1. Compensation Part 2: Making individual compensation decisions OS652 HRM Fisher October 28, 2004

2. 2 Agenda Update presentation on compensation Making individual compensation decisions – Raises – Bonuses Potential conflict between motivating individuals and staying within the overall plan

3. 3 Pay structure helps guide individual decision Grade Salary 1$22,000 2$35,000 3$36,000 4$45,000 5$68,000 Salary line places controls on managers – we know when an employee is paid appropriately

4. 4 Decisions made at hire Incentives to join organization One-time payments – Signing bonus – Relocation package Salary-related decisions – Balancing applicant attraction with salary structure – When is it OK to create salary compression?

5. 5 Raises vs. bonuses Both are viable alternatives depending on compensation system What are the differences in – Motivational impact? – Financial impact?

6. 6 Pay for performance Some portion of pay is at risk; depends on achieving defined performance goals Popular options include – Merit pay – Skill based pay – Profit sharing – Stock ownership/options Issues include – Setting appropriate performance standards – Measuring performance accurately – Team vs. individual vs. organizational performance

7. 7 CEO Compensation Why is CEO compensation so high compared to the rest of the workforce? Is that reasonable? Is it fair?

8. 8 For next class Topic: Benefits Read chapter 13 Presentation