Human Resource Management

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Human Resource Management

• Lecture-28

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Job Pricing
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(No Transcript)
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Developing a Base Pay System
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Job Analysis
Pay Surveys
Job Evaluation
Pay Policies
Pay Structure
Performance Appraisal
Individual Pay
Implementation, Communication, Monitoring
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Compensation system

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• Pay is a statement of an employees worth by an
  employer.
• Pay is a perception of worth by an employee.

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HR Management Strategy Model
HR Strategy
Desired Results
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Employee Compensation
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• Employee compensation refers to all forms of pay
  or rewards going to employees and arising from
  their employment.
• It consists of 2 parts
• Direct financial payments
• Indirect financial payments

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Direct or Indirect compensation is given based on
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• Increments of time
• Hourly
• Salaried
• Performance
• Piecework
• Commission

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• Piecework - Pay is tied directly to what the
  worker produces

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Wages versus Salaries
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• Wages
• generally refer to hourlycompensation paid to
  operating employees the basis for wages is
  time.

• Salary
• is income that is paid an individual not on the
  basis of time, but on the basis of performance.

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Total Compensation
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Compensation of Employees
Extrinsic Rewards
Hourly Wages Salary Monetary Bonuses Rewards
Commissions Pay Incentives
Insurance Retirement Paid
Vacations Benefits Food Services Credit
Union Recreation
Recognition Intrinsic Promotion
Opportunities Rewards Working
Conditions Interesting Work
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Consequences of Pay Dissatisfaction
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Performance
Desire for more Pay
Absenteeism
Strikes
Grievances
Turnover
Search for job
Psychological Withdrawal
Pay Dissatisfaction
Lower Attractiveness of job
Job Dissatisfaction
Dispensary Visits
Poor Mental Health
Absenteeism
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Compensation System

• A total reward system includes both monetary and
  nonmonetary compensation.

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Phases of Compensation Management
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• Phase-1. Evaluate every job to ensure internal
  equity based on each jobs relative worth.
• Phase-2. Conduct wage and salary surveys to find
  the rates paid in the labour market.
• Phase-3. Price each job to determine the rate of
  pay based.

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Objectives of Effective Compensation Management
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• The Big Three
• Attract qualified employment applicants
• Retain qualified employees, while discouraging
  retention of low performing
• Motivate employee behavior toward organization
  objectives

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• Ensure Equity
• Reward Desired Behavior
• Control Costs
• Comply With Legal Regulations
• Facilitate Understanding

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• Achieve external competitiveness
• Support organization priorities
• Strategy and goals
• Culture and values
• Easy to administer

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Steps for Establishing Pay Rates
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• Conduct a salary survey of what other employers
  are paying for comparable jobs
• Employee committee determines the worth of each
  job in your organization through job evaluation

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• Group similar jobs into pay grades
• Price each pay grade by using wage curves
• Fine-tune pay rates

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Pay Grade Structure for Job-Based System
Corporate Policy Line
Rs 50,000
Maximums
Monthly Pay
Rs 30,000
Pay Grade Width
Midpoint
Rs 10,000
250 350 450 550
650 Job Evaluation
Points
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What Determines How Much You Pay?
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• Prevailing Wages
• Ability to Pay
• Cost of Living
• Productivity
• Bargaining Power
• Job Requirements
• Government Laws

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• Equity factors

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Equity Perceptions
Other
Self
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Equity Theory

• Description
• Pay should be based upon contributions made by
  the Employees. Higher effort should be rewarded
  with higher pay.
• Application to Compensation
• Pay should be tied to the performance level of
  individual Employee

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Equity Theory Predictions
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Person B
Person A
Under-reward
Outputs Inputs
lt
Outputs Inputs
Outputs Inputs

Outputs Inputs
Equity
Outputs Inputs
Outputs Inputs
Over-reward
gt
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Balancing Internal and External Equity
Pay Equity
Pay Compression

• Pay
• Differentials
• Market

Internal
External
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Pay above Market Rate
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• Advantages
• Attracts better employees
• Minimizes voluntary turnover
• Fosters strong culture and competitive
  superiority
• Disadvantages
• Additional compensation costs
• Sense of entitlement

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Pay at MarketRate
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• Advantages
• Higher quality of human resources at midrange of
  market-driven compensation costs
• Disadvantages
• Does not attract higher performers
• Turnover will vary with labor demands of
  competing firms

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Pay below Market Rate
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• Advantages
• Lower compensation costs
• Useful in labor markets where unemployment is
  high
• Disadvantages
• Lower-quality employees
• Low morale/job satisfaction
• Higher turnover especially among high performers

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Conditions Necessary for Perceptions of Pay
Fairness

• Internal consistency
• External competitiveness
• Employee contributions

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Line Managers and Compensation
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• Evaluate the worth of jobs.
• Negotiate starting salaries.
• Recommend pay raises and promotions.
• Notify HRM department of job changes.

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The HRM Department and Compensation
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• Establish rates of pay.
• Oversee job evaluation process.
• Conduct salary surveys.

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• Establish procedures for administering pay plans.
• Ensure compliance with antidiscrimination laws.
• Communicate benefits information .