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LECTURE-28
Human Resource
Management
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Job Pricing
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Developing a Base Pay System
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Job Analysis
Job Evaluation Pay Surveys
Pay Structure
Pay StructurePayPay
PoliciePolicie
ss
Individual Pay
Individual Pay
Implementation, Communication,
Monitorin
Performance
Appraisal
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Compensation system
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y Pay is a statement of an employee¶s worth by anemployer.
y Pay is a perception of worth by an employee.
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HR Management Strategy Model
Attract
Retain Engage
Select
Develop
RewardsHR
StrategyDesired
Results
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Employee Compensation
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y Employee compensation refers to all forms of pay orrewards going to employees and arising from their
employment.
y It consists of 2 parts
Direct financial payments
Indirect financial payments
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Direct or Indirect compensation is given basedon
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y Increments of time Hourly
Salaried
y Performance Piecework
Commission
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y
Piecework - Pay is tied directly to what the workerproduces
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W ages versus Salaries
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Total
Compensation
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Compensation
of
Employees
Extrinsic
Rewards
Hourly WagesSalary
Monetary BonusesRewards CommissionsPay Incentives
Insurance
RetirementPaid VacationsBenefits Food Services
Credit UnionRecreation
Recognition
Intrinsic Promotion Opportunities
Rewards Working Conditions
Interesting Work
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Consequences of Pay Dissatisfaction
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Desire for
more Pay
Pay
Dissatisfaction
Performance
Strikes
Grievances
Search for job
Lower
Attractivenessof job
Absenteeism
Turnover
JobDissatisfaction
Absenteeism
Psychological
Withdrawal
Dispensary
Visits
Poor Mental
Health
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Compensation System
y A total reward system includes both monetary andnonmonetary compensation.
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Phases of Compensation Management
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y Phase:-1. E valuate every job to ensure internal equity based on each job¶s relative worth.
y Phase:-2. Conduct wage and salary surveys to find therates paid in the labour market.
y Phase:-3. Price each job to determine the rate of pay based.
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O bjectives of Effective CompensationManagement
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y The ³Big Three´
y Attract qualified employment applicants
y
Retain qualified employees, while discouragingretention of low performing
y Motivate employee behavior toward organizationobjectives
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y Ensure Equity
y Reward Desired Behavior
y Control Costsy Comply W ith Legal Regulations
y Facilitate Understanding
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y Achieve external competitiveness
y Support organization priorities Strategy and goals
Culture and values
y Easy to administer
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Steps for Establishing Pay Rates
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y Conduct a salary survey of what other employers arepaying for comparable jobs
y Employee committee determines the worth of each jobin your organization through job evaluation
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y Group similar jobs into pay grades
y Price each pay grade by using wage curves
y Fine-tune pay rates
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Pay Grade Structure for Job-BasedSystem
Rs 10,000
Rs 30,000
Rs 50,000
Corporate Policy LineCorporate Policy Line
MidpointMidpoint
250 350 450 550 650
Job Evaluation Points
MaximumsMaximums
Pay Grade
Width
Pay Grade
Width
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W hat Determines How Much You Pay?
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y Prevailing W ages
y Ability to Pay
y Cost of Living
y Productivity
y Bargaining Power
y Job Requirements
y Government Laws
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Equity factors
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Equity Perceptions
Inputs
Outcomes
Inputs
Outcomes!
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Equity Theory
DescriptionPay should be based upon
contributions made by theEmployees. Higher effort should berewarded with higher pay.
Application toC
ompensationPay should be tied to the
performance level of individual
Employee
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Equity Theory Predictions
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Outputs
Inputs<
Outputs
Inputs
Outputs
Inputs=Outputs
Inputs
Outputs
Inputs >Outputs
Inputs
Under-reward
Equity
Over-reward
Person BPerson A
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Pay above Market Rate
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Advantages Advantages Attracts better employees Attracts better employees
Minimizes voluntary turnoverMinimizes voluntary turnoverFosters strong culture and competitive superiority Fosters strong culture and competitive superiority
DisadvantagesDisadvantages
Additional compensation costs Additional compensation costsSense of entitlementSense of entitlement
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Pay at MarketRate
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Advantages Advantages
Higher quality of human resources atHigher quality of human resources atmidrange of marketmidrange of market--drivendrivencompensation costscompensation costs
DisadvantagesDisadvantagesDoes not attract higher performersDoes not attract higher performers
Turnover will vary with laborTurnover will vary with labordemands of competing firmsdemands of competing firms
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Pay below Market Rate
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Advantages Advantages Lower compensation costsLower compensation costs Useful in labor markets where unemployment is highUseful in labor markets where unemployment is high
DisadvantagesDisadvantages LowerLower--quality employeesquality employees Low morale/job satisfactionLow morale/job satisfaction Higher turnover; especially among high performersHigher turnover; especially among high performers
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Conditions Necessary for Perceptions of Pay Fairness
y
Internal consistency y External competitiveness
y Employee contributions
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y E valuate the worth of jobs.
y Negotiate starting salaries.
y
Recommend pay raises and promotions.y Notify HRM department of job changes.
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The HRM Department and Compensation
y Establish rates of pay
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y Establish rates of pay.
y O versee job evaluation process.
y Conduct salary surveys.
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