HRM.Ch 10.11.Compensation.Incentives(1)

Page 5: About Compensation Definition: Monetary and non-monetary rewards for work. Purpose: Attract and retain employees. Motivate employees' performance. Reward contributions. Total Rewards: Includes base pay, benefits, incentives, and perks. Equity Theory: Employees assess their input and outcome relative to others.

Page 6: Key Compensation Terms Total Compensation: Sum of salary, bonuses, benefits, and perks. Base Salary: Fixed amount for regular work hours. Variable Pay: Compensation that varies based on performance. Salary Ranges: Minimum and maximum pay for roles; adjusted for cost of living.

Page 7: Essential Compensation Terms Total Compensation: Everything an employee receives for work. Base Salary: Fixed pay for regular hours. Variable Pay: Performance-based compensation. Benefits Package: Non-wage perks. Salary Range: Pay span for a job role. COLA: Adjusts wages for inflation. Deferred Compensation: Pay received later. Equity Compensation: Non-cash payments in company stock. Performance-Based Pay: Directly tied to performance outcomes. PTO: Time off for personal needs. Fringe Benefits: Additional perks. Compensation Benchmarking: Comparing company pay rates with others.

Page 8: Designing a Compensation Structure 5 Steps: Articulate Company Pay Policy. Establish Internal Value of Each Position. Identify Benchmark Jobs. Determine External Competitiveness. Assign Job Pricing.

Page 9: Articulating Pay Policy Determines pay based on company capability, market, and strategy. Philosophy Options: Pay at market. Pay above market. Pay below market.

Page 10: Example - SCOA Compensation Philosophy Goal to maintain competitive compensation practices. Elements include: Engage employees. Provide equitable classifications. Align salary ranges with market. Incentivize performance.

Page 11: Internal Value of Positions Goal: Internal alignment of job values. Hierarchy creation for jobs based on contribution and performance. Conduct job evaluations for relative worth.

Page 12: Types of Job Evaluation Job Ranking: Listing jobs by worth. Job Classification: Grouping jobs with similar tasks. Point Method: Assigning points based on compensable factors. Factor Comparison: Ranking jobs by multiple factors.

Page 13: Benchmark Jobs Represent a range of jobs for pay comparisons. Characteristics include stability, recognition, and clarity in descriptions.

Page 14: External Competitiveness Aligning pay rates to external market rates affects attraction and motivation. Combine results from job evaluations with market data.

Page 15: Market Salary Information Sources Sources: Salary research websites, compensation providers, industry reports, recruitment firms, local surveys, and HR consulting firms.

Page 16: Salary Surveys Systematic collection of wage information from the market. Should be reliable and conducted regularly.

Page 17: Survey Considerations Define goals and appropriate groups for comparison. Ensure benchmarks are well defined and relevant.

Page 18: Assigning Job Pricing Assign monetary rates to jobs based on market alignment. Develop company policy using job evaluations as reference.

Page 19: Compensation Practices Pay grades/ranges outline: Minimum and maximum pay ranges, Compa-ratio definitions for individual pay comparison.

Page 20: Determining Employee Pay Factors include education, experience, negotiation skills, and performance. Special cases: Red-circled: Above maximum. Green-circled: Below minimum.

Page 21: Regulatory Issues Davis-Bacon Act: Minimum wage requirements for federal contractors. Walsh-Healey PCA: Mandates pay standards for contractors.

Page 22: SCOA's Base Compensation Structure Focus on mapping positions to market signals effectively.

Page 23: Mapping Process Methodology for correlating jobs to market data and establishing pay ranges.

Page 24: Job Bands and Levels Framework categorizing positions into bands and levels for compensation.

Page 25: Overview of Bands and Levels Consolidation of jobs affecting salaries based on market and internal frameworks.

Page 26: Salary Range Design Best practices for combining bands into coherent salary ranges.

Page 27: SCOA Salary Ranges Geographic differentials considered for salary structures in varying locations.

Page 28: Incentives and Rewards Overview Introduction to the importance of reward systems.

Page 29: Importance of Incentive Plans Motivating employees through goal-centric rewards and clarity in expectations.

Page 30: Theories of Motivation (1) Reinforcement Theory: Behavior modification through rewards. Goal Setting Theory: Importance of SMART goals.

Page 31: Theories of Motivation (2) Agency Theory: Aligning employee motives with company interests. Expectancy Theory: Employees' expected outcomes influence their work behavior.

Page 32: Expectancy Theory Example Motivation from exceeding sales targets tied to bonuses.

Page 33: Making Incentive Plans Effective Link incentives to strategic objectives and establish clear, attainable standards.

Page 34: Types of Individual Incentive Programs Includes: Merit pay, lump-sum payments, commissions, bonuses.

Page 35: Merit Pay Programs Salary adjustments awarded based on performance evaluations.

Page 36: Lump-Sum Merit Bonuses One-time performance-based payments not affecting base salary.

Page 37: Piecework Incentive Plans Performance rewards based on output.

Page 38: Standard Hour Plans Pay rates based on expected completion times.

Page 39: On-the-Spot Awards Immediate recognition for good performance.

Page 40: Sales Incentive Programs Variations include commission plans and salary-based structures.

Page 41: Bonus Eligibility by Band Different bands reflect varying eligibility percentages for bonuses.

Page 42: Group/Organizational Incentive Plans Types include team incentives, profit sharing, and ownership plans.

Page 43: Team Incentive Plans Rewards for team achievements, but risk of unbalanced effort.

Page 44: Gain Sharing Plans Rewards teams for efficiency improvements.

Page 45: Profit Sharing Plans Employee rewards based on overall company profitability.

Page 46: Ownership Plans Stock options and ownership stakes as incentives.

Page 47: How Stock Options Work (1) Details on receiving and exercising stock options over time.

Page 48: Stock Options (2) Example scenario illustrating potential profit from stock options.

Page 49: Mixed-Incentive Plans Combining various incentive structures to maximize effectiveness.

Page 50: Executive Compensation Varied components including bonuses, perks, and benefits tailored for executives.

Page 51: Average CEO and Worker Compensation Historical data on compensation ratios demonstrating inequities.