Managing the Compensation System

1
Managing the Compensation System

• Chapter 12

2
Compensation Administration

• The process through which employees earnings are
  calculated and the appropriate remittances are
  forwarded to employees, governments, and other
  agencies

3
Four Steps in Compensation Administration

• Collecting the necessary information
• Performing the calculations
• Preparing and distributing the remittances
• Detecting and correcting errors

4
Compensation Communication

• Focuses on ensuring that all who have a role to
  play in operating the compensation system
  understand their roles
• Focuses on ensuring that all who are subject to
  the compensation system understand it

5
Use of Information Technology

• Job documentation and evaluation
• Labour market data analysis
• Communication
• Information collection
• Pay and remittance calculation
• Record keeping
• Compensation planning and research
• Privacy and legal issues

6
Outsourcing- Advantages

• Cost (e.g. computerized benefits systems)
• Expertise
• Spend more time strategically planning

7
Outsourcing- Disadvantages

• Employer may lose touch with emerging problems
• Working with vendor is time consuming
• Impact on employee morale

8
Preparing for Implementation

• Deciding the administrative details
• Assigning responsibilities planning the
  infrastructure
• Documenting the compensation system
• Developing a training and communications plan
• Budgeting for compensation
• Developing the evaluation plan
• Developing the implementation plan

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Implementing the Compensation System

• Establish the implementation task force
• Put the infrastructure in place
• Test the system
• Conduct the training
• Communicate the system
• Launch adjust the system

10
Evaluating theCompensation System

• Evaluating the impact of the compensation system
• Organizational performance indicators
• Behavioural indicators
• Attitudinal indicators

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Initial Dip

• A tendency for performance to decline during the
  initial stages of any change

12
Compensation Cost Ratio

• The ratio of total compensation costs to total
  costs or to revenues

13
Average Employee Earnings

• Total compensation divided by the number of
  full-time equivalent employees

14
Monitoring Changing Circumstances

• Changes in external circumstances legislative
  and taxes, labour market, competitive
  environment, socioeconomic
• Changes in internal circumstances managerial
  strategy, workforce, financial, scope

15
Spiral Career Paths

• Career advancement marked by a combination of
  sideways and vertical progression

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Adapting theCompensation System

• Identifying what to adapt
• Adapting to financial crises
• Adapting to labour shortages
• Accommodating individual employees

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Technical Premiums

• Compensation measures that increase the
  compensation of technical employees