Compensation and Rewards OS352 HRM Fisher April 4, 2005

2 Agenda  Pay grades  Purpose and types of rewards  Effectiveness  Return exams

3 Pay Grades  Used in federal government  Job evaluation places jobs in a specific pay grade  Can have ranges (e.g., GS 11-13, depending on education and experience)  Also have pay differentials

4 How does all of this become a pay structure? Grade Salary 1$22,000 2$35,000 3$36,000 4$45,000 5$68,000 Helps guide/place controls on managers – we know when an employee is paid appropriately

5 Purpose of rewards  Thank employees for a job well done  Motivate certain kinds of behaviors Continued good performance Increased performance Change in how effort is allocated  Need to consider motivation theories when determining appropriate rewards Equity Expectancy Need based theories

6 Pay Increases  Raise – permanent increase  Bonus – one time payment Spot bonuses are less formal bonus programs Many companies still using signing bonuses  Increases must be large enough to be meaningful  Thinking about raises vs. bonuses What are the cost implications of each? What are the motivational implications of each?

7 Basis for rewards  Individual level rewards Piecework Merit pay Sales commissions  Group/organizational level rewards Gainsharing Profit sharing Stock ownership  Allocating group or team level rewards is an important issue. Equity? Equality?

8 Non-monetary rewards  Includes recognition and opportunities Employee of the month Lunch with the boss Bigger office Attending a conference or seminar  Not technically part of the overall compensation package, but an important motivational tool

9 Effectiveness  Aligned with corporate goals, strategy  Contingent on performance  Valued by the employees  Allocation process is perceived as fair

10 An Ongoing Debate: Do Monetary Rewards Motivate or De-Motivate?  Motivate: Economic incentives improve quantity and do not reduce quality (Gupta & Mitra).  De-Motivate: Economic incentives reduce the satisfaction of doing enjoyable tasks (Deci).

11 For next class  Topic: Pay secrecy  Read HBR case “When Salaries Aren’t Secret” and answer case analysis questions  Will use your analyses as the foundation for a discussion