UNIT 5 MT203 Human Resource Management Seminar Compensation and Benefit Plans

Agenda/Overview This week’s Seminar is about what constitutes an adequate compensation and benefit plan. During the discussion, consider compensation and benefits that you have received from your employer. Enhanced Audio Seminar Format Compensation Benefits and Incentives Cost Control Motivation Executive Compensation Abuse and Legislation Questions

Compensation Strategic Compensation Pay for Performance Standard Incentive Pay Skill-Based Pay Expectancy Theory

Compensation Plans: Pay-for-Performance Managers tie pay to effort and performance Link pay to performance to maximize productivity Studies prove out increased output Incentive Plans Focus on specific performance targets Compensation is directly related to Operating Performance Rewards and attracts top performers Most systems are viewed as fair by employees Sales Professionals Salary, Commission, or Combo Group Incentives Team, Gainsharing, Profit Sharing Skill-Based Plans Link to strategy, organizational values, motivation and reward Common in Manufacturing Benefits include increased productivity, a willingness to learn, and, flexible scheduling Expectancy Theory Predicts motivation to rewards

Incentives Professional Employees Hourly Pay Profit Sharing, Stock Ownership, Hiring bonus Sales Professionals Salary, Commission, Combo Group Incentive Plans Team Compensation Gainsharing Merit Pay Hourly Pay Means to reduce managerial levels Align compensation plans with organizational strategies Reward systems

Compensation Strategies Factors Affecting the Wage Mix: Internal Factors Employer’s Strategy Employee’s relative worth: Ability and Capability Employer’s ability to pay: Public, Private, Government External Factors Conditions of Labor Market: Recession, Economic Growth Area wage rates Cost of living Union Environment: Collective Bargaining Legal requirement: Federal Minimum wages Law Wage and Salary Surveys: Department of Labor

Job Evaluation Techniques Job Ranking System Job Classification System Point System Work Valuation System

Benefits Medical health Insurance Why Organizations offer Benefits To attract and hold capable people. To keep up with competition. To foster good morale. To keep employment channels open by providing opportunities for advancement and promotion as older workers retire. Common Benefits Medical health Insurance Life Insurance and Short term disability insurance Disability insurance Vision and Dental 401K Vacation and float day Nurse Hotline Other Compensation and Benefits Employee Assistant Program Membership Benefits Tuition reimbursement

Cost Control Compensation Issues Healthcare costs are a threat to many organizations Employees pay more out of pocket New Law: Every employer has to provide health insurance? Compensation Issues The issue of Equal Pay for Comparable Worth What is Comparable Worth? The issue of Wage-rate compression What is Wage-Rate Compression? The issue of Low Salary Budgets Pay raise freeze The impact of Globalization

Executive Compensation Executive: CEO, President, CFO, COO, Board of Director Base salary, cash bonus, pension, perks, stock options, profit sharing Health, vision, Dental, term life, life insurance, travel accidental insurance, Short term disability Paid spouse travel for meeting, Country club membership, Health club membership, Airline club membership, Corporate jet, Severance package Gap between hourly and executive pay CEO pay: 364 times (avg $10.8 mil)more than workers (2007) 525 times recorded in 2000 (2000) http://money.cnn.com/2007/08/28/news/economy/ceo_pay_workers/index.htm Investors and public Feelings

Executive Abuse Bob Nardelli (Home Depot), Jack Welch (GE) Stockholders “Say-on-Pay” http://dealbook.blogs.nytimes.com/2009/02/19/sec-commissioner-backs-say-on-pay/ Outrageous Perks

Outrageous Perks Country Club Bill, including $200,000 initiation fee (Countrywide Financial CFO) Upgrade of $365,916 to TXU CEO’s Dallas home $1,000,000 donation in the name of Lockheed Martin’s CEO Robert Stevens $894,014 cost to sell CFO Tom Horton’s New Jersey home (AMR) $1,000,000 bonus to reward acquisition of Knight Ridder (CEO Gary Pruitt) $10,000,000 pay package for J.C. Penny CEO Catherine West (who only lasted six months) AIG:  A $440,000 lavish getaway. Merrill Lynch: A million-dollar office re-do for its former CEO just before the company got government bailout money

Legislation and trends governing pay and Perks Corporate Boards no longer “Rubber Stamp” recommendations of managers following Enron Investors are opposing compensation packages New Federal mandates require large companies to disclose executive pay (more straightforward) Companies replacing traditional stock options with rewards linked to specific targets Securities and Exchange Commission (SEC) approved an overhaul of executive pay disclosure Http://crossbordergroup.typepad.com/say_on_pay_forum/ http://www.swamppolitics.com/news/politics/blog/2009/07/say_on_pay_house_says_yea.html

Early History of Legislation Enacted to Regulate Compensation Davis-Bacon Act (1931) Walsh-Healy Act (1936) Fair Labor Standards Act (of 1938, as amended)

Questions What other questions do you have at this time?