HRM BA 211 Compensation

Classisfication Ranking
HR BASICS: COMPENSATION MANAGEMENT Philosophy

Compensation Job Analysis Point Factor

- is a pay provided by an employer to an employee
in return for work.
- Fixed and variable pay in return for work Job Evaluation Market Pricing

Performance
- The alignment of mission with the work of
- Step 3 – Pay Policy
employees.
o The process of determining whether the
Work Life Effectiveness
organization wants to lead, lag or meet the
- Practices that actively help employees achieve
market in compensation.
success at both work and home
o Lead
Benefits
 Lead the market by paying rates
- Indirect and non-wage health, income protection
higher than relative marketplace
and retirement programs
o Match
Recognition
- Reinforcement of employee behavior that supports  Match the market by paying rates
comparable to the relative
organization strategy.
marketplace
Development
o Lag
- Integrated processes to attract motivate and retain
 Lag the market by paying rates
productive, engaged employees
lower than those of the relative
marketplace
Two Elements of Compensation:
o External competitiveness
1. Fixed Pay – base pay that does not vary
2. Variable Pay – changes with performance or  Pay comparisons with competitors
results – other organizations that hire
people with same of similar
Elements of Compensation Plan knowledge skills and abilities.
1. Internal Alignment
2. External Competitiveness - Step 4 – Market Analysis/Pricing
3. Compensation Management o The process of analyzing compensation
data gathered from other employers in a
Internal Alignment survey of the relevant labor market.
- Makes pay comparison among jobs or skill levels o 1 – Select Data
inside a single organization.  Identify and select market data
- Includes steps such as job analysis, job evaluation relevant to the organization
and pay policy identification. o 2 – Age Data
- Step 1 – Job Analysis  Adjust selected data to a common
o The systematic process of collecting point in time, if necessary.
information that identifies similarities and o 3 – Weight Data
differences in work.  Increase influence of better data
o The outcome of job analysis is job by giving it more weight
documentation (descriptions).
o Common methods - Step 5 – Base Pay Structure
 Observation o Developed through job evaluation is
 Interview merged with he external market pay rates
 Questionnaire in a simple regression to develop a market
 Online pay line from which pay grades and
ranges are developed.
- Step 2 – Job Evaluation
o The systematic process of determining the - Step 6 – Pay for Performance
relative worth of jobs. o Determining the use of pay that varies with
o The outcome is the development of an some measure of individual or
internal structure or hierarchical ranking of organization performance, such as merit,
jobs. incentives, and variable pay.
o Approaches: o Base Pay:
 Job evaluation: internal focus with  Fixed Compensation
points  For job responsibilities
 Market pricing: external focus with  Difficult to see link
points o Variable Pay
 Align pay with performance
 individual or group contributions
- Step 7 – Communicate the Plan
o Communicate your communication plan
ensures employees understand their
compensation and have clear line of sight
 between organization mission, culture and
their compensation.
o Structure
 Communicate how structure works
and decisions are made
o Differences
 Ensure difference in pay are
understood by employees
o Statement
 Use total rewards statement to
communicate rewards.