Compensation and Rewards

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Compensation and Rewards

• Business 158
• Spring Semester 2007
• Tim Brown

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Agenda

• Introduction of the students/instructor
• Overview of the course green sheet
• What is Compensation?
• Break
• Pay forms and categories
• Pay perspectives and influencers

3
Econ 101 in a nutshell

• What gives things value?
• Scarcity!
• Example.Alaska Airlines commercial
• Pay works in the same way
• Skills and labor supply drive the market
• Examples star athletes, celebrities

4
What is compensation?

• All forms of financial returns
• and tangible services
• and benefits
• employees receive
• as part of an employment relationship.

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Typical forms of compensation

• Fixed cash
• Salary
• Cash allowances
• Special payments
• Short-term incentives
• Profit Sharing
• Formal Bonus
• Discretionary

• Long-term incentives
• Multi-year cash
• Equity stock options
• Equity restricted stock
• Non-cash
• Statutory programs
• Benefits
• Perquisites

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How are rewards delivered?

• Direct
• Indirect
• Relational

• Intentional
• Unintentional
• Perceptions

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Forms of compensation

• Direct Pay Forms
• Cash Compensation Base
• Cash Compensation Merit Pay
  Cost-of-Living Adjustments
• Cash Compensation Incentives
• Long-Term Incentives

• Indirect Pay Forms
• Benefits Income Protection
• Benefits Work/Life Focus
• Benefits Allowances

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Returns from work
Recognition Status
EmploymentSecurity
LearningOpportunities
ChallengingWork
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Key questions and issues

• How do differing perspectives affect our views of
  compensation?
• What can a pay system do for an organization? For
  an employee?
• How does the pay model help organize ones
  thinking about compensation?
• Do pay systems look forward, backward, or only at
  today?

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The importance of a plan

• Mission, Vision, Values
• Operational intent/structure
• Design of the institution
• ORGANIZATION
• SELECTION
• DEVELOPMENT
• MAINTENANCE
• EVALUATION
• REWARDS

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Total returns from work
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Compensation perspectives
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Internal and external influencers
LAWS AND REGULATION
ECONOMICS
development
organization
VALUES
REWARDS
rewards
development
selection
evaluation
maintenance
COMPETITION
TECHNOLOGY
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Company objectives

• Balance interests of stakeholders
• Meet financial objectives
• Upload fiduciary and legal responsibilities

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Pay systems policy areas

• Internal alignment
• Focus - Comparisons among jobs or skill levels
  inside a single organization
• External competitiveness
• Focus - Compensation relationships external to
  the organization comparison with competitors
• Employee contributions
• Focus - Relation emphasis placed on employee
  performance
• Management
• Focus - Policies related to managing the pay
  system

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Compensation objectives
Efficiency
Fairness
Compliance
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Strategic considerations

• Philosophies
• Entitlement orientation
• Performance orientation
• Design options
• Culture
• Market

• Decisions
• Competency-based pay
• Broadband
• Incentive mix
• Team-based

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Key objectives in reward systems

• ATTRACT
• RETAIN
• MOTIVATE

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An implicit employment contract
How have they changed?
An unwritten understanding between employers and
employees over their reciprocal obligations and
returns employees contribute toward achieving
the goals of the employer in exchange for returns
given by the employer and valued by the employee.
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Types of employment relationships
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Whats next

• For Next Session
• Read Chapters 2 and 3
• Lecture/Discussions
• Strategic Perspectives
• Internal Objectives
• Coming Up
• Quiz in two weeks