wage & salary and reward administration

7/31/2019 Wage & Salary and Reward Administration

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Human ResourceManagement

Wage, Salary and RewardAdministration


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Chapter Content:

We will cover the following:

Remuneration & its Components

Compensation Administration Process

Wage & salary Administration

Different types of reward

Different types of Incentives and Incentives

Plan

International Compensation.


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Remuneration & Its Components

Hourlyand

monthly

RatedWagesand

Salaries

Direct Indirect

Remuneration

Financial Non Financial

Incentives

Individual

Plans

GroupPlans

FringeBenefits

P.F,Gratuity,Medical

Care,Accident

Relief,Health and

Group

insurance

Perquisites

CompanyCar, Club

Membership,

PaidHolidays,Furnished

House, Stockoption

scheme, etc

Job Content

Challenging job,Responsibilities,

Recognition,

Growthprospects,

Supervision,Working

conditions, Jobsharing, etc.

Definition: Remuneration' is a general term covering the

monetary and related entitlements of employees - paid by

employers in return for the work of employees.Components:


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Compensation Administration Process


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Job Analysis

It contains two parts: Job Description & Job

Specification. This can help to know about

the duties and responsibilities will be

covered by the specific job and also thequality of the people engaged in that job.

This is necessary to set a rationale pay

structure for a specific position.


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Job Evaluation

FactorComparison

Ranking Classification

Point

Method

JobEvaluationMethods

Job Evaluation: The systematic determination of the

relative worth of jobs within an organization.

Methods of Job Evaluation


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Quantitative Job Evaluation Methods

Factor Comparison Job Evaluation Method

Step 1. Obtain job information

Step 2. Select key benchmark jobs

Step 3. Rank key jobs by factor

Step 4. Distribute wage rates by factors

Step 5. Rank key jobs according to wages

assigned to each factor

Step 6. Compare the two sets of rankings toscreen out unusable key jobs

Step 7. Construct the job-comparison scale

Step 8. Use the job-comparison scale


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The Point Method of Job Evaluation

Step 1. Determine clusters of jobs to be

evaluated

Step 2. Collect job information Step 3. Select compensable factors

Step 4. Define compensable factors

Step 5. Define factor degrees

Step 6. Determine relative values of factors


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Job Evaluation Methods: Ranking

Ranking each job relative to all other jobs,

usually based on some overall factor.

Steps in job ranking:Obtain job information.

Select and group jobs.

Select compensable factors.Rank jobs.

Combine ratings.


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Job Evaluation Methods: Job Classification

Raters categorize jobs into groups or classesof jobs that are of roughly the same value

for pay purposes.

Classes contain similar jobs.Grades are jobs that are similar in difficulty but

otherwise different.

Jobs are classed by the amount or level ofcompensable factors they contain.


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Developing Pay Surveys

Select Employers with Comparable Jobs

Determine Jobs to be Surveyed

Decide What Information Is Needed

Conduct Survey


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Pay StructuresCommon Pay Structures

Hourly and salaried

Office, plant, technical, professional, managerial

Clerical, information technology, professional,supervisory, management, and executive

Factors that affect Remuneration/Pay Structure:

External:

Labor market Cost of Living

Society

The economy

Geographic LocationInternal Factor:

Business Strategy

Job Evaluation & Performance Appraisal

The employee

Kind of business


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Establishing

Pay Structures


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Wage & Salary

Wages: Wages are compensation. This includes

basic wages, allowances, bonuses etc. On theemployers points of view, wages form that part ofcost of production which is attributed ascompensation paid to labor. Wages are paid in theform of time rate or piece rate to the workers, who

are directly involved in the production orcommercial activities.

Salary: This is compensation paid to the indirect

labor in the form of cash. Indirect labor involvessupervisors, managers and supporting staff likeoffice assistants, clerks, etc. Salaries are paid inthe form of time rate, mostly on monthly basis.


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Wage & Salary On the basis of the employee needs and ability of the

organization, there are various kinds of wages. Wages are

generally four types: Subsistence wages

Minimum Wages

Fair Wages

Living Wages

Subsistence wages: This is level of wage bellows theminimum level which can lead inhuman life to theemployees.

Minimum Wages: This is a wage level fixed bygovernment which is considered adequate, taking intoaccount the cost of living. All the organizations are boundto follow this direction so that no employee is paid a wageless than the minimum wage fixed by governmentirrespective of grade, class or nature of work.


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Wage & Salary

Fair Wages: This is fixed by employer. This level

of wage varies from industry to industry. Themain criteria are the capacity of payment. Fairwage is a wage above the minimum wage butbelow the living wage.

Living Wages: Living wage is one which shouldenable the earner to provide for himself and hisfamily not only the bare essentials of food,clothing and shelter, but a measure of frugalcomfort, including education for his children,protection against ill health, requirement ofessential social needs and a measure of insuranceagainst the more important misfortune including

old age.


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Reward

People do what they do to satisfy someneed and they look for a payoff or reward.

The most obvious reward is pay, but there

are many others, including: promotions

desirable work assignments

peer recognition work freedom

Types of Reward


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Types of Reward


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Types of Reward

Intrinsic versusExtrinsic Rewards Intrinsic rewards (personal satisfactions) come

from the job itself, such as: pride in ones work

feelings of accomplishment being part of a work team

Extrinsic rewards come from a source outside thejob

include rewards offered mainly by management Money

Promotions

Benefits


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Types of Reward

FinancialversusNon-financialRewards

Financialrewards include: wages

bonuses profit sharing

pension plans

paid leaves

purchase discounts Non-financialrewards emphasize making life on

the job more attractive; employees vary greatly onwhat types they find desirable.


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Types of Reward

Performance-basedversusMembership-BasedRewards

Performance-basedrewards are tied to specific

job performance criteria. commissions piecework pay plans

incentive systems

group bonuses merit pay

Membership-basedrewards such as cost-of-livingincreases, benefits, and salary increases are

offered to all employees.

I i C i


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Incentive Compensation

Incentives can be added to the basic pay structure toprovide rewards for performance. It may be 3types:1. Individual Incentives

2. Group Incentives

3. Plant-wide Incentives

Individual Incentives include merit pay plans (annual increase, based on

performance)

piecework plans (pay based on number of unitsproduced typically in a specified time period.)

time-savings bonuses and commissions

Work best where clear objectives can be set and tasks

are independent.


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Incentive Compensation

Incentive Compensation Plans:

Group Incentives Incentives can be offered to groups, rather than

individuals, when employees' tasks are interdependentand require cooperation.

Plant-wide Incentives: Direct employee effortstoward organizational goals (such as cost

reduction) Scanlon Plan - supervisor and employee committeessuggest labor-saving improvements

IMPROSHARE - formula is used to determine bonusesbased on labor cost savings


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Different types of Incentive Plan

Incentive Plan /Incentives Payments

There are following three types of incentive plans:

The Rowan plan

Taylors Differential Piece Rate Plan Emersons Efficiency Plan

Halsey System

Bedeaux system

Taylors Differential Piece Rate System

Merrick Differential Piece Rate System

Gantt Task Method


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Rowan Plan

In Rowan Plan, bonus paid to the employee is

equal to the proportion of time saved to thestandard time. Under the Rowan plan, standard

time and rate per hour are fixed. If the time taken

to complete the job in equal to or exceeds the

standard time, the employee is paid for the time

taken at the rate per hour. If the time taken is less

than the standard time, the employee is entitled to

bonus, in addition to the time wages. The bonustakes the form of a percentage of workers time-

rate. This percentage is equal to the proportion of

the saved time, to the standard time.


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Example of Rowan Plan

Standard time = 10 hrs

Rate per hour = Tk.1 Case-1

Time Taken = 10 hrs

Earnings = 10X1= Tk. 10.00

Case-2

Time Taken = 12 hrs Earnings = 12X1= Tk. 12.00

Case-1

Time Taken = 8 hrs

Earnings = 8X1= Tk. 8.00 Bonus =2/10x8=Tk. 1.60

Tk. 9.60

H l Pl


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Halsey Plan

In this method bonus paid to a worker is equal to 50% oftime saved multiplied by rate per hour. a standard time is

fixed on the basis of previous performance for thecompletion of a job. When the work is completed in lessthan the standard time, for the time actually spent on the

job, he is paid at an hourly rate on a percentage (50%) ofthe time saved by him.

Standard Time = 10 Hrs; Rate per hour = Tk. 1

Case-1: Time taken = 10 hrs

Earnings = 10*1= Tk 10

Case-2: Time taken = 12 hrs

Earnings = 12*1=Tk 12

Case-3: Time taken = 8 hrs Earnings:

Time wages = 8*1 = Tk 8.00

Bonus = *2*1 = Tk 1.00

Tk 9.00


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Taylors differentiate piece rate system

An efficient (output exceeds standard) worker is

paid 120% of the piece rate and an inefficient

(output bellow standard) worker is paid only 80%

of the piece rate. Example: Standard output: 100 units, Standard

Rate: Tk 1.

Earnings at 120 units output=120*120/100*1=144

Earnings at 90 units output = 90*80/100*1=72


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Emersions Plan

In this method upto 67% of efficiency, only time rate is

paid to the worker. Beyond this, a graduated bonus of 20%at 100% efficiency is paid. Thereafter, an additional bonusof 1%, for each additional bonus of 1% for each additional1% efficiency is added

Example: Standard output is 100 units in 10 hrs and rate

per hour = Tk 1 Earnings at 50 units in 10 hrs= 10*1=Tk 10 [as the

efficiency is


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Executive Compensation Components


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Executive Compensation

ProgramsSalaries of Top Managers

Executive salaries, bonuses and stock

options may seem high.

Top twenty CEOs average more than $100million in total compensation.

Competition for executive talent raises the

price of hiring an executive. High salaries can be a motivator for

executives and lower-level managers


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Executive Compensation

ProgramsSupplemental Financial Compensation

Deferred bonusespaid to executives over

extended time periods, to encourage them to

stay with the company. Stock optionsallow executives to purchase

stock in the future at a fixed price.

Hiring bonusescompensate for the deferredcompensation lost when leaving a former

company.


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Executive Compensation Programs

Supplemental Non-financial Compensation:

Perquisites

Perks may include the following:

Golden parachutes protect executives when a

merger or hostile takeover occurs by providing

severance pay or a guaranteed position


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International Compensation

International compensation packagesgenerally consider the following fourfactors: Base Pay: The pay of employees in

comparable jobs at home. Differentials: Compensation given to offset

higher costs of living abroad.

Incentives: Inducements given to encourage

employees to accept overseas assignments. Assistance Programs: Payment for expenses

involved in moving a family abroad and inproviding some services overseas.

wage & salary and reward administration

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