Compensation Finals

Exam na tih

COMPENSATION

is a term that covers everything an employee receives in return for their work.

Salary and Benefits

Many employees see compensation as the basic pay plus additional benefits provided by the company

Contribution-Based Rewards

Others believe that compensation should directly reflect the work they do.

Base Pay

is the fixed amount of money you get for doing your job. This can be called a salary or a wage.

Base Pay

is set based on your skills, education, work experience, and the job’s level or grade. Sometimes, it' s also discussed during collective bargaining or based on market rates.

Variable Pay

is extra money you earn when you meet specific goals or targets. This might include bonuses or incentives.

Benefits

are extra perks provided by the company, which can be required by the government or offered voluntarily. Ex. Health Insurance, Vacation and sick leave, etc.

Retain and Attract Top Talent

A good compensation package helps attract skilled job seekers and keeps current employees happy, so they don’t look for jobs elsewhere.

Boost Productivity and Efficiency

Employees work harder when they feel they’re paid fairly. When the pay matches the work done, it creates a “felt fair” environment, where everyone believes they get what they deserve.

Meet Legal Pay Requirements

Companies must follow the law when it comes to paying employees. This includes paying at least the minimum wage and providing any legally required benefits.

Direct Compensation

Refers to the actual monetary value given to an employee. Can be Salary, Wage or Variable Pay, such as bonuses, incentices, commissions, and other Performance-based.

Indirect Compensation

Refers to non-monetary aspects of compensation, such as benefits packages (hospitalization and life insurance plans, sick and vacation leaves, car plans, educational grants, etc.). It' s often called the " add-on " or extra component of base pay. (Source: Armstrong, 2015)

Internal Alignment

Aligning pay with the contributions of employees in achieving organizational objectives

EXTERNAL COMPETITIVENESS

Aligning pay with competitors calculate the risk of being competitive

EMPLOYEE CONTRIBUTION

Considers contribution to performance as a factor of pay putting a high premium on employee contribution.

MANAGEMENT OF THE PAY SYSTEM

Putting a system to giving of compensation considers timelines of pay.

Job Analysis

It is defined as the process of determining all the information specific to a particular job.

JOB DESCRIPTION

It is referred to as the written summary of all the duties and responsibilities of a particular job position.

JOB EVALUATION

Is the process of determining the worth of job.

PAY STRUCTURES

Many organizations standardize their pay and use grade or levels.

SALARY SURVEYS

These help in determining appropriate rates and at the same time remaining competitive among competitors.

POLICIES AND REGULATIONS

These depend on many factors including the organization’s capacity to provide compensation and the standards set by law.

Subsistence Theory of Wage

states that wages naturally adjust to a level where workers can survive but not thrive. If wages rise above this level, population growth leads to an oversupply of workers, pushing wages back down.

Just Price Theory

argues that wages should be determined based on fairness, contribution, and job hierarchy. Employees compare their work effort (input) with the rewards (output) they receive.

Wage Fund Theory

states that employers allocate a fixed fund for wages, which is distributed among workers. If the number of workers increases, wages decrease, and vice versa.

Residual Claimant Theory

states that wages are determined by the profits remaining after a company pays all its expenses.

Standard of Living Theory

suggests that wages are influenced by workers ' expectations of a certain quality of life. Higher wages allow workers to maintain or improve their standard of living.

Bargaining Theory

states that wages depend on the negotiation power between employers and employees.

Salary

Paid semi-monthly or on a fixed period such as every 15th and 30th of the month

Wage

Based on the number of hours worked multiplied by the employee's hourly rate

Economic Concept

refers to the total value an individual receives for their labor

Psychological Concept

Compensation is a form of motivation. Employees who believe that they are well compensated may be highly motivated and, thus, may be highly productive.

Sociological Concept

compensation is a form of status symbol. Positions has a corresponding compensation package depending on the level in the hierarchy.

Political concept

In some organization, compensation is negotiated at the bargaining table using power and influence.

Equity concept

fairness is always attached to compensation. employees want to perceive their pay as commensurate with their contributions in the organization.

Communication concept

Because of the easy access to technology, the internet can provide salary surveys of different positions anytime. They are readily available so applicants can always ask for whatever salary rates they have seen or read from the internet.

Labor Market Theories

These theories also explain the role of compensation as vital in labor services. These theories are the following: labor markets, labor supply, the labor market worldwide, human capital theory, and labor demand (Atchison et al., 2013).

Labor Markets

offers comprehensive salary rates for most jobs, allowing applicants to compare rates with companies and negotiate with employers.

Labor Supply

refers to the amount of labor that individuals are willing and able to provide at a given wage rate.

Labor Market Worldwide

involves the supply and demand for labor, with compensation being a key factor.

Human Capital Theory

suggests that employee earnings are tied to their skills, knowledge, and abilities, which collectively form

Labor Demand

refers to the relationship between the number of workers an employer wants to hire and the wage they are willing to pay, influencing the overall compensation package.

Job Analysis

is a systematic process of gathering and analyzing information about a specific job, including its duties, responsibilities, required skills, and working conditions, to create a detailed job description and inform various HR functions.

Information to be Collected

Knowledge

Skills and Abilities

Qualifications

Personality Traits

Scope of the Job

Tools and Methos

Work Conditions

Levels of Analysis

Employee Attribute

Element

Task

Sources of Information

Primary Sources

Secondary Sources

Primary Sources

Job Holders

Supervisors

Secondary Sources

Policies and Manuals

Performance Appraisal

Old Job Description

Electronic Publication

Methods of Collecting Information

Observation

Interview

Survey Questionnare

Job Analysis Process

Create an Initial Job Information

Visit the Work Area

Conduct an interview

Visit the work area

Collate Acquired Job Information

Validate Job Description Done

Job Description

The end of job analysis. to summarize the duties and responsibilities of the job as well as the qualifications needed to perform the job. Essentially, a job description provides the what, how, and why of the job.

Job Evaluation

the process of determining the retative worth of various jobs for the purpose of creating a hierarchy of jobs which in tum becomes the basis for the development of a pay structure in the organization

Job Evaluation Process

Job Analysis

Compensable Factors

Job Evaluation Methods

Point Factor

Factor Comparison

Job Ranking

Job Classification

Compensable Factors

are identified which are common to all jobs.

Points Assignment

is a method used in job evaluation where points are given to different aspects of a job, such as the skills required, responsibilities, effort, and working conditions.

Weights Assignments

refers to the process of giving importance or value to different factors or criteria when analyzing or evaluating something.

Job Categories

are groups or classifications of jobs that have similar types of work, skills, or responsibilities

FACTOR COMPARISON

it is used to value jobs based on monetary equivalents using the factors

Graduated Factor Comparison

it compares each factor using a graduated scale.

Analytical Factor Comparison

it is based on compensable factors

JOB RANKING

it is the least complicated job evaluation method because it ranks jobs from highest to lowest based on the importance of the job to the organization.

JOB CLASSICICATION

this job evaluation method uses grades or levels for each job. A particular position has sub-levels depending on educational attainment, experience, and skills

Job Structure

The last step of Job Evaluation. It is the grouping of work which is in accordance with the alignment of jobs of the organization.

Market rate analysis

refers to the process of obtaining the current pays of employers for different jobs which are eventually used to establish pay rates for an organization.

JOB MATCHING

Means connecting a job seeker's skills, experience, and interests with the requirements of a specific job or company, aiming to find the best fit for both parties.

SAMPLE FRAME

The data collected should contain a sample of organizations that represent the pay rates needed by the organization.

TIMING

The information obtained should be updated. Salary surveys may easily become unreliable if they are out-ofdate

Minimum Wage

is the least possible amount of compensation that an organization or employer is required to pay its employees for work performed for a particular period.

salary structures

to effectively implement a fair compensation program and ensure that the pay levels are competitive

Organization's Ability to Pay

means how much a company can afford to pay its workers. If the company is earning well, it can give higher salaries. If it's not doing well, it may offer lower pay.

Supply and Demand of Labor

means how many workers are available and how many are needed. If there are more jobs than workers, companies pay more. If there are more workers than jobs, pay is usually lower.

Prevailing Market Rates

It is always necessary for the organization's salaries to conform to the industry players. Aside from being competitive, it allows for uniformity of salaries given, which helps in employee retention and loyalty.

Living Wage

The organization must see to it that aside from being competitive, the salary structure should also reflect the ability of the employees to provide for their personal and their families' needs

PRODUCTIVITY

To counter the argument of those who say that salary structures should not prioritize the fulfillment of personal needs but on the performance of employees, productivity is another consideration. It measures the employees' contribution to the organization

DEVELOPING SALARY STRUCTURE

Are developed through internal alignment of jobs using job evaluation and external alignment using market rate analysis. According to (Atchison, Belcher, & Thomsen, 2013) developing salary structures starts with pricing the job structures.

Internal Equity

it is an organization’s capability to provide competitive salaries and benefit by giving utmost attention to job grades, competencies, employee performance, and position.

Competitiveness

Salary structures are based not only on job evaluation, but also on benchmarked jobs taken from market rate analysis.

Meritocracy

Performance delivery dwells on salary increases based on performance or promotion increases based on meritorious performance.

Return on Investment

In developing the salary structure, the organization should foresee how the pay rates can drive success for the entire organization.

Lag the market

A organization using this stargtegy may not attract high caliber candidates,but nevertheless offer training and development opportunities instead.

Lead- lag the market

The organization,for example, decides to lead the market by implementing the new salary structure at 2.5 percent higher than the market rate,taking account of the 5 percent change

Lead the Market

The strategy of the organization is to be competitive by paying above the market rate.

pay grade

is defined as a group of jobs which have been determined by any of the job evaluation methods and approximates the group's level of diffuculty and importance.

Graded Pay Structure

A way companies organize and manage employee compensation by categorizing jobs into different grades or levels, each with a specific salary range

GP Structure Framework

Range Spread = Grade Maximum - Grade Minimum / Grade Minimum = Result

Broadband

It is similar to a graded structure It is usually adapted by organizations that respond to an environment with charging business conditions. It aims to reward performance more on salary progressions and career development but without promotion.

Job Family Structure

In this pay structure, there is a separate pay grade for each job family. consists a related or similar job titles with levels that progress through task, activities, skills, and competencies.