Strategic Compensation in Canada

360-degree feedback

An appraisal system that uses feedback from superiors, peers, subordinates, and possibly customers.

affective commitment

Attachment to an organization based on positive feelings toward the organization.

agency theory

Agents (employees) will pursue their own self-interests rather than the interests of their principals (employers) unless they are closely monitored or their interests are aligned with the interests of their principals.

aging the data

The process of adjusting compensation data to bring it up to date with the time period in which the new compensation will take effect.

analyzer business strategy

Focuses on exploiting new opportunities at a relatively early stage while maintaining a base of traditional products or services.

attribution theory

Theory of motivation arguing that humans often act without understanding their motives for their behaviour and afterward attempt to attribute motives for their actions.

average employee earnings

Total compensation divided by the number of full-time equivalent employees.

balance sheet approach to expatriate pay

Approach to designing expatriate compensation that attempts to provide a standard of living comparable with the home country.

base pay

The foundation pay component for most employees, usually based on some unit of time worked.

base pay structure

The structure of pay grades and pay ranges, along with the criteria for movement within pay ranges, that applies to base pay.

beauty effect

The tendency for the physical attractiveness of a ratee to affect their performance appraisals.

behavioural observation scales (BOS)

Appraisal method under which appraisers rate the frequency of occurrence of different employee behaviours.

behaviourally anchored rating scales (BARS)

Appraisal method that provides specific descriptors for each point on the rating scale.

benchmark job

A job in the firm’s job evaluation system for which there is a good match in the labour market data.

broad banding

The practice of reducing the number of pay grades by creating large or 'fat' grades, sometimes known as 'bands'.

business strategy

An organization’s plan for how it will achieve its goals.

central tendency error

Occurs when appraisers rate all employees as 'average' in everything.

classical managerial strategy

An approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their economic needs.

classification/grading method

The use of generic grade descriptions for various classes of jobs to assign pay grades to specific jobs.

combination profit-sharing plan

A plan that combines the current distribution and deferred profit-sharing plans by paying some of the profit-sharing bonus on a current (cash) basis and deferring the remainder.

communication and information structure

A dimension of organization structure that describes the nature of and methods for communication in an organization.

compa-ratio

A measure of distribution of employees within their pay range calculated by dividing the mean base pay by the midpoint of the pay range.

compensable factors

Characteristics of jobs that are valued by the organization and differentiate jobs from one another.

compensating differential

A higher compensation level offered by an employer because of undesirable aspects of the employment.

compensation administration

The process through which employee earnings are calculated and the appropriate remittances are paid to employees, governments, and other agencies.

compensation cost ratio

The ratio of total compensation costs to total costs or to revenues.

compensation strategy

The plan for the mix and total amount of base pay, performance pay, and indirect pay to be paid to various categories of employees.

compensation system

The economic or monetary part of the reward system.

competency-based pay

Pay that is based on the characteristics, rather than the performance, of individual employees; usually applied to managerial or professional employees.

competitive bonus plan

A group pay plan that rewards work groups for outperforming other work groups.

content theories of motivation

Theories that focus on understanding motivation by identifying underlying human needs.

contextual variables

Factors in the firm’s context that indicate the most appropriate managerial strategy and organizational structure.

contingency approach to organizational design

An approach to organization design based on the premise that the best type of structure for an organization depends on the key contingencies (contextual variables) associated with that organization.

contingent workers

Workers not employed on a permanent full-time basis.

continuance commitment

Attachment to an organization based on perceived lack of better alternatives.

contrast effect

The tendency for a set of performance appraisals to be influenced upward by the presence of a very low performer or downward by the presence of a very high performer.

control structure

A dimension of organization structure that describes the nature of the processes used to control employee behaviour in an organization.

conversion selling

Selling established products to new customers.

coordination and departmentation

A dimension of organization structure that describes the methods used to coordinate the work of individual employees and subunits in an organization.

correlation coefficient

A statistic that measures the extent to which plots of two variables on a graph fall in a straight line.

current distribution profit-sharing plan

A profit-sharing plan that distributes the profit-sharing bonus to employees in the form of cash or shares, at least annually.

decision-making and leadership structure

A dimension of organization structure that describes the nature of the decision-making and leadership processes used in an organization.

defender business strategy

Focuses on dominating a narrow product or service market segment.

deferred profit-sharing plan (DPSP)

A profit-sharing plan in which the profit-sharing bonuses are allocated to employee accounts but not actually paid out until a later date, usually on termination or retirement.

defined benefit plans

Pension plans that provide retirement income based on a proportion of the employee’s pay at the time of retirement.

defined contribution plans

Pension plans that provide retirement income based on the accrued value of employer and employee contributions to the plan.

demographic characteristics

A person’s age, gender, ethnicity, education, marital status, and similar characteristics.

differential piece rate

A lower sum of money per piece is paid if employee production does not meet the production standard, and then a higher sum per piece is paid once the production standard is met.

distributive justice

The perception that overall reward outcomes are fair.

domain

Describes the specific products or services offered by a given organization.

employee assistance programs (EAPs)

Employer-provided programs to help employees deal with a variety of personal problems.

employee profit-sharing plan

A formal pay program in which a firm provides bonus payments to employees based on the profitability of the firm.

employee share purchase plan

A plan through which employees may purchase shares in their employer firm.

employee stock bonus plan

A plan through which employees receive shares in their employer firm at no cost to the employee.

employee stock option plan

A plan through which employees are provided with options to purchase shares in their employer at a fixed price within a limited time period.

employee stock plan

Any type of plan through which employees acquire shares in the firm that employs them.

employment standards legislation

Legislation that sets minimum standards for pay and other conditions of employment.

equal increase approach

Method to establish pay grade sizes, in which each pay grade increases in width by a constant number of points from the preceding pay grade.

equal interval approach

Method to establish pay grade widths, in which the point spreads are equal for all pay grades.

equal percentage approach

Method to establish pay grade sizes, in which each pay grade increases in width by an equal percentage from the preceding pay grade.

equity sensitivity

A personality trait that entails a high predisposition toward perceiving personal inequity.

equity theory

Employees’ base perceptions of equity (fairness) on a comparison of their rewards/contributions ratio to the ratios of others perceived as being similar.

expectancy theory

A theory stating that individuals are more likely to exert effort to perform a particular behaviour if they believe that behaviour will lead to valued consequences and if they expect they can perform the behaviour.

extrinsic rewards

Factors that satisfy basic human needs for survival and security, as well as social needs and needs for recognition.

factor comparison method

Assigns pay levels to jobs based on the extent to which they embody various job factors.

family of measures plan

A gain-sharing plan that uses a variety of measures to determine the extent to which a bonus payout is justified.

fixed benefit system

An employee benefit plan that provides a standard set of benefits to all those covered by the plan.

flexible benefit system

An employee benefit plan that allows employees to allocate employer-provided credits to purchase the benefits of most value to them.

forced distribution method

A performance appraisal method that stipulates the distribution of employees across performance categories.

gain-sharing plan

Group performance pay plan that shares cost savings or productivity gains generated by a work group with all members of that group.

goal-sharing plan

A group performance pay plan in which a work group receives a bonus when it meets prespecified performance goals.

graphic rating scale

An appraisal method in which appraisers use a numerical scale to rate employees on a series of characteristics.

group commissions

A performance pay plan in which the commissions of a group of sales workers are pooled and then shared equally among members of the group.

group piece rates

A performance pay plan in which group members get paid based on the number of completed products produced by the group.

halo error

Occurs when appraisers rate an individual either high or low on all characteristics because one characteristic is either high or low.

harshness effect

The tendency of some appraisers to provide unduly low performance appraisals.

health care spending account

A tax-favoured employee benefit that allows employees to use employer-provided health care spending credits to purchase a wide array of health care services.

high-involvement managerial strategy

An approach to management that assumes work can be intrinsically motivating if the organization is structured properly.

high–low method

Determines entry-level and skill-block pay amounts by pricing comparable entry-level and top-level jobs in the market and allocating the difference to the various skill blocks.

horizontal fit

Alignment of strategies at the same level.

human relations managerial strategy

An approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their social needs.

human rights legislation

Legislation that prohibits discrimination in hiring or employment on the basis of race, ethnic origin, religion, gender, marital status, age, or sexual orientation.

hybrid compensation policy

A compensation-level strategy that varies across employee groups or compensation components.

hybrid pension plans

Pension plans that combine features of the defined benefit pension plan and the defined contribution pension plan.

Improshare

A gain-sharing plan that focuses on labour hours per unit of output and that does not usually include worker participation.

incentive

A promise that a specified reward will be provided if a specified employee behaviour is performed.

indirect pay

Noncash items or services that satisfy a variety of specific employee needs, sometimes known as 'employee benefits'.

individual/team merit grid

A method for linking individual merit pay to both individual and team performance.

initial dip

A tendency for performance to decline during the initial stages of any change.

intergrade differential percentage

Calculated by dividing the intergrade differential (expressed in dollars) of each pay grade by the midpoint (in dollars) of the previous pay grade.

intergrade differentials

The differences between the range midpoints of adjacent pay grades in a pay structure, expressed in dollars.

interquartile range

A measure of pay dispersion across employers, calculated by dividing the difference between the 25th and 75th percentile values by the value of the 25th percentile.

intrinsic rewards

Factors that satisfy higher-order human needs for self-esteem, achievement, growth, and development.

job analysis

The process of collecting information on which job descriptions are based.

job autonomy

The degree of freedom workers have in deciding how to perform their jobs.

job description

A summary of the duties, responsibilities, and reporting relationships pertaining to a particular job.

job design

A dimension of organization structure that describes the manner in which the total task of an organization is divided into separate jobs.

job enrichment

The process of redesigning jobs to incorporate more of the five core dimensions of intrinsically satisfying work.

job evaluation

Establishing base pay by ranking all jobs in the firm according to their value to that firm.

job feedback

The extent to which the job itself provides feedback on worker performance.