisons

• Internal labour market comparisons

• Job evaluation

• Collective bargaining

Slide 26.10

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

External Market Comparisons

• Focus on external relativities

• Going rate

• Follow the market

• Sources of intelligence – IDS, IRS

Slide 26.11

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Elements of Payment (1 of 2)

Figure 26.1  The potential elements of payment

Slide 26.12

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Elements of Payment (2 of 2)

Figure 26.1  The potential elements of payment

Slide 26.13

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Importance of Equity

• Perceived inequity in payment matters can be dangerous to organisations

• An area influencing employee satisfaction is way that pay levels and increases are distributed fairly

Slide 26.14

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Principles In Pay Decisions

• Standard approach for determining pay across organisation

• As little subjective or arbitrary decision making • Maximum communication and employee

involvement • Clarity in pay determination matters

Slide 26.15

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Strategic Focus (1 of 2)

• More reward managers than salary administrators but what is change in practices

• New pay philosophy where decisions about payment levels and packages flow from overall strategy

• Pay policy increasingly underpins employer objectives

Slide 26.16

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Strategic Focus (2 of 2)

• Gaps in rhetoric and reality of strategic pay activity

• For most matter of incremental change being made

Slide 26.17

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Summary (1 of 2)

• Employees tend to be concerned with purchasing power, fairness & recognition of effort

• Employers are concerned with pay matters made by law, and realities of their markets

• Four alternative methods of setting basic pay rates

Slide 26.18

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005

Summary (2 of 2)

• There are seven elements of pay

• Procedural equity is essential to the design of successful payment systems

• There is disagreements about how UK managers embrace more strategic approaches to reward management

Slide 26.19