Human resrouce management 12th mathis jacson chapter 0012

CHAPTER 12

Total Rewards and Compensation
S E C T I O N 4 Compensating Human Resources

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PowerPoint Presentation by Charlie Cook
The University of West Alabama


Chapter
Chapter Objectives
Objectives
After you have read this chapter, you should be able to:
■ Identify the three general components of total rewards
and examples of each.
■ Discuss four compensation system design issues.
■ List the basic provisions of the Fair Labor Standards Act
(FLSA).
■ Outline the process of building a base pay system.
■ Describe the two means of valuing jobs.
■ Explain two ways individual pay increases are
determined.
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12–2


Nature Of Total Rewards and Compensation
• Total Rewards
 Monetary and non-monetary rewards provided to

employees in order to attract, motivate, and retain
them.

• Rewards System Strategic Objectives:
 Legal compliance with all laws and regulations
 Cost effectiveness for the organization
 Internal, external, and individual equity for employees
 Performance enhancement for the organization
 Performance recognition and talent management for

employees
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Thomson/SouthWestern. All rights reserved.

12–3


Compensation Approaches
Traditional Approach

Total Rewards Approach

• Compensation is primarily base pay

• Variable pay used with base pay

• Bonuses are for executives only

• Annual/long-term incentives provided

to all employees

• Fixed benefits tied to long tenure
• Pay grade progression is based on
organizational promotions
• One organization-wide pay plan for
all employees

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• Flexible and portable benefits offered
• Knowledge-based broadbands
determine pay grades
• Multiple pay plans consider job
family, location, and business units

12–4


FIGURE 12-1

Total Rewards Components

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12–5


FIGURE 12-2

Continuum of Compensation Philosophies

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12–6


FIGURE 12-3

HR Metrics for Compensation

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12–7


FIGURE 12-4

Typical Division of HR Responsibilities: Compensation

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12–8


Compensation System Design Issues
Compensation Fairness
and Equity

External

Equity

Internal Equity
Procedural Justice
Distributive Justice

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Pay Secrecy
vs. Openness

12–9


Compensation System Design Issues (cont’d)

Market Competitiveness
and Compensation

“Meet the
Market” Strategy

“Lag the Market”
Strategy

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“Lead the
Market” Strategy

12–10


FIGURE 12-5

Compensation Quartile Strategies

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12–11


Compensation System Design Issues (cont’d)
Identification of the required
competencies

Progression and compensation
of employees

Limitations on who can acquire
more competencies

CompetencyBased Pay
Systems
KBP/SBP

Training in the appropriate
competencies

Certification and maintenance

of competencies

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12–12


Compensation System Design Issues (cont’d)
Individual vs. Team Rewards

Team

Individual

How to develop
compensation programs
that build on the team
concept.

How to compensate the
individuals whose
performance may also
be evaluated on team
achievements.

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12–13

FIGURE 12-6
Possible
Components of
Global
Employee
Compensation

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12–14


Global Compensation Issues
Compensating Expatriates

Balance-Sheet
Approach

Global Market
Approach

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Tax Equalization
Plan

12–15


Legal Constraints On Pay Systems

Fair Labor
Standards Act
(FSLA)

Minimum
Wage

Child
Labor
Provisions

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Exempt and
Non-Exempt
Statuses

Overtime
Pay

12–16


Categories of Exempt Employees
Executive

Administrative

Exempt
Employees

Outside Sales

Professional

Computer
Employees

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12–17


FIGURE 12-7

Determining Exempt Status Under the FLSA

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12–18


Compensation for Overtime Work
Common
Overtime
Issues

Compensatory
Time Off

Incentives for
Non-exempts

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Training
Time

Travel
Time

12–19


Independent Contractor Regulations
Identifying Criteria for
Independent Contractors

Behavioral
Control

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Financial
Control

RelationshipType Factors

12–20

Acts and Legislation Affecting
Compensation
Compensation
and the Law

Davis-Bacon Act
Walsh-Healy Act
McNamara-O’Hara
Act

Equal Pay Act
of 1963 and
Pay Equity

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State and
Local Laws

Garnishment
Laws

12–21


FIGURE 12-8
Compensation
Administration
Process

Pay Structure



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Pay grades
Pay ranges

12–22


Valuing Jobs with Job Evaluation Methods
• Job Evaluation
 The formal systematic means used to identify the

relative worth of jobs within an organization.

• Compensable Factor
 A job value commonly present throughout a group of

jobs.
 Something for which an organization will compensate
an employee.

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12–23

FIGURE 12-9

Examples of Compensable Factors for Different Job Families

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12–24


Job Evaluation Methods

Job Evaluation
Methods

Point
Method

Ranking
Method

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Classification
Method

FactorComparison
Method

12–25