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Unit 7: Compensation and Benefits Unit Study Questions1.What different approaches can organizations take to compensate workers?-Total rewards– a comprehensive approach to compensating and rewarding employees.-Organizations with this total rewards approach create a value propositionfor current and prospective employees that considers the total value they receive for contributing their time and energy to the company.Because compensation, benefits, and the work experience have a major impact on employee attitudes and behaviours, total rewards influence what kinds of employees are attracted to (and remain with) the organizationSurveys suggest that organizations develop total rewards strategies to align rewards with the business strategy.-Total compensation– all types of financial rewards and tangible benefits and services employees receive as part of their employment.Direct and indirect compensation including base pay, incentives, and benefits received in exchange for the employee’s contribution.-Direct compensation– financial rewards employees receive in exchange for their work-Indirect compensation– the benefits and services employees receive in exchange for their work-An unplanned approach, in which employee’s pay is independently negotiated, will likely result in unfairness,dissatisfaction, and rates that are either overly expensive or so low that positions are hard to fill-Product and labour markets (pg. 211)The organizations under pressure to cut labour costs may respond by reducing staff levels, freezing pay levels, postponing hiring decisions, or requiring employees to bear more of the cost of benefits such as insurance premiums. However, organizations also compete to obtain human resources in labour markets—competing with other firms to hire the same skilled employees.-When organizations have a broad range in which to make decisions about pay, they can choose to pay at, above, or below the rate set by market forces. Economic theory holds that the most profitable level, all things being equal, would be at the market rate. Often, however, all things are not equal from one employer to another. For instance, an organization may gain an advantage by paying above the market rate if it uses the higher pay as one means to attract top talent and then uses these excellent employees’ knowledge to be more innovative, produce higher quality, or work more efficiently (this view is based on the view of employees as resources)-Organizations typically apply the pay structure information by establishing some combination of pay rates, pay grades, and pay ranges.-Hourly wage– rate of pay for each hour worked-Piecework rate– rate of pay for each unit produced-Salary - rate of pay for each week, month, or year worked-If the company’s main concern is to match what people are earning in comparable jobs, the organization can base pay directly on market research into as many of its key jobs as possible. To do this the organization can