Managing Rewards, Job

Evaluation, Managing
Employee Benefits
MGMT6301 Human Resource Management
 Aims of Reward Management

• Reward people in accordance with organization values and for the

value they create
• Align reward practices with both business goals and employee
values
• Reward the right things to convey the right message about what is
important in terms of behavior and outcomes
• Develop a performance culture
• Help to attract and retain the high quality people the organization
needs
• Motivate people and obtain their commitment and engagement
• Operate fairly – people feel that they are treated justly in
accordance with what is due to them
• Function consistently – decisions on pay do not vary arbitrarily and
without due cause between different people or at different times.
• Operate transparently – people understand how reward processes
operate and how they are affected by them.
 Rewards and other functions of HR Management
Skill-based pay

Training Culture
Overtime
pay rules in Merit pay
contract reinforces

Labor
Rewards performance
culture
Relations

Performance
Management

Sign-on Bonus Employment

Merit Pay
Corporate Policies, Competitive Strategy, and
Compensation
Aligned reward strategy
• The employer’s basic task is to create bundle of rewards – a total
reward package – specifically aimed at eliciting the employee
behavior the firm needs to support and achieve its competitive
advantage
• HR (or compensation) manager will write the policies in conjunction
with the top management, in a manner such that the policies are
consistent with the firm’s strategic objectives
Total reward
Total rewards vs. Traditional approach
Traditional approach
• Primarily – base pay
• Bonuses – executives only
• Benefits – fixed & tied to
seniority
• Pay grade progression –
based on organizational
promotion
• Pay plan – one organization-
wide
Total Reward approach
• Base and variable pay
• Annual / long term incentives
provided to all employees
• Benefits - flexible an portable
• Pay grades - Knowledge-based
broadbands
• Pay plans – Multiple: family,
location and business units
Designing compensation: individual vs. collective focus
Job evaluation – calculating base pay
Certain jobs contribute more to organizational effectiveness
and success than others and are worth more than others and
should be paid more than others. How to measure?
Job evaluation – A systematic comparison done in order to
determine the worth of one job relative to another.
Methods of job evaluation:
• Analytic method
• Non-analytic method
Job Evaluation: Analytic Method

Process of breaking whole job down into a number of

defined fundamental, compensable elements of job
such as responsibility, decision making, the knowledge
and required skills.
–Each characteristic is evaluated separately under the
defined guidelines to increase the objectivity and
transparency.
The elements are usually referred to as Compensable
factors – characteristics of jobs which organization
values and chooses to pay for.
– Job complexity, working conditions, required education,
required experience and responsibility.
Point factor method: the steps

1. Create job evaluation committee member

2. Select benchmark jobs
3. Choose compensable factors
4. Define factor degrees
5. Determine weight of each factor
6. Determine point values
7. Verify factor degrees and point values
8. Evaluate the jobs
Point factor method: the steps

1. Create Job Evaluation (JE) Committee

Advantages of JE Committees
• Broader job knowledge from different perspectives
• Increased participation leads to increased understanding and
commitment to the Job Evaluations.
Selecting members to be on the JE committee
• Job incumbents, managers, HR expert, Union reps
• Employees who have knowledge of jobs
• Manageable size
 Point factor method: the steps

2. Select Benchmark Jobs 3. Choose Compensable Factors

• “Generic” jobs with similar and “Universal” factors:
agreed upon characteristics
• Relatively stable Skill
• Represent entire range of jobs in Effort
company Responsibility
• Generally accepted in the labor Working Conditions
market for purposes of setting pay
levels Custom factors
Sub-Factors
 Point factor method: the steps
4. Define Factor Degrees
• Provides levels within each factor
or sub-factor
• Best to define each level in job-
specific terms
• Fewer degrees required if system
only needs to cover a smaller
range of jobs
5. Determine Weight of each Factor
6. Determine Point Values
Set arbitrary maximum (i.e.
1000 pts.)
Determine weighted maximum
per factor
If responsibility was
weighted 10%, it can have
maximum score of 100
Divide factor maximum by
number of degrees
If 5 factors, 200 pts. per
degree
 Point factor method: the steps

7. Verify Factor Degrees and Point Values

• Committee members score random set of jobs
• Review scores to determine logical consistency and fairness
• Make sure points are consistent with business strategy of the firm
• Adjust as necessary
 Hypothetical Point Values for Job Factors
Factors Very low Low Mid High Very high
Mental Demand 200 400 600 800 1000
Education 200 400 600 800 1000
Physical Demand 200 400 600 800 1000
Hazard 200 400 600 800 1000
Autonomy 200 400 600 800 1000
Responsibility 200 400 600 800 1000
Decision making 200 400 600 800 1000
Interpersonal Skills 200 400 600 800 1000
Foreign Language 200 400 600 800 1000
Job grading
Group similar jobs into pay grades
• Committee will assign
pay rates to each job
based on one of the job
methods
• Ranking method grades
fall in to a point range
• Classification method
puts into classes or
grades
Price each grade (Wage Curve)
• Developing a wage curve
involves the following:
• Find the average pay for each
pay grade
• Plot the pay rates for each pay
grade
• Fit the line called a wage line
through the points just plotted
• Price the jobs
Broadbanding

Consolidating salary grades and ranges into few wide

levels (bands)
 The salary survey
• It is a survey aimed at determining prevailing wage rates which include:
• Formal
• Informal
• A good salary survey provides specific wage rates for specific jobs.
• Formal written questionnaire surveys are the most comprehensive, but
telephone surveys and newspaper ads are also sources of information.
• Labor Statistics including: Area wage surveys, Industry wage surveys and
Professional, administrative, technical and clerical (PATC) surveys
• Professional Associations statistics
• Private consultants: Hay Associates, Heidrick and Struggles, and Hewitt
Associates (publish compensation data for top and middle management).
Others include: Wageweb, Towers Perrin (Watson Wyatt) - also offers middle
management & supervisory management compensation surveys, sales and
marketing personnel surveys, professional and scientific & office personnel
surveys
• Internet based salary surveys: worldatwork.org, salary.com, salaryexpert.com,
FutureStep, ExecuNet
 Employee benefits
What is benefit?
• Employee benefits are elements
of remuneration given in
addition to the various forms of
cash pay.
• They also include items that are
not strictly remuneration such as
annual holidays.
Why benefits?
• Provide a competitive total
remuneration package that both
attracts and retains high quality
employees
• Provide for the personal needs
of employees and increase their
commitment
• Provide for some people a tax-
efficient method of
remuneration
Employee benefits: categories
• Legally required social insurance programs
• Social Security, Workers’ Compensation
• Discretionary benefits
• Payments for private insurance and retirement plans
• Medical, disability, life insurance
• Payments for time not worked
• Vacations, parental leave, sabbaticals
• Extra cash payments to employees
• Educational expenses, suggestion awards
• Cost of services to employees
• Subsidized cafeterias, adoption assistance, parking
Allowances

Payments for special circumstances.

 Location allowances (cost of leaving)
 Overtime payments
 Shift payments
 Working conditions allowances
 Subsistence allowances may be paid for accommodation and meals when
working away from home
 Stand-by and call-out allowances may be made to those who have to be
available to come in to work when required
Thank you

Questions