Date post: | 07-Apr-2018 |
Category: |
Documents |
Upload: | rohitbab8050 |
View: | 223 times |
Download: | 0 times |
of 36
8/4/2019 1st Comp & Pay Model
1/36
COMPENSATION & PAY
MODEL
8/4/2019 1st Comp & Pay Model
2/36
COMPENSATION
What is Compensation ?
What Importance it has ?
Stake holders
Various forms of Compensation
8/4/2019 1st Comp & Pay Model
3/36
8/4/2019 1st Comp & Pay Model
4/36
CONTRASTING PERSPECTIVES OFCOMPENSATION
8/4/2019 1st Comp & Pay Model
5/36
COMPENSATION: DEFINITION
Society Pay as a measure of justice
Benefits as a reflection of justice in society
Job losses (or gains) attributed to differences incompensation
Belief that pay increases lead to price increases
StockholdersUsing stock to pay employees creates a sense of
ownership
Linking executive pay to company performancesupposedly increases stockholders' returns
Managers A major expense
Used to influence employee behaviors and toimprove the organization's performance
8/4/2019 1st Comp & Pay Model
6/36
COMPENSATION: DEFINITION (CONT.)EmployeesMajor source of financial securityReturn in an exchangebetween employer
and themselvesEntitlementfor being an employee of the
companyRewardfor a job well done
Global Views Vive la diffrenceChina: Traditional meaning of
compensation providing necessities of life
replaced with dai yuJapan: Traditional word kyuyo replaced
with hou-syu; very recently the phraseused is teate
8/4/2019 1st Comp & Pay Model
7/36
Compensation refers toall forms of financial
returns and tangible
services and benefits
employees receive as
part of an employment
relationship
WHAT IS COMPENSATION?
8/4/2019 1st Comp & Pay Model
8/36
CURRENT CHALLENGES
One of the greatest challenges companiesfacing today is retaining top talent.
The expense to an organisation of replacing anemployee (including separation, replacement,training and lost performance costs) can be asmuch as that employees salary for a year.
Turnover further erodes morale among thosewho stay and harms customer retention.
8/4/2019 1st Comp & Pay Model
9/36
REWARD TRENDS
From
Narrowly-defined jobsand job standards
Inflexible job-evaluation systemssizing tasks,rewarding non-adaptive behaviourand empire-building,encouraging point-grabbing
To
Broad, generic roles-emphasis oncompetence and
continuousdevelopment
Flexible job
evaluation processesassessing the valueadded by people inroles, often within job
families
8/4/2019 1st Comp & Pay Model
10/36
REWARD TRENDS (CONT.)
From Hierarchical and rigid pay
structures - only way toget on, is to move up.Focus on next promotion.
Emphasis on individualperformance-related pay(PRP)
Consolidation of rewardsinto base pay
To Broad-banded and job
family pay structuresemphasising flexibility,career development payand continuousimprovement. Focus onnext challenge.
More focus on team
performance, team-basedpay; contribution-relatedpay
More emphasis on atrisk pay
8/4/2019 1st Comp & Pay Model
11/36
iscussion iscussion
ransactional Returnsransactional Returns
elational Returnselational Returns
8/4/2019 1st Comp & Pay Model
12/36
What are the Kind of Returns , EmployeeWhat are the Kind of Returns , EmployeeGets from the OrganizationGets from the Organization
-Total CompensationTotal Compensation
- Cash CompensationCash Compensation
- BenefitsBenefits
-Relational ReturnsRelational Returns
8/4/2019 1st Comp & Pay Model
13/36
FRAMEWORK FOR ANALYZINGDIFFERENT DEALS
HIGH PAY LOW COMMITMENT
Hired Guns(Stockbrokers)
HIGH PAY HIGH COMMITMENT
Cult - like(Microsoft)
LOW PAY LOW COMMITMENT
Workers as Commodity(Employers of Migrant
Farm Workers)
LOW PAY HIGH COMMITMENT
Family(Starbucks)
LowLow HighHigh
RELATIONALRELATIONAL
Low
Low
High
High
TRANS
ACTI ONA
L
TRANS
ACTIONA
L
8/4/2019 1st Comp & Pay Model
14/36
: TOTAL RETURNS FOR WORK
8/4/2019 1st Comp & Pay Model
15/36
FORMS OF PAY
Relational returns Psychological in nature
Total compensation Cash Compensation/ transactional
Base wages
Difference between wage and salary
Merit pay/cost-of-living adjustments
Merit increases given in recognition of past workbehavior
Cost-of-living adjustments same increases to everyone,regardless of performance
8/4/2019 1st Comp & Pay Model
16/36
FORMS OF PAY (CONT.)
Cash Compensation/ transactional (cont.) Incentives/ Variable pay tie pay increases directly to
performance
Does not increase base wage; must be re earned eachpay period
Potential size generally known beforehand Long-term(stock options), and short-term
Benefits
Income protection
Work/life balance
Allowances
8/4/2019 1st Comp & Pay Model
17/36
FORMS OF PAY (CONT.)
Total earnings opportunities: Present value ofa stream of earnings
Shifts comparison of today's initial offers toconsideration of future bonuses, merit increases,and promotions
Relational returns from workNonfinancial returns
Organization as a network of returns
Created by different forms of pay, including totalcompensation and relational returns
8/4/2019 1st Comp & Pay Model
18/36
A PAY MODEL
Three basic building blocks:Compensation objectives
Policies that form the foundation of the
compensation system
Techniques that make up the compensationsystem
8/4/2019 1st Comp & Pay Model
19/36
: THE PAY MODEL
8/4/2019 1st Comp & Pay Model
20/36
COMPENSATION OBJECTIVES (CONT.)
Efficiency
Improving performance, increasing quality,delighting customers and stockholders
Controlling labor costs
Fairness
Fundamental objective of pay systems
Fair treatment by recognizing both employeecontributions, and employee needs
Procedural fairness
8/4/2019 1st Comp & Pay Model
21/36
COMPENSATION OBJECTIVES (CONT.)
ComplianceConformance to Government and State
compensation laws and regulations
EthicsOrganizations care about how its results are
achieved
ObjectivesGuide the design of the pay systemServe as the standards for judging success of
the pay systemPolicies and techniques are means to reach
objectives
8/4/2019 1st Comp & Pay Model
22/36
Suggest . Your Thoughts on .
Objectives of Compensation System
8/4/2019 1st Comp & Pay Model
23/36
8/4/2019 1st Comp & Pay Model
24/36
Internal alignment
Focus - Comparisons among jobs or skill levels insidea single organization
Pay relationships within an organization affectemployee decisions to: Stay with the organization Become more flexible by investing in additional training Seek greater responsibility
External competitiveness
Focus - Compensation relationships external to theorganization: comparison with competitors
Pay is market driven
FOUR POLICY CHOICES
8/4/2019 1st Comp & Pay Model
25/36
FOUR POLICY CHOICES (CONT.)
External competitiveness (cont.)Effects of decisions regarding how much and
what forms:To ensure that pay is sufficient to attract and retain
employees
To control labor costs to ensure competitive pricingof products/ services Employee contributionsFocus - Relation emphasis placed on employee
performance Performance based pay affects fairness
ManagementFocus - Policies ensuring the right people get
the right pay for achieving the right objectivesin the right way
8/4/2019 1st Comp & Pay Model
26/36
REWARD MANAGEMENT
Definition: RM is concerned with theformulation and implementation of strategiesand policies that aim to reward employeesfairly, equitably and consistently in accordancewith their value to the organisation (Armstrong,
2003).
Strategic aims: to develop and implement thereward policies, processes and practices
required to support the achievement of theorganisations goals by helping to ensure that ithas the skilled, competent, well motivated andcommitted people it needs.
total reward defined Michael Armstrongtotal reward defined Michael Armstrong
8/4/2019 1st Comp & Pay Model
27/36
total reward defined- Michael Armstrongtotal reward defined- Michael Armstrong
Total reward includes all types ofTotal reward includes all types of
reward non-financial as well asreward non-financial as well asfinancial, indirect as well as direct,financial, indirect as well as direct,
intrinsic as well as intrinsic. It is aintrinsic as well as intrinsic. It is a
value proposition which embracesvalue proposition which embraces
everything that people value in theeverything that people value in the
employment relationship and isemployment relationship and is
developed and implemented as andeveloped and implemented as an
integrated and coherent whole.integrated and coherent whole.
i l f l dti l f t t l d
8/4/2019 1st Comp & Pay Model
28/36
rationale for total rewardrationale for total reward
Creating a fun, challenging, andCreating a fun, challenging, and
empowered work environment inempowered work environment inwhich individuals are able to use theirwhich individuals are able to use their
abilities to do meaningful jobs forabilities to do meaningful jobs for
which they are shown appreciation iswhich they are shown appreciation is
likely to be a more certain way tolikely to be a more certain way to
enhance motivation and performanceenhance motivation and performance
even though creating such an even though creating such anenvironment may be more difficultenvironment may be more difficult
and take more time than simplyand take more time than simply
turning the reward lever.turning the reward lever.
Jeffrey Pfeffer Stanford University Jeffrey Pfeffer Stanford University
Ch t i ti f t t l d t t (CIPD)Ch t i ti f t t l d t t (CIPD)
8/4/2019 1st Comp & Pay Model
29/36
HolisticHolistic -- focuses on how organisations attract,focuses on how organisations attract,retain and motivate employees to contribute toretain and motivate employees to contribute to
success using an array of financial and non-financialsuccess using an array of financial and non-financialrewards.rewards.
Best fitBest fit tailored to the organisations culture andtailored to the organisations culture andwork processes.work processes.
IntegrativeIntegrative the reward system is integrated withthe reward system is integrated withHR policies and practices.HR policies and practices.
StrategicStrategic aligns reward and business strategies.aligns reward and business strategies.
People centredPeople centred-- focuses on employee needs andfocuses on employee needs andwants.wants.
CustomisedCustomised provides a flexible mix of reward thatprovides a flexible mix of reward thatoffers choice.offers choice.
DistinctiveDistinctive -- uses rewards to create a distinctiveuses rewards to create a distinctive
Characteristics of a total reward strategy (CIPD)Characteristics of a total reward strategy (CIPD)
8/4/2019 1st Comp & Pay Model
30/36
models of total rewardmodels of total reward
total reward (engaged performance) model Haytotal reward (engaged performance) model Hay
8/4/2019 1st Comp & Pay Model
31/36
total reward (engaged performance) model Haytotal reward (engaged performance) model Hay
GroupGroup
quality of workquality of work
work/life balancework/life balance
inspiration/valuesinspiration/values
enablingenabling
environmentenvironment
tangible rewardstangible rewards
futurefuture
growth/opportunitgrowth/opportunit
yy
engagedengaged
performanceperformance
total reward model WorldatWorktotal reward model WorldatWork
8/4/2019 1st Comp & Pay Model
32/36
organisationalorganisational
cultureculture
business strategybusiness strategy
HR strategyHR strategy
totaltotal
rewards strategyrewards strategy compensationcompensation
benefitsbenefits work/lifework/life
performance andperformance and
recognitionrecognition development anddevelopment and
career opportunitiescareer opportunities
attractattract
motivatemotivate
retainretain
employeeemployee
satisfactionsatisfaction
andand
engagementengagement
businessbusiness
performanceperformance
and resultsand results
total reward model - WorldatWorktotal reward model - WorldatWork
Total rewards are all the tools available to the employer that may beTotal rewards are all the tools available to the employer that may be
used to attract, motivate and retain employees. Total rewards includeused to attract, motivate and retain employees. Total rewards include
everything the employee perceives to be of value resulting from theeverything the employee perceives to be of value resulting from theemployment relationshipemployment relationship
total reward model Watson Wyatttotal reward model Watson Wyatt
8/4/2019 1st Comp & Pay Model
33/36
total reward model Watson Wyatttotal reward model Watson Wyatt
business strategybusiness strategy
human capital strategyhuman capital strategy
total reward strategytotal reward strategy
fixed reward costsfixed reward costs performance-based rewardsperformance-based rewards environment-based rewardsenvironment-based rewards
fixed costs of employmentfixed costs of employment
value of role to organizationvalue of role to organization
variable costs ofvariable costs of
employmentemployment
contribution made bycontribution made by
individualindividual
intrinsic rewardsintrinsic rewards
employment dealemployment deal
effective delivery through focused communication, greater flexibility and use of technologyeffective delivery through focused communication, greater flexibility and use of technology
total reward model - Towers Perrintotal reward model - Towers Perrin
8/4/2019 1st Comp & Pay Model
34/36
PAY/REWARDPAY/REWARD
base paybase pay
ccontribution payontribution pay
shares/profit sharingshares/profit sharing
recognitionrecognition
TRANSACTIONALTRANSACTIONAL((TANGIBLE)TANGIBLE)
RELATIONALRELATIONAL(INTANGIBLE)(INTANGIBLE)
INDIVIDU
AL
INDIVIDU
AL
COMMUNAL
COMMUN
AL
total reward model - Towers Perrintotal reward model - Towers Perrin
BENEFITSBENEFITS
ppensionsensions
health carehealth care
perksperks
flexible benefitsflexible benefits
LEARNING ANDLEARNING AND
DEVELOPMENTDEVELOPMENT
wworkplace learningorkplace learning
trainingtraining
performance managementperformance management
career developmentcareer development
WORK ENVIRONMENTWORK ENVIRONMENT
ccore valuesore values
leadershipleadership
employee voiceemployee voice job/work designjob/work design
total reward model - Michael Armstrongtotal reward model - Michael Armstrong
8/4/2019 1st Comp & Pay Model
35/36
transactionaltransactional
rewardsrewards
relationalrelational
rewardsrewards
base paybase pay
contingent paycontingent pay
employee benefitsemployee benefits
learning and developmentlearning and development
the work experiencethe work experience
totaltotal
remunerationremuneration
non-financialnon-financial
rewardsrewards
recognition, achievement, growthrecognition, achievement, growth
total rewardtotal reward
total reward model Michael Armstrongtotal reward model Michael Armstrong
8/4/2019 1st Comp & Pay Model
36/36
conductconduct
diagnosticdiagnostic
reviewreviewdefinedefine
objectivesobjectives
developdevelop
approachapproach
(involve)(involve)
designdesign
prioritiseprioritise
implementimplement
progressivelyprogressively(encourage/guide)(encourage/guide)
communicacommunica
tete
monitormonitor
andand
evaluateevaluate
making totalmaking total
rewardreward
happenhappen