Basics of Managing Compensation
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Transcript Basics of Managing Compensation
Chapter 10
Managing
Compensation
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
10-1
What Is Compensation?
Total Compensation
Sum total of quantifiable rewards
Received for an employee’s labor
Pay Mix—proportion of each of:
Base compensation
Pay incentives
Indirect compensation (benefits)
Perquisites— “perks”
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
10-2
Compensation System Design
Fixed vs. Variable Pay
Performance vs. Membership
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10-3
Job versus Individual Pay
Job-Based Pay is best when:
Jobs and technology are stable
Training is required to learn a given job
Turnover is relatively low
Individual-Based Pay is best when:
Company and environment are dynamic
Workforce is relatively educated
Workforce is able & willing to learn different
jobs
Participation and teamwork are encouraged
Opportunities to learn new skills are
available.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
10-4
Compensation Tools: Job-Based Plans
Advantages:
Rational, objective, systematic
Relatively easy to administer
Drawbacks:
Do not account for nature of business
Job descriptions often too general
Wage and salary data not definitive
Job-based plans tend to be bureaucratic,
mechanistic and inflexible
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
10-5
Compensation Tools: Skill-Based Plans
Skill mastery increases pay
Three types of skills:
Depth skills—specialized area
Breadth Skills—jobs/tasks in firm
Vertical skills—self-management
Workforce is more flexible
Higher training costs
Skills can become “rusty”
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
10-6
The Legal Environment and Pay Systems
Governance
The Fair Labor Standards Act (1938)
Exempt/Non-exempt employees
Minimum wage and Overtime
The Equal Pay Act (EPA, 1963)
Exemptions: seniority, job performance,
or other factors (e.g. shift differential)
“Comparable worth”—not the same as
Equal Pay Act considerations
Reliability of comparable worth
determinations can be highly suspect
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
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