Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Part 6 Pay

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 What Constitutes Pay? Transaction Label Status symbol Determinant of standard of living Discriminator Slide 26.1

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Importance of Pay Influence in employees’ lives Importance reflected in Trade Union interest in pay levels Legislation re minimum wage and pay bargain Slide 26.2

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Terminology Compensation Reward Remuneration Pay Slide 26.3

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Reward Strategy Aligning an organisation’s payment arrangements with its business objectives Developing payment systems that enhance employees contribution to business goals Experimentation stage with many new approaches being considered Slide 26.4

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Employee Objectives for Contract of Payment Purchasing power Fair Rights Relativities Recognition Composition Slide 26.5

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Conventional Wisdom over Pay Composition (1 of 2) Younger employers more interested in high direct earnings Incentive or performance related payment of interest to those who see an opportunity to control own personal activities Slide 26.6

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Conventional Wisdom over Pay Composition (2 of 2) Women with children are less interested in payment arrangements that depend on overtime Overtime used by many to produce acceptable purchasing power Slide 26.7

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Employer Objectives For Contract For Payment Prestige Competition Control Motivation and performance Cost Change management Slide 26.8

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Factors That Can Influence The Setting of Base Pay Rates National minimum wage Equal pay law Nature of product markets Slide 26.9

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Base Pay Rates Approaches External labour market comparisons Internal labour market comparisons Job evaluation Collective bargaining Slide 26.10

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 External Market Comparisons Focus on external relativities Going rate Follow the market Sources of intelligence – IDS, IRS Slide 26.11

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Elements of Payment (1 of 2) Figure 26.1 The potential elements of payment Slide 26.12

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Elements of Payment (2 of 2) Figure 26.1 The potential elements of payment Slide 26.13

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Importance of Equity Perceived inequity in payment matters can be dangerous to organisations An area influencing employee satisfaction is way that pay levels and increases are distributed fairly Slide 26.14

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Principles In Pay Decisions Standard approach for determining pay across organisation As little subjective or arbitrary decision making Maximum communication and employee involvement Clarity in pay determination matters Slide 26.15

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Strategic Focus (1 of 2) More reward managers than salary administrators but what is change in practices New pay philosophy where decisions about payment levels and packages flow from overall strategy Pay policy increasingly underpins employer objectives Slide 26.16

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Strategic Focus (2 of 2) Gaps in rhetoric and reality of strategic pay activity For most matter of incremental change being made Slide 26.17

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Summary (1 of 2) Employees tend to be concerned with purchasing power, fairness & recognition of effort Employers are concerned with pay matters made by law, and realities of their markets Four alternative methods of setting basic pay rates Slide 26.18

Torrington, Hall & Taylor, Human Resource Management 6e, © Pearson Education Limited 2005 Summary (2 of 2) There are seven elements of pay Procedural equity is essential to the design of successful payment systems There is disagreements about how UK managers embrace more strategic approaches to reward management Slide 26.19