1. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri Chapter Thirteen Managing compensation

2. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-2 Managing compensation Objectives 1 List the major decision areas and concepts in employee compensation management. 2 Describe the major administrative tools used to manage employee compensation. 3 Explain the importance of competitive labour- market and product-market forces in compensation decisions. 4 Discuss the significance of process issues such as communication in compensation management.

3. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-3 Managing compensation Objectives (continued) 5 Describe new developments in the design of pay structures. 6 Explain the reasons for the controversy over executive pay. 7 Describe the regulatory framework for pay in Australia.

4. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-4 Compensation: key terms Pay structure The relative pay of different jobs (job structure). How much different jobs are paid (pay level).

5. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-5 Equity theory and fairness People evaluate the fairness of their situations by comparing them with those of other people. Outputs p Inputs p, or = Outputs o Inputs o

6. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-6 Table 13.1 Pay structure concepts and consequences

7. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-7 Job evaluation An administrative procedure used to measure job worth. Job evaluation is used to design job structures.

8. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-8 Job evaluation Key concepts: Distributive justice (also distributive fairness) The perception that rewards are distributed in relation to contribution. Procedural justice (also procedural fairness) A concept of justice focusing on the methods used to determine the outcomes received.

9. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-9 Developing pay levels Market pressures Product-market competition Labour-market competition

10. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-10 Developing pay levels Market pay surveys Key questions to address: Which employers should be included in the survey? Which jobs are included in the survey? If multiple surveys are used, how are all the rates of pay weighted and combined?

11. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-11 Developing a job structure Table 13.2 Example of a three-factor job evaluation system

12. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-12 Developing a pay structure Pay-policy line A mathematical expression that describes the relationship between a job’s pay and its job evaluation points. Pay grade Jobs of similar worth or content grouped together for pay administration purposes. Range spread: the distance between the minimum and maximum amounts in a pay grade.

13. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-13 Pay grade 1234512345 MinimumMaximumMinimumMaximumMidpoint Job evaluation points rangeFortnightly pay rate range 100 150 200 250 300 150 200 250 300 350 $1740 $2648 $3555 $4463 $5370 $2175 $3310 $4444 $5579 $6713 $2610 $3971 $5333 $6694 $8056 Table 13.5 Sample pay grade structure

14. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-14 Monitoring compensation costs Compa-ratio An index of the correlation between actual and intended pay. Grade compa-ratio = Actual average pay for grade Pay midpoint for grade

15. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-15 The importance of process: participation and communication Important processes in compensation: Participation Communication

16. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-16 Current challenges Problems with job-based pay structures Responses to these problems: Delayering and banding Paying the person: pay for skill, knowledge and competency

17. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-17 Can the Australian labour force compete? Average hourly labour costs (cash and benefits) Instability of country differences in labour costs Skill levels Productivity Non-labour factors

18. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-18 Executive pay in Australia Accountability and its relationship to organisational performance Governance Design and structure

19. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-19 Figure 13.4 A comparison of CEO pay and stock-market- based indicators

20. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-20 Government regulation of compensation Minimum wage Wage laws Wage determination Restructuring and Efficiency Principle Award restructuring Enterprise Bargaining Principle

21. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-21 Summary Equity theory suggests that social comparisons are an important influence on how employees evaluate their pay. Pay benchmarking surveys and job evaluation are two administrative tools widely used in managing the pay-level and job-structure components of the pay structure, which influence employee social comparisons.

22. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Human Resource Management in Australia 2e by De Cieri, Kramar, Noe, Hollenbeck, Gerhart & Wright. Slides prepared by Helen De Cieri 13-22 Summary (continued) The nature of pay structures is undergoing a fundamental change in many organisations. How a new program is designed, decided on, implemented and communicated is perhaps just as important as its core characteristics.