© © 2012 2012 South-Western, South-Western, Cengage Cengage Learning, Learning, Inc Inc All All rights rights reserved reserved Prepared Prepared by by Joseph Joseph B B Mosca, Mosca, Monmouth Monmouth University University and and Marla Marla M M Kameny, Kameny, Baton Baton Rouge Rouge Community Community College College PowerPoint PowerPoint Presentation Presentation Design Design by by Charlie Charlie Cook Cook The The University University of of West West Alabama Alabama Learning Objectives After studying this chapter, you should be able to: Describe the basic issues involved in developing a compensation strategy Discuss how organizations develop a wage and salary structure Identify and describe the basic issues involved in wage and salary administration Discuss the basic considerations in understanding benefit programs Identify and describe mandated benefits Identify and describe nonmandated benefits Discuss contemporary issues in compensation and benefits © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–2 What Is Compensation? The set of rewards that organizations provide to individuals in return for their willingness to perform various jobs and tasks within the organization © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–3 What are Benefits? Purposes Purposes of of Benefits Benefits Rewards Rewards Incentives Incentives © 2012 South-Western, Cengage Learning, Inc All rights reserved Items Items of of Value Value 9–4 Beyond the Book: Components of the Compensation System © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–5 Understanding the Basic Purposes of Compensation Developing Developing aa Compensation Compensation Strategy Strategy Internal Internal Equity Equity External External Equity Equity © 2012 South-Western, Cengage Learning, Inc All rights reserved Pay Pay Surveys Surveys 9–6 Example of a Pay Survey © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–7 Wages Versus Salaries • Wages  Is hourly compensation paid to operating employees; basis for wages is time • Salary  Is income paid to an individual on the basis of time © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–8 Strategic Options for Compensation Which Which pay pay level level is is aa firm firm on on the the decline decline likely likely to to choose? choose? © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–9 Job Evaluation: Determining What to Pay Job Job Evaluation Evaluation Methods Methods Classification Classification system system © 2012 South-Western, Cengage Learning, Inc All rights reserved Point Point system system 9–10 JobClassification System © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–11 Beyond the Book: Linking Pay to Performance Motivation Motivation Retention Retention Cost Costsavings savings © 2012 South-Western, Cengage Learning, Inc All rights reserved Productivity Productivity Organizational Organizational objectives objectives 9–12 Pay-for-Knowledge and Skill-Based Pay • Pay-for-Knowledge  Compensating employees for learning specific information • Skill-based Pay  Rewards employees for acquiring new skills © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–13 Wage and Salary Administration The ongoing process of managing a wage and salary structure; managers must be sensitive to these costs and must be vigilant about managing them properly © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–14 Understanding Compensation Wage Wage and and Salary Salary Administration Administration Issues Issues Pay Pay Secrecy Secrecy Pay Pay compression compression © 2012 South-Western, Cengage Learning, Inc All rights reserved Pay Pay Inversion Inversion 9–15 Types of Benefits • Mandated Benefits • Additional Benefits  Unemployment Insurance  Wellness programs  Social Security  Child care programs  Workers’ Compensation  Cafeteria-style benefits • Non-Mandated Benefits  Private pension plans   Defined benefit plans Defined contribution plans  Paid time off  Health insurance coverage © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–16 Beyond the Book: Benefits for U.S Private Industry Workers Child Care Assistance Access to Paid Vacation Acess to Paid Sick Leave Access to Paid Holiday Defined Contribution Plan Defined Benefit Pension 0% © 2012 South-Western, Cengage Learning, Inc All rights reserved 20% 40% 60% 80% 100% 9–17 Minimum Annual Vacation by Law in Different Countries © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–18 Executive Compensation Components • Base Salary • Incentive Payments  Usually a bonus based on company performance Perquisites â 2012 South-Western, Cengage Learning, Inc All rights reserved 9–19 Senior Executive Perquisites in Different Countries © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–20 Number of Executives Receiving a Bonus of at Least $1 Million in 2008 © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–21 Legal Issues in Compensation • Fair Labor Standards Act  Includes provisions for the minimum wage, overtime, and child labor  HR managers must adhere to overtime laws • Vesting Rights  Entitle employees to guaranteed rights to receive pension benefits © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–22 Evaluating Compensation Policies • Organizations should provide reasonable compensation and appropriate benefits to its employees—employees should be aware of them! • It is in the best interests of stockholders and other constituents of the organization that the firm manages its resources wisely © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–23 ...Learning Objectives After studying this chapter, you should be able to: Describe the basic issues involved in developing a compensation... South-Western, Cengage Learning, Inc All rights reserved 20% 40% 60% 80% 100% 9–17 Minimum Annual Vacation by Law in Different Countries © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–18... interests of stockholders and other constituents of the organization that the firm manages its resources wisely © 2012 South-Western, Cengage Learning, Inc All rights reserved 9–23