1. UNIT 5 MT203 Human Resource Management Seminar
Compensation and Benefit Plans

2. Agenda/Overview
This week’s Seminar is about what constitutes an adequate compensation and benefit plan.
During the discussion, consider compensation and benefits that you have received from your employer.
Enhanced Audio Seminar Format
Compensation
Benefits and Incentives
Cost Control
Motivation
Executive Compensation
Abuse and Legislation
Questions

3. Compensation Strategic Compensation Pay for Performance Standard
Incentive Pay
Skill-Based Pay
Expectancy Theory

4. Compensation Plans: Pay-for-Performance
Managers tie pay to effort and performance
Link pay to performance to maximize productivity
Studies prove out increased output
Incentive Plans
Focus on specific performance targets
Compensation is directly related to Operating Performance
Rewards and attracts top performers
Most systems are viewed as fair by employees
Sales Professionals
Salary, Commission, or Combo
Group Incentives
Team, Gainsharing, Profit Sharing
Skill-Based Plans
Link to strategy, organizational values, motivation and reward
Common in Manufacturing
Benefits include increased productivity, a willingness to learn, and, flexible scheduling
Expectancy Theory
Predicts motivation to rewards

5. Incentives Professional Employees Hourly Pay
Profit Sharing, Stock Ownership, Hiring bonus
Sales Professionals
Salary, Commission, Combo
Group Incentive Plans
Team Compensation
Gainsharing
Merit Pay
Hourly Pay
Means to reduce managerial levels
Align compensation plans with organizational strategies
Reward systems

6. Compensation Strategies
Factors Affecting the Wage Mix:
Internal Factors
Employer’s Strategy
Employee’s relative worth: Ability and Capability
Employer’s ability to pay: Public, Private, Government
External Factors
Conditions of Labor Market: Recession, Economic Growth
Area wage rates
Cost of living
Union Environment: Collective Bargaining
Legal requirement: Federal Minimum wages Law
Wage and Salary Surveys: Department of Labor

7. Job Evaluation Techniques
Job Ranking System
Job Classification System
Point System
Work Valuation System

8. Benefits Medical health Insurance
Why Organizations offer Benefits
To attract and hold capable people.
To keep up with competition.
To foster good morale.
To keep employment channels open by providing opportunities for advancement and promotion as older workers retire.
Common Benefits
Medical health Insurance
Life Insurance and Short term disability insurance
Disability insurance
Vision and Dental
401K
Vacation and float day
Nurse Hotline
Other Compensation and Benefits
Employee Assistant Program
Membership Benefits
Tuition reimbursement

9. Cost Control Compensation Issues
Healthcare costs are a threat to many organizations
Employees pay more out of pocket
New Law: Every employer has to provide health insurance?
Compensation Issues
The issue of Equal Pay for Comparable Worth
What is Comparable Worth?
The issue of Wage-rate compression
What is Wage-Rate Compression?
The issue of Low Salary Budgets
Pay raise freeze
The impact of Globalization

10. Executive Compensation
Executive: CEO, President, CFO, COO, Board of Director
Base salary, cash bonus, pension, perks, stock options, profit sharing
Health, vision, Dental, term life, life insurance, travel accidental insurance, Short term disability
Paid spouse travel for meeting, Country club membership, Health club membership, Airline club membership, Corporate jet, Severance package
Gap between hourly and executive pay
CEO pay: 364 times (avg $10.8 mil)more than workers (2007)
525 times recorded in 2000 (2000)
Investors and public Feelings

11. Executive Abuse Bob Nardelli (Home Depot), Jack Welch (GE)
Stockholders “Say-on-Pay”
Outrageous Perks

12. Outrageous Perks
Country Club Bill, including $200,000 initiation fee (Countrywide Financial CFO)
Upgrade of $365,916 to TXU CEO’s Dallas home
$1,000,000 donation in the name of Lockheed Martin’s CEO Robert Stevens
$894,014 cost to sell CFO Tom Horton’s New Jersey home (AMR)
$1,000,000 bonus to reward acquisition of Knight Ridder (CEO Gary Pruitt)
$10,000,000 pay package for J.C. Penny CEO Catherine West (who only lasted six months)
AIG:  A $440,000 lavish getaway. Merrill Lynch: A million-dollar office re-do for its former CEO just before the company got government bailout money

13. Legislation and trends governing pay and Perks
Corporate Boards no longer “Rubber Stamp” recommendations of managers following Enron
Investors are opposing compensation packages
New Federal mandates require large companies to disclose executive pay (more straightforward)
Companies replacing traditional stock options with rewards linked to specific targets
Securities and Exchange Commission (SEC) approved an overhaul of executive pay disclosure

14. Early History of Legislation Enacted to Regulate Compensation
Davis-Bacon Act (1931)
Walsh-Healy Act (1936)
Fair Labor Standards Act (of 1938, as amended)

15. Questions
What other questions do you have at this time?