I NSTITUTE OF N EW K HMER Human Resources Managements Lectured by: NOUV Brosh Mobile Phone: & 1 HRM By: NOUV Brosh

Chapter 10: Employee Compensation and Benefits HRM By: NOUV Brosh2

Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. WHAT IS EMPLOYEE COMPENSATION? HRM By: NOUV Brosh3

Total Compensation Direct Compensation  Wages  Salaries  Commissions  Bonuses  Gain-sharing  Fixed allowances  Incentives Indirect Compensation  Pay for Time Not Worked Vacations Breaks Holidays  Insurance Plans Medical Dental Life  Security Plans Pension Disability Insurance  Employee Services Educational Assistance Recreational programs HRM By: NOUV Brosh4

Components of a Total Reward System 1. Compensation 2. Benefits 3. Social Interaction 4. Security 5. Status / Recognition 6. Work Variety 7. Workload 8. Work Importance 9. Authority / Control / Autonomy 10. Advancement 11. Feedback 12. Work Conditions 13.Development Opportunity Wages, Commissions and Bonuses Vacations, Health Insurance Friendly Workplace Stable, Consistent Position and Rewards Respect, Prominence Due to Work Opportunity to Experience Different Things Right Amount of Work (not too much, not too little) Is Work Valued by Society Ability to Influence Others; Control Own Destiny Chance to Get Ahead Receive Information Helping to Improve Performance Hazard Free Training to Learn New Knowledge / Skills / Abilities HRM By: NOUV Brosh5

Compensation Management and other HRM Functions HRM By: NOUV Brosh6

OBJECTIVES OF PAY SYSTEM: Attract and retain employees Motivate performance Promote skills and knowledge development Shape corporate culture Reinforce and define structure Determine pay costs HRM By: NOUV Brosh7

Pay-Design Process Before any new compensation program is designed, there must be a clear understanding by the organization of: – its current values – its structure – its people – its goals and vision for the future HRM By: NOUV Brosh8

Goals of Strategic Compensation Policies Motivating Value of Compensation Pay-for- Performanc e Standard Linking Compensation to Organizational Objectives HRM By: NOUV Brosh9

Components ofthe Wage Mix WAGE MIX Conditions of Labor Market Area Wage Rates Cost of Living Collective Bargaining Legal Requirements Compensation Policy of Organization Worth of Job Employee’s Relative Worth Employer’s Ability to Pay HRM By: NOUV Brosh10

Job Ranking Job Evaluation Systems Point System Job Classification Factor Comparison Common Methods of Job Comparison HRM By: NOUV Brosh11

Value-added compensation refers to evaluating the individual components of the compensation program to see if they advance the needs of employees and the goals of the organization. Pay-for-Performance Standard refers to the standard by which managers tie compensation to employee effort and performance. Pay Equity refers an employee’s perception that compensation received is equal to the value of the work performed. Hourly Work refers to work paid on an hourly basis. Piecework refers to work paid according to the number of units produced. Real Wages refers to wage increases larger than rises in the consumer price index; that is, the real earning power of wages. Consumer Price Index (CPI) refers to the measure of the average change in prices over time in a fixed “market basket” of goods and service. Escalator Clauses refers to clauses in the labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index. GENERIC TERMS USED IN COMPENSATION: HRM By: NOUV Brosh12

Job Evaluation Systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization. HRM By: NOUV Brosh13

Job Ranking System is the simplest and oldest system of job evaluationby which jobs are arrayed on the basis of their relative worth. Job Classification System is the system of job evaluation by which jobs are classified and grouped according to a series of predetermined wage grades. Point System is the quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it. Factor Comparison System is a job evaluation system that permits the evaluation process to be accomplished on a factor- by-factor basis by developing a factor comparison scale. Hay Profile Method is a job evaluation technique using three factors – knowledge, mental activity, and accountability – to evaluate executive and managerial position. COMMON METHODS OF JOB COMPARSION: HRM By: NOUV Brosh14

1: Paired-Comparison Job Ranking Table Direction: Place an X in the cell where the value of a row job is higher than that of a column job. Column JobsSeniorData-EntryData-Data-FileSystemSystemProgrammerTotalTotal AdministrativeOperatorProcessingClerkAnalyst Row JobsSecretaryDirectorDirector Senior Administativexxx3 Secretary Data-Entryx1 Operator Data-Data- Processingxxxxx5 DirectorDirector File Clerk0 SystemsSystemsxxxx4 Analyst Programmerxx2 HRM By: NOUV Brosh15

2 :Points Values for Job Factors of the American Association of Industrial Management Source : Developed by the National Metal Trades Association. Reproduced with permission of the American Association of Industrial Management, Springfield, Mass. FACTORSFACTORS1ST DEGREE 2ND DEGREE 3RD DEGREE 4TH DEGREE 5TH DEGREE Skill 1. Job Knowledge Experience Initiative and ingenuity Effort 4. Physical demand Mental or visual demand Responsibility 6. Equipment or press Material or product Safety of others Work of others Job Conditions 10. Working Conditions Hazards HRM By: NOUV Brosh16

Characteristics of Key Jobs Have importance to employees and organizations Vary in terms of job requirements Possess relatively stable job content Are used as important jobs in salary surveys HRM By: NOUV Brosh17

Wage Curve Rate Ranges Pay Grades Issues Involved in Setting Compensation Structures The Compensation Structure Wage and Salary Surveys HRM By: NOUV Brosh18

Wage and Salary Survey Survey of the wages paid to employees of other employers in the surveying organization’s relevant labor market HRM By: NOUV Brosh19

How to conduct Wage and Salary Surveys?  Select key jobs.  Determine relevant labor market.  Select organizations.  Decide on information to collect: wages/benefits/pay policies.  Compile data received.  Determine wages and benefits to pay. HRM By: NOUV Brosh20

COMPENSATION STRUCTURE - CONTINUE  Wage Curve refers to the curve in a scattergram representing the relationship between relative worth of jobs and wage rates.  Pay Grades refers to groups of jobs within a particular class that are paid the same rate or rate range.  Red Circle Rates refers to the payment rates above the maximum of the pay range.  Skill-Based Pay refers to pay based on how many skills employees have or how many jobs they can perform.  Comparable Worth refers to the concept that male and female jobs that are dissimilar, but equal in terms of value or worth to the employer, should be paid the same.  Wage-Rate Compression refers to the compression of differentials between job classes, particularly the differential between hourly workers and their managers. HRM By: NOUV Brosh21

What are the Universal Compensable Factors? 1.Skill: the experience, training, ability, and education required to perform a job under consideration - not with the skills an employee may possess – Technical Know-how – Specialized Knowledge – Organizational Awareness – Educational Levels – Specialized Training – Years of Experience Required – Interpersonal Skills – Degree of Supervisory Skills HRM By: NOUV Brosh22

Universal Compensable Factors - CONTINUE 2. Effort: the measurement of the physical or mental exertion needed for performance of a job. – Diversity of Tasks – Complexity of Tasks – Creativity of Thinking – Analytical Problem Solving – Physical Application of Skills – Degree of Assistance Available HRM By: NOUV Brosh23

Universal Compensable Factors - continue 3. Responsibility: the extent to which an employer depends on the employee to perform the job as expected, with emphasis on the importance of job obligation. Decision-making Authority Scope of the organization under control Scope of the organization impacted Degree of integration of work with others Impact of failure or risk of job Ability to perform tasks without supervision. HRM By: NOUV Brosh24

Universal Compensable Factors - CONTINUE 4.Working Conditions: Hazards, physical surroundings of the job. Potential Hazards Inherent in Job Degree of Danger Which Can be Exposed to Others Impact of Specialized Motor or Concentration Skills Degree of Discomfort, Exposure, or Dirtiness in Doing Job HRM By: NOUV Brosh25

EMPLOYEE BENEFITS: that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (e.g., life insurance, pension, workers’ compensation, vacation). WHAT IS EMPLOYEE BENEFITS? HRM By: NOUV Brosh26

Strategic Reasons for Offering Employee Benefits: Help attract employees Help retain employees Elevate the image of the organization with employees and other organizations Increase job satisfaction HRM By: NOUV Brosh27

Strategic considerations Consistency of benefits package with long- term business strategy plans Consistency of benefits with objectives of total compensation strategy Competitive costs of benefits package Meeting needs of company workforce Satisfaction of legal requirements HRM By: NOUV Brosh28

Components of benefits package Security & health Pay for time not worked Employee services HRM By: NOUV Brosh29

Payment For Time Not Worked Paid Vacations in Cambodia: – 18 days per year in Cambodia – 30 days mandatoryin Europe Paid holidays according to Prakas. 90 days paid maternity leave in Cambodia Sick leave Special leave of 7 days granted to an employee in Cambodia. HRM By: NOUV Brosh30

Employee Wellness Programs Effort to raise overall health levels of all employees Two types of programs: Passive emphasis on building awareness people identify own problems & take action physical fitness facility program Active emphasis on reinforcement & support example: outreach and follow-up model HRM By: NOUV Brosh31

Flexible Benefits (Cafeteria) Plans Advantages – more appreciation of benefits offered – better match between benefits and employee preference – cost reduction to employee Disadvantages – increased design and start-up costs HRM By: NOUV Brosh32

Key Issues In Benefits Planning, Design, and Administration Allowing for Employee Input Modifying Employee Benefits Providing Flexibility Establishing Specific Objectives Communicating Benefits Information HRM By: NOUV Brosh33

Managing Benefits Surveys and Benchmarks Cost controls -Managed Care -Co-insurance -Employee wellness programs Workforce Demographics Communicating with employees Flexible Benefit (Cafeteria) Plans HRM By: NOUV Brosh34

EXAMPLES OF EMPLOYEE BENEFITS: Some examples of discretionary employee benefits include : HEALTH CARE BENEFITS DEATH BENEFITS LIFE INSURANCE (could be mandatory or compulsory if required by law) PENSIONS EDUCATIONAL ASSISTANCE COMPANY LOANS CHILD AND ELDER CARE RECREATIONAL AND SOCIAL SERVICES PAID VACATIONS 2 main concerns of management regarding EB are : Costs and Legal. HRM By: NOUV Brosh35

Reading Cases 1.Case 10-1: The comparable Worth Debate on page 322 to Case 11-1: Customizing Bonus Pay Plan on page 351 to Case 12-1: Benefits are vanishingon page 384 to 386 HRM By: NOUV Brosh36