Direct Financial Compensation Chapter 9 © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Nature Of Total Rewards and Compensation Monetary and non-monetary rewards provided to attract, motivate, and retain employees. Rewards System Strategic Objectives: Legal compliance with all laws and regulations Cost-effectiveness for the organization Internal, external, and individual equity Performance enhancement for the organization Performance recognition and talent management Enhanced recruitment, involvement, and retention © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Total Rewards Components FIGURE 11–1 Total Rewards Components © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Managing The Workforce Abraham Maslow’s Hierarchy of Needs

Continuum of Compensation Philosophies FIGURE 11–2 Continuum of Compensation Philosophies © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Compared to what others around the person receive for their efforts, Equity Theory Motivation is in proportion to the perceived fairness of rewards received for amount of effort exerted. Compared to what others around the person receive for their efforts, Equity and fairness important in compensation. 9-6

Equity in Financial Compensation Financial equity: Perception of fair pay External equity: Employees paid comparably to workers who perform similar jobs in other firms Internal equity: Employees paid according to relative value of jobs within a single organization Employee equity: Individuals performing similar jobs for same firm paid according to factors such as performance level or seniority Team equity: More productive teams are rewarded more than less productive groups 9-7

Primary Determinants of Direct Financial Compensation Organization Compensation Policies Organizational Level Ability to Pay Employee Job Performance Skills Competencies Seniority Experience Organization Membership Potential Political Influence Luck Salary Compression Job Pricing Labor Market Compensation Surveys Expediency Cost of Living Labor Unions Economy Legislation Direct Financial Compensation Job Job Analysis Job Descriptions Job Evaluation 9-8

HR Metrics for Compensation FIGURE 11–3 HR Metrics for Compensation © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Compensation System Design Issues Compensation Fairness and Equity External Equity Internal Equity Procedural Justice Distributive Justice Pay Secrecy vs. Openness © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Compensation System Design Issues (cont’d) Market Competitiveness and Compensation “Meet the Market” Strategy “Lag the Market” Strategy “Lead the Market” Strategy © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Compensation Quartile Strategies FIGURE 11–5 Compensation Quartile Strategies © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Possible Components of Global Employee Compensation FIGURE 11–6 Possible Components of Global Employee Compensation © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Global Compensation Issues Compensating Expatriates Balance-Sheet Approach Global Market Approach Tax Equalization Plan © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Compensation Administration Process FIGURE 11–8 Compensation Administration Process © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Valuing Jobs with Job Evaluation Methods The formal systematic means used to identify the relative worth of jobs within an organization. Compensable Factor A job value commonly present throughout a group of jobs. Something for which an organization will compensate an employee. © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.