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Compensation Management
Schwind 9th Canadian Edition
Compensation
Cash and non-cash rewards employees receive in exchange for their work Effective compensation management
Employees more likely to be satisfied and motivated
Objectives of Compensation
Acquire personnel
Administrative efficiency
Retain employees
Legal compliance
Effective Compensation
Ensure equity
Control costs
Schwind 9th Canadian Edition
Reward behaviour
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Copyright 2010 by McGraw-Hill Ryerson
Compensation Management
Phase I Job Analysis
Compensation Management
Phase I Job Analysis Phase II Job Evaluation
Determine relative worth or value of jobs Provides for internal equity Job evaluation methods
Job ranking Job grading Point system
Compensation Management
Phase I Job Analysis Phase II Job Evaluation Phase III Salary Surveys
Discover what other employers are paying for specific key jobs Provides for external equity Sources of data: e.g.
Labour Canada HRSDC Offices Employer Associations Professional Associations Self-conducted Surveys
Compensation Management
Phase I Job Analysis Phase II Job Evaluation Phase III Salary Surveys Phase IV Pricing Jobs Match
Grouping the different pay levels into a structure that can be managed
Job classes and rate ranges
Compensation Challenges
Prevailing wage rates Government constraints Union power
Compensation Challenges
Productivity
Pay Equity
Canadian Human Rights Act prohibits discrimination because of sex It is illegal for companies to pay women less than men if their jobs involve equal skills, effort, responsibilities, and conditions Government enforces these provisions
Pay Equity
Equal pay for equal work
Part of the Canada Labour Code since 1971 Employers must pay men and women the same wage or salary when they do the same work
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Pay Equity
Pay gap Historical gap between the pay of men and women Canadian women earn about 80 percent as much as men Pay gap exists in part due to: Women tend to work in lower paying occupations Career gaps Note: 5 - 10% of the pay gap is unexplained
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Pay-for-Performance Model
Incentive systems provide a clear link between pay and performance or productivity Incentive pay
Directly linked to an employees performance or productivity
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Incentive Systems
Benefits
Performance is reinforced regularly Reinforcement is quick and frequent Desired behaviours are likely to continue Wages paid in proportion with performance
Schwind 9th Canadian Edition
Problems
Administration can be complex May result in inequities Employees may not achieve standards due to uncontrollable forces Union resistance Focus efforts on one aspect
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Copyright 2010 by McGraw-Hill Ryerson
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Pay Secrecy
Advantages
Most employees prefer to have their pay kept secret Gives managers greater freedom Covers up inequities in the internal pay structure
Disadvantages
May generate distrust in the pay system Employees may perceive that there is no relationship between pay and performance
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Variable pay
Performance-linked compensation approach
Broadbanding
Consolidation of pay grades into a few broad bands
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Modern
Variable component added Employees may perceive there is no relationship between pay and performance
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Motivating development
Performancerelated
Consequences
Setting goals
Copyright 2010 by McGraw-Hill Ryerson
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C H A P T E RN E NI
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Compensation Management
Schwind 9th Canadian Edition
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