Chapter 7 - Recognizing and Rewarding Employees

Employeeswage earners o salaried employees

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Unformatted text preview: • Pay is a quantitive measure of an employee’s relative worth • Pay represents reward received in exchange for contributions o Essential pay be equitable in relation to those contributions o Also be equitable in relation to what other employees are receiving • Equity – anything of value earned through the investment of something of value o Equity theory is a motivation theory that explains how employees respond to situations in which they feel they have received less/more than they deserve ! role of perception in motivation and fact that individuals make comparisons ! individuals form ratio of inputs in a situation to outcomes and compare that value of ratio with value of input/output ratio for other individuals in a similar class of jobs internal/external to the organization • inequitable = motivates to eliminate/reduce inequity • equitable pay – compensation received is perceived to be equal to value of the work performed o employees’ perceptions of equity/inequity have dramatic effects on work behaviour and productivity • line managers must respond to employee concerns about being paid equitably • compensation policies are internally equitable when employees believe wage rates for their jobs approximate the job’s worth to the organization • perceptions of external equity exist when organization is paying wages and benefits that are relatively equal to what other employers are paying for similar types of work The Bases for Compensation • hourly work – work paid on an hourly basis (most common) – hourly employees/wage earners o salaried employees- compensation computed on weekly/biweekly/monthly pay periods ! usually receive certain benefits not provided to hourly employees • piecework – work paid according to number of units produced Determining Compensation • combination of internal and external factors can influence (directly/indirectly) the rates at which employees are paid Internal Factors • employer’s compensation policy, worth of a job, employee’s relative worth in meeting job requirements, employer’s ability and willingness to pay Employer’s Compensation Strategy • organizations usually state objectives regarding compensation for employees • employers set pay policies reflecting: o internal wage relationship among job and skill levels o external competition or employer’s pay position relative to what competitors are paying o policy of rewarding employee performance o administrative decisions concerning elements of the pay system ! ex. Overtime premiums, payment periods, short/long- term incentives Worth of a Job • organizations without formal compensation program base worth of jobs on subjective opinions of people with familiar j...
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