Chapter 7 - Recognizing and Rewarding Employees

Qualified labour within an area o help influence wage

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Unformatted text preview: obs o pay rate influenced heavily by labour market or collective bargaining • organizations with formal compensation programs more likely to rely on system of job evaluation to aid in rate determination o job evaluation assist in maintaining some degree of control over its wage structure • job evaluation – systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization o helps establish internal equity between various jobs o measured by: skill, effort, responsibility, working conditions ! relative worth compares with others Employee’s Relative Worth • employee performance can be recognized and rewarded through promotion and incentives • superior performance rewarded by granting merit raises on basis of steps within a rate range established for a job class o must be determined by effective performance appraisal system that differentiates between employees who deserve the raises and those who do not o must provide visible and credible relationship between performance and any raises • sometimes supervisors compare performance of one employee to another o usually in absence of any performance management system Employer’s Ability and Willingness to Pay • in public sector, amount of compensation employees can receive is limited by funds budgeted for this purpose and willingness of taxpayers to provide them • in private sector, profits and other financial resources available to employers often limit pay levels o economic conditions and competition faced by employers affect rates willing to pay External Factors • external factors that influence wage rates include overall economy, labour market conditions, area wage rates, cost of living, collective bargaining if employer is unionized, and legal requirements Economy • with current economic recession, organizations had to re- examine compensation approach • following actions by companies were taken: o differentiating between average and high performers when making compensation adjustments o reducing bonuses o creating unpaid vacations o managing overall workforce costs through a combination of hiring freezes and terminating poor performers Labour Market Conditions • labour market reflects forces of supply and demand for qualified labour within an area o help influence wage rates required to recruit or retain competent employees • economic power of unions may prevent employers from lowering wage rates • employment laws also prevents employer from paying at market rate less than established minimum Area Wage Rates • formal wage structure should provide rates that are in line with those being paid by other employers for comparable j...
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