HRM教案第7章.doc

date teachingcontentchapter 7 compensation managementobjectives1. list basic afctrs in determinging pay rates 2. explain in detail how to establish pay rates3. understand of compensation system 4. establish compensation system 5. describe trends of compensation system 6. establish a pay plan key issuesproblems with job-based pay structures and its solutionscases & discussedquestionsquestion:problems with job-based pay structures and its solutions.homework1.compare and contrast the following methods of job evaluation: ranking, classification, point method, factor comparison.2. can you identify the types of compensation?3. illustrate influences on compensation.4. explain how to develop a base pay system.reference1.gary dessler, a framework for human resource management, 3nd edition, china machine press, 2007 2.liao shanyu，human resource management，tsinghua university press, 2006lead incase strategic overviewdetailsremarklearning objectivesafter reading and studying this chapter, you should be able to:1. describe pay structure, pay level and job structure2. identify the two general types of compensation and the components of each.3. describe the considerations affecting individual pay4. define job evaluation and discuss methods of performing it.5. describe the process of building a wage and salary administration system .internet/web resources/compensation//advice/hr-mod/latest-newsflash/baseline-survey/report/survey-results.htm/webcast/total-compensation-management/compensation-strategy.html 1introduction to compensation management1.1definition of compensationcompensation is the human resource management function that deals with every type of reward individual receive in exchange for performing organizational tasks, in return for his/her contribution to the organization. it is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.1.2criteria for effectiveness of compensation patton suggests that in compensation policy there are seven criteria for effectiveness. compensation should be: adequate, equitable, balance, cost-effective, secure, incentive, and acceptable to the employee.1.2.1 adequate adequate refers minimal governmental, union, and managerial levels should be met.1.2.2 equitable equitable means each person should be paid fairly, in line with his or her effort, abilities, and training. 1.2.3 balanced balanced means pay, benefits, and other rewards should provide a reasonable total reward package.1.2.4 cost-effective cost-effective refers to pay should not be excessive, considering what the organization can afford to pay. 1.2.5 secure secure means pay should be enough to help an employee feel secure and aid him or her in satisfying basic needs. 1.2.6 incentive incentive means that pay should motivate effective and productive work.1.2.7 acceptable acceptable to the employee refers that the employee should understand the pay system and feel it is a reasonable system for the organization and himself or herself.1.3 needs for compensation management 1.3.1 retain the best talentthe most competitive compensation will help the organization to attract and sustain the best talent. the compensation package should be as per industry standards. the organization is able to retain the best talent by providing them adequate compensation thereby stopping them from switching over to another job. the organization can think of expansion and growth if it has the support of skillful, talented and happy workforce.1.3.2 motivate the employees a good compensation is important to motivate the employees to increase the organizational productivity. an ideal compensation system will have positive impact on the efficiency and results produced by employees. it will encourage the employees to perform better and achieve the standards fixed. it would motivate and encouragement those who perform better and should provide opportunities for those who wish to excel. it aims at creating a healthy competition among them and encourages employees to work hard and efficiently.1.3.3 enhance the process of job evaluationit will enhance the process of job evaluation. it will also help in setting up an ideal job evaluation and the set standards would be more realistic and achievable. 1.3.4 raise the moraleit will raise the morale, efficiency and cooperation among the workers. it, being just and fair would provide satisfaction to the workers. a good compensation would help management in complying with the various labor acts. a good compensation would also solve disputes between the employee union and management. sound compensation/reward system brings peace in the relationship of employer and employees.1.3.5 provide growth and advancement opportunitiesit provides growth and advancement opportunities to the deserving employees.the perfect compensation system provides platform for happy and satisfied workforce. this minimizes the labor turnover. the organization enjoys the stability.2. components of compensation system2.1 types of compensation2.1.1 direct compensationdirect compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. the monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, etc. they are given at a regular interval at a definite time. basic salary the basic compensation that an employee receives usually as a wage or salary, is called base pay. many organizations use two base pay categories, hourly and salaried. hourly pay is the most common means of payment based on time, and employees paid hourly receive wages, which are payments directly calculated on the amount of time worked.salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. it is the money an employee receives from his/her employer by rendering his/her services. house rent allowance organizations either provide accommodations to its employees who are from different place or country or they provide house rent allowances to its employees. this is done to provide them social security and motivate them to work. conveyanceorganizations provide for cab facilities to their employees. few organizations also provide vehicles and petrol allowances to their employees to motivate them. leave travel allowance these allowances are provided to retain the best talent in the organization. the employees are given allowances to visit any place they wish with their families. the allowances are scaled as per the position of employee in the organization. medical reimbursement organizations also look after the health conditions of their employees. the employees are provided with medi-claims for them and their family members. these medi-claims include health-insurances and treatment bills reimbursements. bonusbonus is paid to the employees during festive seasons to motivate them and provide them the social security. the bonus amount usually amounts to one months salary of the employee. special allowance special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity.2.1.2 indirect compensationindirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. they include leave policy, overtime policy, car policy, hospitalization, insurance, leave travel assistance limits, retirement benefits, holiday homes, flexible timings, and employee benefits etc. leave policyit is the right of employee to get adequate number of leave while working with the organization. the organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc. overtime policyemployees should be provided with the adequate allowances and facilities during their overtime, if they happened to do so, such as transport facilities, overtime pay, etc. hospitalizationthe employees should be provided allowances to get their regular check-ups, say at an interval of one year. even their dependents should be eligible for the medi-claims that provide them emotional and social security. insuranceorganizations also provide for accidental insurance and life insurance for employees. this gives them the emotional security and they feel themselves valued in the organization. leave travel the employees are provided with leaves and travel allowances to go for holiday with their families. some organizations arrange for a tour for the employees of the organization. this is usually done to make the employees stress free. retirement benefitsorganizations provide for pension plans and other benefits for their employees which benefits them after they retire from the organization at the prescribed age. holiday homesorganizations provide for holiday homes and guest house for their employees at different locations. these holiday homes are usually located in hill station and other most wanted holiday spots. the organizations make sure that the employees do not face any kind of difficulties during their stay in the guest house. flexible timingsorganizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons. employee benefits benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. some of these benefits are: housing (employer-provided or employer-paid), group insurance (health, dental, life etc.), disability income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits.2.2 influences on compensationmany factors might influence the making of compensation, both includes 2.2.1 culture:cultural differences necessitate understanding that the value of compensation and benefits programs is in “the eye of the beholder”. a benefit highly valued in one country may be comparatively worthless in another. differences are often rooted in subconscious beliefs, attitudes and values.compensation and benefits strategy recommendations includes: engross local contacts to understand usual and traditional compensation and benefits practices. circumvent headquarter biases or imitation of hq country policies and procedures (for example, paying sales commissions in risk-averse cultures or reward and recognition programs that reward individual contributions in cultures that places greater prominence on team or group contributions or prefer private gratitude). 2.2.2 economic factorsmany differences subsist from country to country, in terms of the: influence of politics and power, distribution of wealth across countrys citizenry, unpredictability of events (i.e., sometimes rapid changes in rates of inflation, currency).2.2.3 taxationtax regulations vary extensively from country to country. some countries have no income tax, while others have income tax in excess of 50%. some benefits that are taxable in one country are not taxable in the geographically adjacent country or vice-versa.2.2.4 competitive labor marketmany people believe that human labor should not be regulated by forces such as supply and demand, it does in fat happen. in times of full employment, wages and salaries may have to be higher to attract and retain enough qualified employees; in depressions, pay can be lower. pay may also be higher if few skilled employees are available in the job market. thus, t a broader level, the compensation and benefits required to magnetize and sustain talent are determined by the aggressive demand for that talent. however, the nature of the competition for talent may differ across countries and regions, depending on factors such as: type of talent sought, geographic scope of the talent market, industries in which the talent may be found, mix of remuneration components.international labor force has influences on compensation. employees have been transporting cheap labor or work “on site” since the building of the pyramids. compensation specialist must base their plans on a competitive global marketplace.2.2.5 laws and regulations:laws and regulations impact the remuneration of employees in many areas, such as: work hours and compulsory time-off (paid and unpaid), minimum wage, overtime, compulsory bonuses, employment at will, acquired rights.2.2.6 collective bargainingemployees in most parts of the world are protected from actions that impact their wages and employment conditions. unions play a very strong role in many countries and sometimes include provisions for management as well as employees. work councils also offer worker protection.3. development of a base pay system3.1 job analysisas figure 7-1 shows, development of a base wage and salary system assumes that accurate job analysis. job analysis is a systematic approach to defining the job role, description, requirements, responsibilities, evaluation, etc. it helps in finding out required level of education, skills, knowledge, training, etc for the job position. it also depicts the job worth i.e. measurable effectiveness of the job and contribution of job to the organization. thus, it effectively contributes to setting up the compensation package for the job position (detailed information see chapter 2.).3.2 job evaluation3.2.1 method of job evaluationjob evaluation is a practical technique, designed to enable trained and experienced staff to judge the size of one job relative to others. it does not directly determine pay levels, but will establish the basis for an internal ranking of jobs. job analysisjob evaluationpay surveyspay structureindividual payimplementation, communication,monitoringpay policyperformance appraisalfigure 7-1 compensation administration processregardless of the method used, the intent is to develop a usable, measurable, and realistic system to determine compensation in an organization. rankingthis method is one of the simplest to administer. jobs are compared to each other based on the overall worth of the job to the organization. it places jobs in order, ranging from highest to lowest in worth to the organization. the worth of a job is usually based on judgements of skill, effort (physical and mental), responsibility (supervisory and fiscal), and working conditions. ranking methods can be extremely subjective, leaving managers the difficult task of explaining why one job is ranked higher tha another to employees whose pay is affected by these rankings when ranking invlives a large number of jobs, the process may become awkward and unwieldy. therefore, the ranking method generally is more appropriate in a small organization having relatively few jobs. classification jobs are classified into an existing grade/category structure or hierarchy. each level in the grade/category structure has a description and associated job titles. each job is assigned to the grade/category providing the closest match to the job. the classification of a position is decided by comparing the whole job with the appropriate job grading standard. to ensure equity in job grading and wage rates, a common set of job grading standards and instructions are used. because of differences in duties, skills and knowledge, and other aspects of trades and labor jobs, job grading standards are developed mainly along occupational lines. point method the point method, the most widely used job evaluation method, is more sophisticated that the ranking and classification methods. it breaks down jobs into various compensable factors and places weights, or points, on them. a compensable factor identifies a job value commonly present through out a group of jobs. the factors are derived from the job analysis. a set of compensable factors are identified as determining the worth of jobs. typically the compensable factors include the major categories of: skill, responsibilities, effort, working conditions. these factors can then be further defined. skill includes experience , education , ability. responsibilities includes fiscal, supervisory,. effort includes mental, physical. working conditions refers to location, hazards and extremes in environment. each factor is then divided into levels or degrees which are then assigned points. each job is rated using the job evaluation instrument. the points for each factor are summed to form a total point score for the job. factor comparisonthe factor comparison method is a quantitative and quite complex combination of the ranking and point methods. a set of compensable factors are identified as determining the worth of jobs. typically the number of compensable factors is small (4 or 5). examples of compensable factors are: skill, responsibilities, effort, working conditions. it involve