Chapter 8- Total Rewards

Total Rewards

An employee reward strategy that brings together all the investments an organization makes in its workforce with everything that employees value about working.

Direct Compensation

The money paid directly to employees in exchange for their work, including wages, salaries, bonuses, commissions, and tips.

Indirect Compensation

The benefits and services employees receive in exchange for their work.

Total Compensation

All types of financial rewards and tangible benefits and services employees receive as part of their employment.

Job Structure

The relative pay for different jobs within the organization.

Pay Level

The average amount (including wages, salaries, and incentives) that the organization pays for a particular job.

Pay Structure

The pay policy is a result of job structure and pay-level decisions.

Consideration in Developing a Pay Structure

Legal Requirements, Market focus, Organizational Goals

Benchmarking

A procedure in which an organization compares its own practices against those of successful competitors.

Pay grades

Sets of jobs having similar worth or content are grouped to establish rates of pay.

Pay range

A set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade

standard hour plan

An incentive plan that pays workers extra for work done in less than a preset "standard time."

Merit Pay

A system of linking pay increases to ratings on performance appraisals.

gainsharing

Team incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.

Profit Sharing

Incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary.

Competency-based pay systems

Pay structures that set pay according to the employees’ levels of skills or knowledge and what they are capable of doing

Incentive Pay

Forms of pay linked to an employee’s performance as an individual, group member, or organization member