1. Chapter 08 Total Rewards AND Compensations Lecturer: SENG THEARA, MBA-Management © 2011 South-Western, Cengage Learning Ch08-1

2. Chapter Objectives 1.Nature of total rewards and compensation 2.Compensation design 3.Benefit design 4.Talent management and development © 2011 South-Western, Cengage Learning Ch08-2

3. Total Rewards and Compensation  Total Rewards  Monetary and non-monetary rewards provided to attract, motivate, and retain employees.  Types of Total Rewards  Compensation  Benefits  Talent management © 2011 South-Western, Cengage Learning Ch08-3

4.  Compensation  Base pay is basic compensation that an employee receives, usually as a wage or salary. Wages—employees paid hourly receive. Salaries—receive consistent payment.  Variable pay is compensation linked directly to individual, team, or organizational performance— bonuses and incentive, and stock options.  Benefits is indirect reward given to employee– health insurance, vacation pay, or a retirement pension. Compensation Design © 2011 South-Western, Cengage Learning Ch08-4

5. Compensation Design (Cont’d) Compensation Fairness and Equity External Equity Internal Equity Pay Secrecy Compensation Fairness and Equity © 2011 South-Western, Cengage Learning Ch08-5

6.  Compensation Fairness and Equity  Equity—perceived fairness of what a person does (inputs) and what the person receives (outcomes). Individuals judge equity in compensation by comparing their input (effort and performance) against others and against the outcome (rewards received).  External equity—if an employer does not provide pay that employees view as equitable compared to other employees performing similar jobs in other organizations, that employer is likely to experience higher turnover. © 2011 South-Western, Cengage Learning Ch08-6 Compensation Design (Cont’d)

7.  Compensation Fairness and Equity  Internal equity in compensation—means that employees receive compensation in relation to the knowledge, skills, and abilities (KSAs) used in their jobs, responsibilities and accomplishment.  Pay secrecy vs. openness Some firms have policies that prohibit employees from discussion their pay with others. Some firms are opening up their pay systems to some degree by providing employees with more information on compensation policies. © 2011 South-Western, Cengage Learning Ch08-7 Compensation Design (Cont’d)

8.  Competency-Based Pay  Rewards individuals for the capabilities they demonstrate and acquire.  In knowledge-based pay (KBP) or skill-based pay (SBP) system, employees start at a base level of pay and receive increases as they learn to do their jobs or gain additional skills and knowledge and thus become more valuable to the employer. © 2011 South-Western, Cengage Learning Ch08-8 Compensation Design (Cont’d)

9.  Security Benefits  Workers’ compensation Provides benefits to persons injured on the job. State law require most employers to supply workers’ compensation coverage by purchasing insurance from a private carrier or state insurance fund or by providing self-insurance. Requires employers to give cash benefits, medical care, and rehabilitation services to employees for injures or illnesses. Benefit Design © 2011 South-Western, Cengage Learning Ch08-9

10.  Security Benefits  Severance Pay Is voluntarily offered by employers to individuals whose jobs are eliminated or who leave by mutual agreement with their employers. Employer severance pay provisions often provide severance payment corresponding to an employee’s level within the organization and the person’s years of employment. Benefit Design (Cont’d) © 2011 South-Western, Cengage Learning Ch08-10

11.  Health-Care Benefits  Employer provides a variety of health-care and medical benefits, usually through insurance coverage.  Most common plans cover medial, dental, prescription drug and vision care expense for employees. © 2011 South-Western, Cengage Learning Ch08-11 Benefit Design (Cont’d)

12.  Family Benefits  Adoption benefits and dependent-care assistance.  Child care benefits  Elder care benefits  Retirement Benefits  Health care for retirees  Individual retirement accounts © 2011 South-Western, Cengage Learning Ch08-12 Benefit Design (Cont’d)

13.  Financial Benefits  Life insurance  Financial services  Educational assistance  Time-Off Benefits  Lunch and rest breaks  Holiday and vacations  Leave of absence © 2011 South-Western, Cengage Learning Ch08-13 Benefit Design (Cont’d)

14.  Talent Management – Concerned with enhancing the attraction, development, and retention of key human resources. – Talent management focus on three main point: Training Human resource (HR) development Career development © 2011 South-Western, Cengage Learning Ch08-14 Talent Management and Development

15.  HR Development  Development Efforts to improve employees’ abilities to handle a variety of assignments and to cultivate employees’ capabilities beyond those required by the current job. Development benefits both organizations and individuals. Employees and managers with appropriate experiences and abilities may enhance organizational competitiveness and the ability to adapt to a changing environment. © 2011 South-Western, Cengage Learning Ch08-15 Talent Management and Development (Cont’d)

16.  HR Development – HR development approaches Job-site development – Coaching: training and feedback given to employees by immediate supervisors. – Job rotation: process of shifting a person from job to job. – Assistant-to- position: Some firms create “assistant- to” positions, which are staff positions immediately under a manager © 2011 South-Western, Cengage Learning Ch08-16 Talent Management and Development (Cont’d)

17.  HR Development – Off-site development Classroom course: Most off-the-job development programs include some classroom instruction. Seminar: Organizations often send employees to externally sponsored seminars. Outdoor training: Some organizations send executives and managers off to ordeals in the wilderness, called outdoor training or outdoor development, which can last one day or even seven days or longer © 2011 South-Western, Cengage Learning Ch08-17 Talent Management and Development (Cont’d)

18.  Career Development – Three career transitions are of special interests to HR: organizational entry and socialization, transfers and promotions, and job loss. – Organizational entry and socialization Starting as a new employee. “Entry shock” is especially difficult for younger new hires who find the work world very different from school. © 2011 South-Western, Cengage Learning Ch08-18 Talent Management and Development (Cont’d)

19.  Career Development – Transfers and promotions Transfers and promotions offer opportunities for employees to develop. However, unlike new hires, employees who have moved to new positions are often expected to perform well immediately. © 2011 South-Western, Cengage Learning Ch08-19 Talent Management and Development (Cont’d)

20.  Career Development – Job loss Job loss as a career transition has been most associated with downsizing, mergers, and acquisitions. Yet the potential for job loss continues to increase for many individuals, and effectively describing their concerns should be considered in career transition decision making © 2011 South-Western, Cengage Learning Ch08-20 Talent Management and Development (Cont’d)