Strategic Ompensation 1

8/8/2019 Strategic Ompensation 1

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Strategic CompensationStrategic CompensationA Component of Human Resource SystemsA Component of Human Resource Systems

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You Would Learn About You Would Learn AboutCompensation Context

Strategic Versus Tactical Decision

Compensation Professionals· Goals

Stakeholders of the Compensation System




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What is Compensation? What is Compensation?Compensation represents both the Intrinsic &Extrinsic rewards employees receive for

performing their jobs.

Together both Intrinsic & Extrinsic compensation

describes a company·s total compensation system.




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Total Compensation SystemTotal Compensation SystemIntrinsic Compensation

Reflects employees· psychological mind-sets thatresult from performing their jobs.

Extrinsic CompensationIncludes both monetary and non-monetaryrewards




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Social Securities Act Workers·CompensationLaws

Family & MedicalLeave Act

Health Insurance Disability Insurance Life Insurance Retirement Plans Paid Time-off Accommodationand Enhancement

Cost of Living Seniority Merit Incentive

Person-Focused

Hourly Wages

Annual Salary

CoreCompensation

Adjustment toCore

Compensation

LegallyRequiredEmployee

Benefits

DiscretionaryEmployee

Benefits



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Core Job Characteristics

Skill Variety

Task Identity

Task Assignment

Autonomy

Feedback



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Core JobCharacteristics

Skill Variety

Task Identity

Task Assignment

Autonomy

Feedback

CriticalPsychological State

ExperiencedMeaningfulness

ExperiencedResponsibility for Work

Outcomes

ained Knowledge of Results for Work

Acti ities

Benefit toEmployers

- Lower Turno er,

- LowerAbsenteeism,

- Enhanced JobPerformance,

- reater JobSatisfaction



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Core CompensationCore Compensation

1. Base Pay

Represents the monetary compensation employeesearn on a regular basis for performing their jobs.Hourly pay and salary are the main forms of basepay.




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Adjustment to Core CompensationAdjustment to Core Compensation

1. Cost of Living Adjustments (COLA)

Represent periodic base pay increases that are basedon changes in prices, as indexed by the ConsumerPrice Index (CPI). COLAs enable workers to maintaintheir purchasing power and standard of living byadjusting base pay for inflation.

Consumer Price Index (CPI)Indexes monthly price changes of goods and services that peoplebuy for day to day living




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Adjustment to Core CompensationAdjustment to Core Compensation2. Seniority Pay

Systems reward employees with permanent additions to

base pay periodically, according to employees· length of service performing their jobs.3. Merit Pay

Programme reward employees with permanent increases tobase pay according to differences in job performance.

4. Incentive PayAs compensation, other than base wages or salaries, thatfluctuates according to employees· attainment of somestandard, such as a pre-established formula, individual orgroup goals, or company earning




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Adjustment to Core CompensationAdjustment to Core Compensation5. Person Focused Pay

Generally reward employees for acquiring job-related

competencies, knowledge, or skills rather than fordemonstration successful job performances. (Skill BasedPay or Pay for nowledge Plans)




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Employees· BenefitsEmployees· Benefits

1. Legally Required Benefits

Are protection programmes, that attempt to promoteworker safety and health, maintain family income streams,and assist families in crisis.




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Discretionary BenefitsDiscretionary Benefits

1. Protection Programme

Provide family benefits, promote health, and guard againstincome loss caused by catastrophic factors such asunemployment, disability, or serious illness.

2. Paid Time Off Provides employees with pay for time when they are not

working, such as vacation.3. Services

Provide enhancements such as tuition reimbursement andday care assistance to employees and their families




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Relationship B/W Strategic & Tactical DecisionsRelationship B/W Strategic & Tactical Decisions

Strategic DecisionCompetitive Strategy

Human Resource Strategy

Compensation Strategy

General Tactical HRDecision

Recruitment

Selection

Performance Appraisal

Compensation

Training

Specific Tactical HRDecision (CompensationExamples)

Seniority PayMerit PayIncentive PayPay for

nowledgeSkill Based PayBroad bandingTwo Tier Pay StructuresDiscretionary Benefits Options




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Compensation Professionals· GoalCompensation Professionals· Goal

Compensation, Recruitment, and SelectionCompensation & Performance AppraisalCompensation & TrainingsCompensation & Career DevelopmentCompensation & Labour Management RelationCompensation & Employee Termination

Compensation & LegislationInternally Consistent Compensation SystemMarket Competitiveness

Recognizing Individual Contributions




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Stakeholders of the Compensation SystemStakeholders of the Compensation System

Employees

Line Managers

Executives

Unions

Government




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Strategic Ompensation 1