1. Direct Financial Compensation
Chapter 9
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2. Nature Of Total Rewards and Compensation
Monetary and non-monetary rewards provided to attract, motivate, and retain employees.
Rewards System Strategic Objectives:
Legal compliance with all laws and regulations
Cost-effectiveness for the organization
Internal, external, and individual equity
Performance enhancement for the organization
Performance recognition and talent management
Enhanced recruitment, involvement, and retention
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

3. Total Rewards Components
FIGURE 11–1
Total Rewards Components
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4. Managing The Workforce
Abraham Maslow’s
Hierarchy of Needs

5. Continuum of Compensation Philosophies
FIGURE 11–2
Continuum of Compensation Philosophies
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6. Compared to what others around the person receive for their efforts,
Equity Theory
Motivation is in proportion to the perceived fairness of rewards received for amount of effort exerted.
Compared to what others around the person receive for their efforts,
Equity and fairness important in compensation.
9-6

7. Equity in Financial Compensation
Financial equity: Perception of fair pay
External equity: Employees paid comparably to workers who perform similar jobs in other firms
Internal equity: Employees paid according to relative value of jobs within a single organization
Employee equity: Individuals performing similar jobs for same firm paid according to factors such as performance level or seniority
Team equity: More productive teams are rewarded more than less productive groups
9-7

8. Primary Determinants of Direct Financial Compensation
Organization Compensation Policies Organizational Level Ability to Pay
Employee Job Performance Skills Competencies Seniority Experience Organization Membership Potential Political Influence Luck
Salary Compression
Job
Pricing
Labor Market Compensation Surveys Expediency Cost of Living Labor Unions Economy Legislation
Direct Financial Compensation
Job Job Analysis Job Descriptions Job Evaluation
9-8

9. HR Metrics for Compensation
FIGURE 11–3
HR Metrics for Compensation
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10. Compensation System Design Issues
Compensation Fairness and Equity
External Equity
Internal Equity Procedural Justice Distributive Justice
Pay Secrecy vs. Openness
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

11. Compensation System Design Issues (cont’d)
Market Competitiveness and Compensation
“Meet the Market” Strategy
“Lag the Market” Strategy
“Lead the Market” Strategy
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

12. Compensation Quartile Strategies
FIGURE 11–5
Compensation Quartile Strategies
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

13. Possible Components of Global Employee Compensation
FIGURE 11–6
Possible Components of Global Employee Compensation
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

14. Global Compensation Issues
Compensating Expatriates
Balance-Sheet Approach
Global Market Approach
Tax Equalization Plan
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

15. Compensation Administration Process
FIGURE 11–8
Compensation Administration Process
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16. Valuing Jobs with Job Evaluation Methods
The formal systematic means used to identify the relative worth of jobs within an organization.
Compensable Factor
A job value commonly present throughout a group of jobs.
Something for which an organization will compensate an employee.
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.