File Name: reward and compensation strategies .zip
- Compensation and Reward Management
- What Are the Components of a Comprehensive Total Rewards & Motivation System?
- Performance & Reward Management
- Total reward strategies in employee motivation
Compensation and Reward Management
As you sit down to review the compensation package your company offers, one thing that stands out is that your compensation package no longer matches the core values of your organization. When your organization merged five years ago with a similar firm that specializes in online shoe retailing, your company had to hire hundreds of people to keep up with growth. As a result—and what happens with many companies—the compensation plans are not revised and revisited as they should be.
The core values your company adopted from the merging company focused on customer service, freedom to work where employees felt they could be most productive, and continuing education of employees, whether or not the education was related to the organization. The compensation package, providing the basic salary, health benefits, and k plans, seems a bit old-fashioned for the type of company yours has become. For example, you are considering implementing a team bonus program for high customer service ratings and coverage for alternative forms of medicine, such as acupuncture and massage.
Instead of guessing what employees would like to see in their compensation packages, you decide to develop a compensation survey to assess what benefits are most important to your employees. So far, we have discussed the process for strategic plan development and the recruitment and selection process. The next aspect of HRM is to develop compensation plans that will help in the recruitment and retention of employees.
This is the topic of this chapter. Most of us, no matter how much we like our jobs, would not do them without a compensation package. When we think of compensation, often we think of only our paycheck, but compensation in terms of HRM is much broader.
A compensation package Includes all aspects of how employees are rewarded for their work, such as pay, benefits, bonuses, and k plans. Before we discuss specifics, you should be aware of courses and certifications that can be earned through the WorldatWork Society of Certified Professionals, specifically related to compensation other certifications will be discussed in their respective chapters. WorldatWork offers several certifications in the area of compensation:. These certifications involve taking a multiple-choice exam online or at one of the WorldatWork testing locations.
The exams test for knowledge, experience, and skills in each of the compensation certification areas and can be a valuable asset to you when applying for HR positions. The certifications are based on many of the aspects of this chapter, including understanding the goals of compensation packages for employees, which is our focus for this section.
First, the compensation package should be positive enough to attract the best people for the job. An organization that does not pay as well as others within the same industry will likely not be able to attract the best candidates, resulting in a poorer overall company performance. Once the best employees and talent come to work for your organization, you want the compensation to be competitive enough to motivate people to stay with your organization. Although we know that compensation packages are not the only thing that motivates people, compensation is a key component.
We discuss other motivations in Chapter 10 "Managing Employee Performance". Third, compensation can be used to improve morale, motivation, and satisfaction among employees. If employees are not satisfied, this can result not only in higher turnover but also in poor quality of work for those employees who do stay.
A proper compensation plan can also increase loyalty in the organization. Pay systems can also be used to reward individual or team performance and encourage employees to work at their own peak performance.
In fact, in the list of the Best Companies to Work For by Fortune magazine, all the companies who topped the list SAS and Boston Consulting Group, for example had satisfied employees—not only with their pay, but their entire benefits package.
With an appropriate pay system, companies find that customer service is better because employees are happier. In addition, having fairly compensated, motivated employees not only adds to the bottom line of the organization but also facilitates organizational growth and expansion. So far, our focus on HRM has been a strategic focus, and the same should be true for development of compensation packages.
For example, in , the US military spent 22 percent of its budget on personnel salaries. One-fifth of the total budget—or more—is not uncommon for most US organizations, depending on the industry. As a result, it is easy to see why the compensation plan should be an important aspect of the overall HRM strategic plan.
The next few sections will detail the aspects of creating the right compensation packages: for your organization, including legal considerations. If you have had or currently have a job, do you feel the compensation plan motivated you?
Why or why not? There are a few basic aspects of compensation packages we should discuss before moving into the specific aspects of compensation. These foundations can assist in the development of a compensation strategy that meets the goals of your organization and is in line with your strategic plan.
Before development of your compensation philosophies, there are some basic questions to address on your current compensation packages. Some possible compensation policies might include the following:. One major internal factor is the compensation strategy the company has decided to use. Sixty-two percent of organizations have a written, documented compensation policy. Some organizations choose a market compensation policy, market plus, or market minus philosophy.
A market compensation policy A compensation policy that pays similar to what the market offers. The organization that uses a market plus philosophy will determine the going rate and add a percentage to that rate, such as 5 percent. In order to fulfill its mission, the University of Arizona shall maintain a compensation program directed toward attracting, retaining, and rewarding a qualified and diverse workforce.
Within the boundaries of financial feasibility, employee compensation shall be externally competitive and internally equitable, and shall be based upon performance as recognized within the work unit. An example of an organization with a market plus philosophy A compensation policy that determines the going rate and adds a percentage to the market rate, so pay is higher than the market.
The pay at Cisco reflects its compensation philosophy and objectives:. Cisco operates in the extremely competitive and rapidly changing high-technology industry. The Board's Compensation Committee believes that the compensation programs for the executive officers should be designed to attract, motivate, and retain talented executives responsible for the success of Cisco and should be determined within a framework based on the achievement of designated financial targets, individual contribution, customer satisfaction, and financial performance relative to that of Cisco's competitors.
Within this overall philosophy, the Compensation Committee's objectives are to do the following:. An example of an organization with a market minus philosophy A compensation policy that determines the going rate and subtracts a particular percentage, so pay is less than the market.
When a workplace is perceived as unfair and greedy, it begins to destroy the social fabric of the organization. Another example of an organization with a market minus philosophy is Southwest Airlines. Despite the lower pay and more hours , the organization boasts just a 1. There are many reasons why an organization would choose one philosophy over another.
In addition, the presence of a union can lead to mandated pay scales. Unions are discussed in Chapter 12 "Working with Labor Unions". External pay factors can include the current economic state. For example, in June , the US unemployment rate was 9.
As a result of surplus workers, compensation may be reduced within organizations because of oversupply of workers. Inflation and cost of living in a given area can also determine compensation in a given market.
Once an organization has looked at the internal and external forces affecting pay, it can begin to develop a pay system within the organization. We discuss how to develop a pay system in Section 6. Once you have determined your compensation strategy based on internal and external factors, you will need to evaluate jobs, develop a pay system, and consider pay theories when making decisions.
Next, you will determine the mix of pay you will use, taking into consideration legal implications. Figure 6. As mentioned when we discussed internal and external factors, the value of the job is a major factor when determining pay. There are several ways to determine the value of a job through job evaluation. Job evaluation The process of determining the relative worth of jobs to determine pay structure. Job evaluation can help us determine if pay is equitable and fair among our employees.
There are several ways to perform a job evaluation. One of the simplest methods, used by smaller companies or within individual departments, is a job ranking system. In this type of evaluation, job titles are listed and ranked in order of importance to the organization. A paired comparison Individual jobs are compared with every other job, based on a ranking system, and an overall score is given for each job, determining the highest valued job for pay decisions.
For example, in Table 6. Zero indicates the job is less important than the one being compared, 1 means the job is about the same, and 2 means the job is more important. When the scores are added up, it is a quick way to see which jobs are of more importance to the organization. Of course, any person creating these rankings should be familiar with the duties of all the jobs. Table 6. In a job classification system A job evaluation system in which every job is classified and grouped based on the knowledge and skills required for the job, years of experience, and amount of authority for a particular job.
The US military is perhaps the best known for this type of classification system. The navy, for example, has job classification codes, such as HM hospitalman. Then the jobs are divided into specialties, such as HM, the classification for surgical technologist, and HM for a hospitalman-X-ray technician.
The federal government and most state governments use this type of system. Tied to each job are the basic function, characteristics, and typical work of that job classification, along with pay range data. A sample of a job classification system is shown in Table 6. Another type of job evaluation system is the point-factor system A job evaluation system that determines the value of a job by calculating the total points assigned to compensable factors.
The points given to a specific job are called compensable factors The aspects of a job that are assigned points in a point-factor system. These can range from leadership ability to specific responsibilities and skills required for the job. Once the compensable factors are determined, each is given a weight compared to the importance of this skill or ability to the organization. When this system is applied to every job in the organization, expected compensable factors for each job are listed, along with corresponding points to determine which jobs have the most relative importance within the organization.
Tompkins County in New York uses a point-factor system. Some of their compensable factors include the following:. In this point-factor system, autonomy ranks the highest and is given a weight of twenty-nine, while knowledge is given a rate of twenty, for example. Each of the compensable factors has a narrative that explains how points should be distributed for each factor. The points are then multiplied by the weight for knowledge, the weight is twenty to give a final score on that compensable factor.
What Are the Components of a Comprehensive Total Rewards & Motivation System?
Your small business needs the best talent available to succeed. To attract and keep talented individuals, you must think of compensation in a holistic way that includes several forms of compensation as well as other attractive features you can offer to make the workplace desirable. Develop the habit of speaking about your total rewards system when interviewing prospective employees, and you will attract and retain the best. The right rewards system is a blend of monetary and non-monetary rewards offered to employees. It can generate valuable business results in terms of increasing productivity and loyalty, and has hiring advantages too since a good rewards programs should make your organization stand out from other employers, reports the Society for Human Resource Management.
Compensation management, also known as wage and salary administration, remuneration management, or reward management, is concerned with designing and implementing total compensation package. Compensation is what employees receive in exchange for their work. It is a particular kind of price, that is, the price of labor. Like any other price, remuneration is set at the point where the demand curve for labor crosses the supply curve of labor. Compensation is referred to as money and other benefits received by an employee for providing services to his employer.
employee of the company, or as a reward for a job well done. Compensation can be all The strategic policies that form the foundation of the compensation system, Expectations Manual (PDF) and the Crown Agency Accountability System.
Performance & Reward Management
This trend of implementing new rewarding strategies connects with another very striking fact: work recognition is one of the top five drivers of candidate attraction in the UK Armstrong, This essay critically examines the concept of total reward as a way to motivate employees and the benefits and challenges for them and their employers with both financial and non financial rewards, backed up with different company examples and up-to-date facts and figures that contribute to answering the topic question on a deeper level. This section of the paper will delve into the theoretical concept of total reward, making reference to different authors and associations. More specifically, basic work remunerations and other financial benefits for instance, paid time off or retirement are some of the matters covered by total reward, as well as non-financial benefits such as personal and professional growth opportunities, training, involvement in decision-making, work of value and inspirational environment and organisational culture SHRM Foundation, , p.
What's the secret sauce of top business performance? Clearly, it's not just having a brilliant business strategy. It's also the successful execution of the strategy that counts.
As you sit down to review the compensation package your company offers, one thing that stands out is that your compensation package no longer matches the core values of your organization. When your organization merged five years ago with a similar firm that specializes in online shoe retailing, your company had to hire hundreds of people to keep up with growth.
Total reward strategies in employee motivation
We develop Performance Management and Reward Systems customized to the specific needs of each organization. We develop Performance Management Systems tailored to the specific needs of each organization and Reward Systems that enhance employee performance, motivation and retention, creating a contemporary and complete performance and reward framework. To this end, KPMG in Greece assists companies define their strategy on performance and reward management. Request for proposal. We can help with your HR needs in the most effective way for your organization Please note that your account has not been verified - unverified account will be deleted 48 hours after initial registration. Click anywhere on the bar, to resend verification email.
The compensation and rewards as received by employee is proportional to the effort exerted by them. Besides, several other internal and external factors determine the financial as well as non-financial compensation for them. W ithin compensation and reward scenario there are few levels denotes the role and status of employees. Basically, these levels are based on the parameters of skill, knowledge, capabilities and qualifications of human resources. Within present HR scenario, different organisations are much devoting their personnel efforts to manage and maintain their compensation and reward system. Objectives of Compensation and Reward Management 2. Classification of Compensation and Reward Management 3.
Reward management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization. Reward management consists of analysing and controlling employee remuneration , compensation and all of the other benefits for the employees. Reward management aims to create and efficiently operate a reward structure for an organisation. Reward structure usually consists of pay policy and practices, salary and payroll administration, total reward, minimum wage, executive pay and team reward. Reward management is a popular management topic.
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