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Unformatted text preview: Employee Compensation II
COMM392: Managing Employment Relationship 103/104 Fall 2009 Yoshio Yanadori Midterm Exam Midterm exam on October 21, 6:308:00pm Wood 2 (http://www.students.ubc.ca/facultystaff/buildings.cfm?code=WOOD)) http://www.students.ubc.ca/facultystaff/buildings.cfm?code=WOOD Chapters 1 (Introduction) 7 (Compensation) [Benefits NOT included] Textbook Chapter 1: pp. 128 Chapter 2: pp. 3346 Chapter 3: pp. 4768 Chapter 4: pp. 7592, excludes pp. 93103 Chapter 5: pp. 107138 (not 134), excludes pp.139144 Chapter 6: pp. 162195 Chapter 7 pp. 202232 SRP A, B, C, D, E, F, and I My PPT slides On WebCT Vista Announcement Format (tentative) 15 multiple choice questions (2 points each, 30 points total) 5 short answer questions (8 points each, 40 points total) choose from 8 questions 1 case study (4 question? 30 points total) Sample exam and review questions on WebCT Review on October 20 (in class) bring review questions (on WebCT Vista) No class on October 22 Objectives Review Understand key steps involved in designing compensation systems Describe the fundamental pay programs for recognizing employees' contributions to the organization' success (i.e., payforperformance plans) Establishing Pay Rates (page 206)
Develop internal structure Ensure internal equity
1. Price jobs Ensure external equity
1. 2. 3. Job evaluation 2. Group similar jobs into pay grades Determine compensable factors (what to value) Assess value Point method Ranking method Classification Conduct a salary survey Price each pay grade Finetune pay rates Job Evaluation Example Bookstore manager Check one x Administrative Technical Degree x X Weight 20% 20% 15% 15% 10% 10% 5% 5% = = = = = = = = = Total Subtotal 80 60 30 60 40 30 5 5 310 Job: Compensable Factors Skill (40%) Mental Experience Effort (30%) Physical Mental Responsibility (20%) Effect of error Inventiveness/ Innovation Working Conditions (10%) Environment Hazards x x x x x x x Internal Equity External Equity
HR Manager II (425575pts) HR Manager I (315425pts)
HR Specialist III (225315pts) HR Specialist II (175225pts) HR Specialist I (125175pts) Market pay 150000 level y = 161.85x + 15767 HR Mgr II (500) 100000 50000 HR I HR I (150) (150) HR II (200) HR III (270)
200 300 HR Mgr I (370) (Pay) Wage Curve Range HR Mgr II HR Mgr I HR III HR II 0 0 100 400 500 600 Job evaluation point Market Pay
HR Specialist I $48K HR Specialist II $50K HR Specialist III $52K HR Manager I $75K HR Manager II $102K HR I (Grade) Compensation All forms of financial returns and tangible services and benefits employees receive as a part of employment relationship
Employee Compensation Cash Compensation
Longterm Incentives Shortterm Incentives Employee benefits Base/wage Merit/Cost of Living Income Protection (insurances, Allowances pensions) Work/Life Balance PayforPerformance Pay that varies with some measure of individual or organizational performance Specific plans include: Merit pay Individual incentives Profit sharing Gainsharing Ownership * Skillbased pay and competencybased pay are also payfor performance plans PayforPerformance Plans Payment method
Change in base pay Bonus Bonus Bonus Equity changes Typical frequency of payment
Annually Weekly Semianually or annually Monthly or quarterly When stock sold Performance measures
Supervisors' appraisal of individual performance Individual output, productivity, sales Company profit Production or controllable costs of work unit Company stock returns Merit pay Individual incentives Profit sharing Gainsharing Stock ownership Merit Pay Annual pay increases linked to performance appraisals
Performance Evaluation Superior Commendable Competent Needs improvement Unsatisfactory Annual salary increase 10% 7% 4% 2% 0% Requires welldeveloped performance appraisal system Merit increases are rolled into base pay Will pay better performers more over time Merit Pay (Actual Practice) st nd rd th Superior Commendable 5% 6% 7% 8% Competent... 4Q
Range 6% 7% 8% 9% 3Q 2Q 1Q Individual Incentives Reward individual performance (sales commission, piecework) Differ from merit pay: Not rolled into base pay Performance typically measured as physical output Advantages Clear performancereward connection Sorting effects: Productive workers stay while unproductive workers leave/productive workers are more likely to apply for the firm Potential disadvantages: http://i18.tinypic.com/34461wi.jpg ) http://i18.tinypic.com/34461wi.jpg Unintended consequences (e.g., Green Giant, Sears Auto service) ( May not fit well with a team approach Profit Sharing Payments based on company's profits and do not become a part of the employees' base pay Advantage Encourages employees to think like owners Labor costs are automatically reduced during difficult economic times less layoffs Disadvantage Link between individual effort and organization performance may be ambiguous Individual efforts influence company profit? Freerider problem if payment distributed equally Gainsharing Payments based on group or plant performance (typically productivity gains) that does not become a part of the employees' base pay Different from profit sharing Link payments with group or plant performance instead of company profits Payments are distributed more frequently Advantage Performance measures are likely to be seen more controllable (compared with company profit) by employees Ownership Stock Options A longterm incentive plan A plan that gives the option (not obligation) to buy the company's stock at a previously fixed price Originally for executives but trend toward broadbased options (e.g., PepsiCo, Starbucks) Advantages Encourage employees to think more like owners Attraction and retention Disadvantages Link between individual effort and organization stock performance Employees may put up money to exercise options Other PayforPerformance Plans Employee stock ownership plans (ESOPs) Employees buy company stock Usually cash out when employees retire Align the interests of employees with their employers' 25% of Lehman Brothers' stock was owned by its employees... Skillbased pay/competencybased pay Determine base pay level based on employee skill level or competency Motivates employees to improve their skill/competency levels Pay rates are linked to person, not job Base pay level remains the same irrespective of positions held Next Class Midterm review Go through review questions Bring review questions (on WebCT Vista) ...
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This note was uploaded on 04/29/2010 for the course COMM 392 taught by Professor Carson during the Fall '09 term at The University of British Columbia.
- Fall '09