HRM Test 3

compensation

monetary adn nonmonetary rewards employees recieve in exchange for work they do for organization.

• to entice employees to work for the company

• to motivate employees to perform at a high level

• to ensure employees stay at the company

• to reward employees for their contributions.

total compensation

salary + bonuses + benefits + perks. Everything your employee gets for showing up and crushing it…

base salary

The fixed amount your people earn for their regular hours. No overtime. No bonuses. Just the basics.

Variable pay

Commission, bonuses profit sharing. It changes based on performance or other factors. Keep your top performers hungry.

Benefits package

Health insurance, life insurance, and retirement plans.

Salary range

From entry-level to seasoned pro. The span between min and max pay for a role. Room to grow.

Cost of living adjustment (COLA)

The inflation fighter. Helps your tema keep up with rising prices.

deferred compensation

“We’ll pay you later for what you’re doing now.“ often used in retirement plans.

Equity compensation

Stock options or RSUs. Used when you want your people to think like owners.

Performance-based pay

Tie pay directly to results

Paid time off

Vacation, personal days, sick leave. 

Fringe benefits

Company car, gym membership, childcare assistance

compensation benchmarking

How do your rates stack up? Because you can’t win the talent war if you’re bringing a knife to a gunfight.

5 steps for designing a compensation structure for base pay

1. articulate your company pay policy

2. establish the internal value of each position

3. identify benchmark jobs

4. determine external competitiveness

5. assign job pricing

articulate your company pay policy

communicates information to employees about what is valued and steers the overall direction of how the company stands in the marketplace. 

• traditional

• market-based

• broadband

traditional

predictable raises; strong internal equity; employees “move up“ levels based on role, experience, seniority; focus upon stability; slow and steady growth

market-based

externally competitive; talent attracting; based on current market rates for role, industry, and regions.

broadband

fewer, wider grades; more flexibility in setting pay within role groups; compensate employees based on their skills and performance rather than strict job titles or grades.

establish the internal value of each position.

Goal = internal alignment: when each job in the company is appropriately valued relative to every other job in terms of its ability to help the company achieve its goals. establish a relative worth of each position by creating a hierarchy for the jobs.

Conduct a job evaluation

systematic process of establishing the relative worth of the jobs within the company.

4 types of job evaluation methods

point method, factor comparison, job ranking, and job classification.

identify benchmark jobs

Used to represent range of jobs in a company. Used for comparing common jobs in companies with jobs in other companies to establish pay rates. Typically target your industry and geography.

determine external competitiveness

ensuring pay rates for jobs in a company are appropriately aligned relative to pay rates for similar jobs in the company’s external labor market. 

• affects how attractive the company is to potential employees

• affects attitude and motivation of current employees.

• combine information with job evaluation results to decide wage rates for jobs

• must collect market data through surveys.

sources of market salary information

• salary research websites

• compensation data providers

• industry specific reports

• recruitment firms and job boards

• local salary surveys and data

• HR consulting firms

• Job posting websites

• conducting your own survey

assign job pricing

systematic process of assigning monetary rates to jobs so a company’s internal wages are aligned with the external wages in the marketplace.

minimum of range

starting point for someone brand new to job with little to no relevant experience

midpoint of range

salary someone fully qualified to perform the job should make

maximum of range

highest amount someone in the job should be making.

internal equity

internal salary equity is the practice of ensuring that employees within the same organization are paid fairly for their work, regardless of factors like race, gender, age, or ability.

compra-ratio

As a tool, it ensures fairness and transparency in compensation, fostering a positive and equitable work environment.

• red circled individual

• green circled individual

exempt employee

exempt from overtime pay. Usually perform high level tasks that require independent judgment and expertise, and oftne carry executive, professional, or administrative responsibilities. Typically have high level responsibilities that might involve regular decision making.

non exempt employees

work hourly and are entitled to overtime pay. Usually perform tasks that are more routine and supervised.

Gen Z and Millenials

42% and 40% have shared information in their contract.

developing salary ranges

• mapping - articulate policy, establish value, identify benchmarks

• analysis - analyze the market, assign pricing. 

• build - derive minimums and maximums based on midpoints.

incentive plans

The ultimate purpose of _______ is to motivate employees to work as hard as possible to reach certain goals by rewarding them when they do what is desired.

benefits of incentive plans

• increased productivity

• improved quality of work

• increased employee retention

• positive workplace culture

• enhanced employer reputation

financial metrics

gross profit, revenue, operating income, cash flow, and earnings per share.

strategic goals

market share growth and customer satisfaction, sales growth, productivity gains, and quality improvements

qualitative factors

such as peer and manager feedback.

cobra effect

a situation where incentives encourage exactly the opposite behaviour to what was intended.

making incentive plans effective

• link plan to firm’s strategic objectives

• have clear standards

• sample the full performance domain

• be attainable

• be easy to understand

merit pay increase

employees receive a percentage increase to their base salary/wages based on results of their performance evaluation and past performance.

performance bonuses

This incentive is given to an employee who has achieved specific performance targets or exceeded expectations. 

sales commissions

salespeople are often incentivized with commissions based on the number of sales they make.

On-the spot recognition awards

these awards can take the form of plaques, certificates, or other forms of public recognition or discretionary bonuses, examples for a job well done.

time off

Employees may be offered additional time off, such as extra vacation days, for achieving specific goals or objectives.

Promotions

provide employees with the incentive to work harder and develop their skills to advance their careers.  

Profit sharing

give employees a percentage of the company’s profits, which can be a strong motivator.

piecework incentives 

employees receive a rate of pay per unit of production or if a certain level of production is exceeded.

educational opportunities

employers can offer educational opportunities, such as tuition reimbursement or professional development programs.

flexible work arrangements

employees may be motivated by the flexibility to work from home or have a more flexible schedule

stock options

give employees the option to purchase company stock at a discounted price, which can provide a significant financial incentive.

drawbacks of individual incentices

• hinders collaboration

• encourages unhealthy competition

• risk of short-term focus

• potential for biased evaluation

• neglects collective responsibility

performance-based bonuses

a bonus can be awarded to the entire team for achieving a specific target or goal

gain-sharing plans

designed to help increase a company’s efficiency by rewarding teams that exceed productivity levels and/or lower labor costs with a share of the gains realized

profit sharing

incentives give employees a percentage of the company’s profits, which cna be a strong motivator

time off incentives

employees can be given extra time off as an incentive. for instance, if a team completes a project before the deadline, they can be given an extra day off.

recognition awards

recognizing and rewarding team members who make significant contributions to a project or goal

training and development opportunities

the company can offer training and development opportunities to teams who meet specific goals

stock ownership plans

• employee stock ownership plan

• stock grants

• stock option plans.

free rider problem

team incentives may lead to this where some taem members may not contribute their fair share but still benefit from the team’s success.

complex performance measurement

measuring individual contributions within a team can be challenging. determining how to attribute success or failure to individuals efforts when rewards are team based can result in complex performance evaluation processes, potentially leading to confusion and dissatisfaction.

CEO-to-WORKER pay ratio

285:1

recruitment defined

• Process of identifying potential employees, communicating job and organizational attributes to them, and convincing them to apply for available jobs.

• The process of focusing on finding qualified applicants begins when a manager needs to fill a job and continues until the job is filled and the new hire is onboarded.

7 steps of recruitment

• Preparation

• Talent sourcing

• Applicant screening

• Interview and selection

• Job offers and negotiation

• Smooth onboarding

• Post evaluation and feedback

a more detailed look at recruitment:

• Planning and decision

• Initiating

• Sourcing and applications

• Screening and interviews

• Offers and rejection

recruiter’s role

is to identify staffing needs, source candidates, screen applicants, coordinate the hiring process, and manage employer branding.

key to successful recruiting

is more likely the recruiter’s ability to relate to the recruit’s value system and motivations than demographics

who should recruit

all employees

brand

the sum total of visual and non-visual, verbal, and non verbal, tangible and non-tangible elements that help to identify, form, create and influence unique and positive associations for a product, service or entity, that differentiates it from its competition, creating meaning, value and preference in one’s mind.

Employer brand

the reputation and image a company has as an employer, rather than as a provider of products or services. It’s the way current employees feel and how potential employees perceive a company and its culture, values, work environment, and the employees experience.

positive employer brand

helps attract the top talent, retain employees, and boost employee engagement and loyalty. To build a positive employer brand: know your values, involve your employees, be honest and transparent, give examples, and highlight what makes your organization unique.

Trader Joe’s

has a fun and supportive work environment, invests in employee career development and opportunities, offers competitive compensation and benefits, and a strong sense of community and shared values.

Google

is innovative, has great perks for employee wellness, flexible work arrangements, career development in training, and a DEI culture.

netflix

trust and autonomy, independent decision making, freedom, responsibility, values their employees in treatment and compensation.

Salesforce

offers meaningful work, they move with technology and the times, and foster a value-driven culture with a focus on equality. They celebrate achievements of their employees.

Strategies to effectively deliver on the employee value proposition:

pay 51%, benefits 33% and work-life balance 32%.

Considered nontraditional applicants

workers with disabilities, temporary staffing agencies, veterans, boomerangs or former employees.

Diverse companies

are in the top quartile are 35% more likely to outperform the national industry median.

Contingency recruiting agency

provides job search assistance to employers with payment made as a flat fee or a percentage of the first year’s salary (I.E. 20%) if the employer hires a candidate recommended by the agency.

Retained agency

conducts searches for on a retainer basis with the fee paid (I.E. 3% of the first year) at the conclusion of

Contingency 

fee is typically about 20% of first year’s annual salary, search firm is only paid when the placement is made. Company may have more than 1 contingent search firm looking for a new hire. Usually used to lower and mid-level positions

retained

fee is typically about 30% of first year’s annual salary, search firm is paid in 3 installments. Typically at the beginning of the assignment, after presenting a slate of candidates, when the assignment is at/near completion. Usually there is an exclusive relation. Used for upper level and/or niche positions.

active job seekers

people who need a job and are actively looking for information about job openings

semi-passive job seekers

people who are interested in a new position, but only occasionally look actively for one.

Passive job seekers

Currently employed and are not actively seeking another job, but could be tempted by the right opportunity.

stages of hiring

First, you are job applicants being evaluated, then you pass that initial screen to be considered a job candidate being assessed in more depth. Lastly you are a finalist, what remains after all the assessments.

realistic job previews

provide both positive and potentially negative information to job candidates, striving to present an honest and accurate picture. They serve 3 main purposes: self-selection, vaccination, and a commitment to the choice.

pre-employment tests

assessments that employers use during the hiring process to evaluate candidates and make informed hiring decisions.

personality tests

assess various aspects of a candidates character, behavior, and compatibility with the team and company culture.

integrity tests

evaluate a candidate’s honesty, ethics, and reliability. They help employers assess the likelihood of a candidate’s honesty, ethics, and reliability.

aptitude tests

assess a candidate’s ability to learn new skills and adapt to new situations.

skills assessments

evaluates specific abilities related to the job, such as technical skills, writing proficiency, or software knowledge.

job knowledge tests

measures a candidates understand and expertise in a particular field or profession.

role specific assessments

can test technical skills, and practical aptitudes.

structured interviews

have higher validity than unstructured interviews. Validity may be r= .50 or better.

motivational interviews

ask open ended questions to see the potential commitment.

Behavioral interview

uses information about what the applicant has done in the past to predict future behaviors. They often revolve around and seek detail about interpersonal matters, leadership attributes or how a person acts under pressure. “tell me about a time when….”

situational interviews

ask how you would handle a real life situation

case study interview

gives you a scenario and asks how you go about it, market it, analyze it.