Compensation

1
Compensation

• All forms of financial return tangible benefits
  that employees receive as part of an employment
  relationship i.e., the total rewards provided
  employees in return for their service

2
Compensation

• is divided into two parts direct or cash
  compensation and indirect or fringe compensation

3
Inputs

• Refer to employee characteristics (e.g.,
  education, experience, certifications), efforts
  (e.g., how long it takes to solve a problem), and
  performance (e.g., end product)

4
Outcomes

• Refer to what employees get out of their jobs
  (e.g., salary, fringe benefits, promotion,
  feelings of accomplishments)

5
Equity Theory

• People assess their performance attitudes by
  comparing both their contributions benefits
  they derive to others who may or may not be
  similar to them. If inequity is perceived, people
  will strive for equality by changing their inputs
  or outcomes.

6
Effective Compensation Systems

• Enable orgs to attract/retain qualified,
  competent workers
• Motivate employee performance, foster feelings of
  equity, provide direction
• Support, communicate reinforce the culture,
  values strategy of orgs
• Reflect orgs ability to pay
• Comply with government regulations

7
Legislation Directly Affects Compensation

• Fair Labor Standards Act of 1938 Equal Pay Act
  of 1963

8
Compensation Considerations

• Organizational cultures structures
• Employee empowerment
• Team approaches
• Labor unions
• Gender equity
• Laws
• Global workplace

9
Structuring Cash Compensation Systems

• How to administer base pay programs internal
  external equity

10
Internal Equity Traditional Job Evaluation
Methods

• Ranking
• Classification
• Point-factor

11
Job Classification

• Use of classes/grades to describe a group of jobs
  (GS-1 through GS-18)
• Descriptions reflect differences between groups
  at various difficulty levels
• Specific job descriptions compared to assigned
  the pre-established class/grade descriptions
• Simple yet ambiguous

12
Point-Factor Comparison Method

• Numerical values assigned to specific job factors
  
• Mental physical requirements, skills,
  responsibilities, working conditions
• Conducted within job family
• Tailored to organization
• Weighted scored factors
• Hay Plan

13
External Equity

• Market pricing
• Benchmark positions
• Salary surveys
• Bias in the marketplace

14
Organizational Pay Structures

• Traditional
• Single rates
• Pay grades/ranges
• Tenure-based
• Merit-based
• Commission

• Trends
• Broadbanding
• Knowledge, skill, competence-based
• Team plans

15
Pay Equity Comparable Worth

• Pay structure strictly based on internal equity
  within job families
• Gender wage gap
• Equal Pay Act (EPA)

16
Earnings Gap(What women of various races earn,
compared with a dollar earned by a white male)
17
Fair Labor Standards Act (FLSA)

• Minimum wage
• Federal
• State
• Overtime pay requirements
• Exempt
• Non-exempt
• Child labor rules
• Employer record-keeping

18
Structuring Indirect Compensation Programs

• Fringe compensation employee benefits

19
Indirect Compensation Fringe Benefits

• Maintain or improve employees quality of life
• Provide a level of protection financial
  security for workers their families
• Attract, retain motivate qualified, competent
  employees
• Tax deductible tax free
• Current trends variety flexibility

20
Fringe Mandated

• Social Security
• Retirement
• Survivor
• Disability
• Health benefits (Medicare)
• Unemployment Insurance
• Workers Compensation Insurance
• Consolidated Omnibus Budget Reconciliation Act
  (COBRA)
• Family Medical Leave Act

21
Fringe Discretionary

• Health care
• Managed care
• PPO
• Personal responsibility clauses
• Paid time off
• Life insurance
• Retirement
• Defined benefits (pension plans)
• Defined contributions (401K)

22
Vacation Days Per Year
23
Current Trends

• Cafeteria plans
• Flexible spending accounts
• Educational assistance
• Wellness programs
• On site child care
• Telecommuting
• Job sharing
• Paid sabbaticals

24
Current Issues

• In compensation

25
International Compensation

• Host country employees v. expatriates
• Laws standards
• Base salary
• Foreign service premium

26
Pay Inequity Executive Compensation

• Average Fortune 500 CEO base salary 10.9
  million
• Gap 431 to 1 (compared to factory worker)
• Top 3 earners
• Richard Fairbanks, Capital One Financial 249.3
  million
• Terry Semel, Yahoo! 231 million
• Henry Silverman, Cendant 140 million

27
CEO Pensions