Compensation and Benefits

Compensation and Benefits

Compensation is the process of providing adequate, equitable and fair remuneration to the employees Benefits are Non-Wage benefits, such as paid vacations, pensions, health and welfare provisions, life insurance, the cost of which is borne in whole or in part by the employer.

Compensation and Benefits

Compensation System Components Equity Issues Equity Theory Pay Systems

Market-Based Pay Job Evaluation Pay Systems

Pay Policy Issues

Compensation Overview
Q1: What are the basic goals of any compensation system?

to attract high quality employees to retain high quality employees to stimulate high performance

Q2: What are the basic components of any compensation system?

base pay (wages) incentives benefits

Compensation Overview
Q3: What are the basic tools of any compensation system?

Wage surveys Job analysis/evaluation Performance appraisal

Q4: Why do wages differ?

Differences by industry Differences by occupation Differences based on individual performance, seniority, etc.

Compensation decisions are influenced by both internal and external factors:

Internal:

financial conditions corporate/managerial philosophy corporate strategy/life cycle

External:

labor market factors

area wages/cost of living collective bargaining agreements government regulations

All organizations face three basic compensation decisions:

A. Pay-Level Decision:

Are we going to lead, meet, or lag the market? Comparison: Employees working on similar jobs in other organizations

B. Pay-Structure Decision:

How do we determine differences in pay for various jobs in our organization? Comparison: Employees working on different jobs within the organization

C. Individual Pay Determination:

How do we determine how much to pay various people in our organization? Comparison: Employees working on the same jobs within the organization