Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Managing Compensation 10-1 Chapter 10

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall What Is Compensation?  Total Compensation  Sum total of quantifiable rewards  Received for an employee’s labor 10-2  Pay Mix—proportion of each of:  Base compensation  Pay incentives  Indirect compensation (benefits)  Perquisites— “perks ”

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Compensation System Design  Fixed vs. Variable Pay 10-3  Performance vs. Membership

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Job versus Individual Pay  Job-Based Pay is best when:  Jobs and technology are stable  Training is required to learn a given job  Turnover is relatively low 10-4  Individual-Based Pay is best when:  Company and environment are dynamic  Workforce is relatively educated  Workforce is able & willing to learn different jobs  Participation and teamwork are encouraged  Opportunities to learn new skills are available.

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Compensation Tools: Job-Based Plans  Advantages:  Rational, objective, systematic  Relatively easy to administer 10-5  Drawbacks:  Do not account for nature of business  Job descriptions often too general  Wage and salary data not definitive  Job-based plans tend to be bureaucratic, mechanistic and inflexible

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Compensation Tools: Skill-Based Plans  Skill mastery increases pay 10-6  Three types of skills:  Depth skills—specialized area  Breadth Skills—jobs/tasks in firm  Vertical skills—self-management  Workforce is more flexible  Higher training costs  Skills can become “rusty ”

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall The Legal Environment and Pay Systems Governance  The Fair Labor Standards Act (1938)  Exempt/Non-exempt employees  Minimum wage and Overtime 10-7  The Equal Pay Act (EPA, 1963)  Exemptions: seniority, job performance, or other factors (e.g. shift differential)  “Comparable worth”—not the same as Equal Pay Act considerations  Reliability of comparable worth determinations can be highly suspect