1. Total Rewards and Compensation
Monetary and non-monetary rewards used to attract, motivate, and retain employees
Rewards System Strategic Objectives
Legal compliance
Cost effectiveness
Internal and external equity for employees
Recognizing contribution to maximize performance and manage talent

2. Compensation Approaches
Traditional Approach
Total Rewards Approach
Compensation primarily base pay
Bonuses for executives only
Fixed benefits tied to seniority
Pay grade progression based on organizational promotions
One organization-wide pay plan for all employees
Variable pay used with base pay
Annual/long-term incentives provided to all employees
Flexible and portable benefits offered
Knowledge-based broadbands determine pay grades
Multiple pay plans consider job family, location, and business units

3. Total Rewards Components

4. Compensation Philosophies

5. HR Metrics for Compensation

6. Typical Division of HR Responsibilities: Compensation

7. Compensation System Design Issues
Fairness
Internal Equity
Procedural
Distributive
Interactional
External Equity
Privacy
Transparency

8. Market Competitiveness and Compensation
Lead the market
Meet the market
Lag the market

9. Compensation Quartile Strategies

10. More Compensation System Design Issues
Identification of the required competencies
Progression and compensation of employees
Limitations on who can acquire more competencies
Training in the appropriate competencies
Certification and maintenance of competencies
Competency-Based Pay Systems

11. More Compensation System Design Issues
Team
How to develop compensation programs that build on the team concept.
Individual
How to compensate the individuals whose performance may also be evaluated on team achievements.
Individual vs. Team Rewards

12. Possible Components of Global Employee Compensation

13. Legal Constraints on Pay Systems
Minimum wage
Child labor
Exempt vs. nonexempt status
Overtime

14. Exempt Status Under the FLSA

15. Compensation for Overtime Work
Common Overtime Issues
Compensatory Time Off
Incentives for Non-exempts
Training Time
Travel Time

16. Legislation Affecting Compensation
Compensation and the Law
Davis-Bacon Act Walsh-Healy Act McNamara-O’Hara Act
Equal Pay Act of 1963 and Pay Equity
State and Local Laws
Garnishment Laws

17. Compensation Administration Process
Pay Structure
Pay grades
Pay ranges
Compensation Administration Process

18. Valuing Jobs with Job Evaluation Methods
Means used to identify the relative worth of jobs within an organization.
Compensable Factor
Job value common among a group of jobs.
Something for which an organization chooses to compensate an employee.

19. Examples of Compensable Factors for Different Job Families

20. Job Evaluation Methods
Point Method
Ranking Method
Classification Method
Factor-Comparison Method

21. Job Evaluation Methods
Point method
Ranking method
Classification method
Factor-comparison method

22. Valuing Jobs Using Market Pricing
Using market data to identify the relative value of jobs based on what other firms pay for similar jobs.
Advantages
Disadvantages
Ties organizational pay levels to the external job market, without “internal” job evaluation distortion.
Communicates to employees that the compensation system is “market linked.”
It relies on market survey data.
A specific job may differ from a “matching” job in the survey.
The market data’s scope (range of sources) is a concern.
Tying pay levels to market data can lead to wide fluctuations.

23. Pay Surveys
Collection of data on compensation rates for workers performing similar jobs in other organizations.
Benchmark Jobs
Jobs found in many organizations.
Internet-Based Pay Surveys

24. Pay Structures Job Family
Group of jobs with common organizational characteristics.
Common Pay Structures
Hourly and salaried
Office, plant, technical, professional, managerial
Clerical, information technology, professional, supervisory, management, and executive
Pay Grades
Groupings of individual jobs having approximately the same job worth.

25. Compensation Administration Process

26. More on Pay Structures Market Banding
Grouping jobs into pay grades based on similar market survey amounts.
Market Line
Shows relationship between job value as determined by job evaluation points and job value based on pay survey rates.
Shows distribution of pay for surveyed jobs
Linear trend line to be developed by the least-squares regression method.

27. Market-Banded Pay Grades Example (Bank)
*Computed by averaging the pay survey summary data for the jobs in each pay grade.

28. Example of Pay Grades and Pay Ranges

29. Pay Ranges Broadbanding
Using fewer pay grades having broader pay ranges that in traditional systems.
Benefits
Encourages horizontal movement of employees
Is consistent with trend towards flatter organizations
Creates a more flexible organization
Encourages competency development
Emphasizes career development

30. Individual Pay Rates Out of Range Pay Compression Red-Circled Employee
An incumbent (current jobholder) who is paid above the range set for the job.
Green-Circled Employee
An incumbent who is paid below the range set for the job.
Pay Compression
Pay differences among individuals with different levels of experience and performance in the organization are reduced.

31. Pay Adjustment Matrix Compa-ratio89
Compa-ratio
The pay level divided by the midpoint of the pay range.

32. Standardized Pay Adjustments
Standardized Pay Increases
Seniority
Cost-of-Living Adjustments (COLA)
Across-the-Board Increases
Lump-Sum Increases (LSI)