7) Compensasion (tools and merhods)

Cards (108)

  • Labor costs

    • Gross wages
    • Taxes (e.g. income tax)
    • Social contributions payable by the employee
    • Net earnings (including family allowances)
    • Social contributions payable by the employer
    • Other costs - Taxes on labor, Training and other costs
  • Personal Income Tax 15%, Social Security Tax 18.5%, Social Contribution Tax 13%
  • Total of contributions, taxes 46.5%, Tax Wedge 41.15%
  • Tax Burden – Single individual without children, Tax Burden – Two-earner couples with two children
  • Changes in total and regular gross earnings 571,200 HUF → 393,700 HUF, +14.2‰, -2.9‰ (+17.6‰)
  • Total rewards

    Monetary and nonmonetary rewards provided by companies to attract, motivate, and retain employees
  • Strategic decisions can guide the design of compensation practices

    • Compliance with all applicable laws and regulations
    • Cost-effectiveness for the organization
    • Internal and external equity for employees
    • Optimal mix of compensation components
    • Performance enhancement for the organization
    • Performance recognition and talent management for employees
    • Enhanced recruitment, involvement, and retention of employee
  • Tangible Rewards

    • Elements of compensation that can be quantitatively measured and compared between organizations
  • Intangible Rewards

    • Elements of compensation that cannot be as easily measured or quantified
  • Components of Compensation

    • Base Pay
    • Variable Pay
    • Benefit
  • Creative Awards
    • Golden Banana Award, Spirit of Fred Award, The Lifetime Fred Award, World of Thanks Award
  • Special Corporate Benefits

    • Microsoft - The Commons, Google - open, green areas, sports facilities, Chesapeake Energy - fitness center, frequent bonuses, medical care, Advanced Medical - a moving beer car every Friday, Clif Bar - 12-meter high climbing wall, professional gym, massage parlor, dance hall, personal trainers and nutritionists, higher salary, Asana - own office +$10,000 for furniture, yoga class, lifestyle counseling, personal cook, Zappos - $50 monthly bonus for one colleague, then drawing the "Hero of Zappos"
  • Entitlement philosophy

    Assumes that individuals who have worked another year with the company are entitled to pay increases with little regard for performance differences
  • Pay-for-performance philosophy

    Assumes that compensation decisions reflect performance differences
  • HRM develops and administers the compensation system, HRM ensures pay practices comply with all legal requirements, Line managers evaluate employee performance and participate in pay decisions
  • HRM Metrics for Compensation

    • Employee satisfaction
    • Motivation theories
    • Fairness and equity
    • Market competitive compensation
    • Competency-based pay
    • Individual versus team rewards
    • Global compensation issues
  • Expectancy theory

    Employee's motivation is based on the probability that his or her efforts will lead to an expected level of performance that is linked to a valued reward
  • Equity theory

    Individuals judge fairness (equity) in compensation by comparing their inputs and outcomes against the inputs and outcomes of referent others
  • Compensation Fairness and Equity

    • External Equity
    • Internal Equity
    • Procedural Justice
    • Distributive Justice
    • Pay Secrecy vs. Openness
  • Market Competitive Compensation Strategies

    • Lag-the-Market Strategy
    • Lead-the-Market Strategy
    • Match-the-Market Strategy
  • Competency-based pay

    Rewards individuals for the capabilities they demonstrate and acquire
  • Individual versus Team Rewards

    How to compensate individuals whose performance may be a result of team efforts and achievements, How to develop compensation programs that support the team concept
  • The growing world economy has led to an increase in employees working internationally, Laws, living costs, tax policies, currency fluctuations, local wage scales, and more must be considered, Offshoring - Moving jobs to lower-wage countries, Reshoring - Returning operations to the home country
  • Compensation of International Assignees

    • Home Country–Based Approach
    • Host Country–Based Approach
  • Market pricing

    Uses market pay data to identify the relative value of jobs based on what other employers pay for similar jobs
  • Pay survey
    Collection of data on compensation rates for workers performing similar jobs in other organizations
  • Benchmark jobs

    Jobs that are found in many organizations that can be used for the purposes of comparison
  • Pay survey data relevance and validity depends on participants, methodology, job matches, and timeliness
  • Pay grades
    Groupings of individual jobs that have approximately the same value to the organization
  • Market line

    Graph line that shows the relationship between job value as determined by job evaluation points and job value as determined pay survey rates
  • Market banding
    Grouping jobs into pay grades based on similar market survey amounts
  • Broadbanding
    Practice of using fewer pay grades with much broader ranges than in traditional compensation systems
  • Red-circled employees

    Incumbent who is paid above the range set for the job
  • Green-circled employees

    Incumbent who is paid below the range set for the job
  • Pay compression
    Occurs when the pay differences among individuals with different levels of experience and performance become small
  • Salary Inversion

    When the pay given to new hires is higher than the compensation provided to more senior employees
  • Pay Increases

    • Performance-Based Increases
    • Standardized Pay Adjustments
  • Economic Recessions - Organizations reduce employment-related expenses, use sparingly to reduce dissatisfaction and turnover, Gender Pay Gap - Women have gained ground recently, Gap increases in executive-level positions
  • Incentives
    Tangible rewards that encourage or motivate action
  • Variable pay (pay for performance)

    Compensation that is tied to performance