Chapter 9-Managing compensation

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22 Terms

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consumer price index (CPI)

A measure of the average change in prices

over time in a fixed “market basket” of

goods and services

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escalator clauses

Clauses in collective agreements that

provide for quarterly cost-of-living adjustments

in wages, basing the adjustments on

changes in the consumer price index

3
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real wages

Wage increases larger than rises in the consumer

price index, that is, the real earning

power of wages

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job evaluation

a systematic process of determining the

relative worth of jobs to establish which jobs

should be paid more than others within an

organization

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job ranking system

The simplest and oldest system of job

evaluation by which jobs are arrayed on the

basis of their relative worth

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job classification system

a system of job evaluation in which jobs are

classified and grouped according to a series

of predetermined wage grades

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points system

a quantitative job evaluation procedure that

determines the relative value of a job by the

total points assigned to it

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hay profile method

A job evaluation technique using three

factors—knowledge, mental activity, and

accountability—to evaluate executive and

managerial positions

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wage and salary survey

a survey of the wages paid to employees of

other employers in the surveying organization’s

relevant labour market

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wage curve

A curve in a scattergram representing the

relationship between the relative worth of

jobs and wage rates

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pay grades

Groups of jobs within a particular class that

are paid the same rate

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red circle rates

Payment rates above the maximum of the

pay range

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broadbanding

Collapses many traditional salary grades

into a few wide salary bands

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competency -based pay

Pay based on an employee’s skill level,

variety of skills possessed, or increased job

knowledge

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wage rate compression

Compression of differentials between job

classes, particularly the differential between

hourly workers and their manag

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absolute pay

based on labour market pricing and what they pay for similar jobs

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relative pay

determined by its ranking in the job evaluation process

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equity theory

employee perceive compensation as fair when it manages the value for their work

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expectancy theory

motivated to work harder if they believe their effort will lead to valued reward

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