ECE _DSST _ Human Resource MGMT

Value added compensation can also be called value

Info iconThis preview shows pages 13–15. Sign up to view the full content.

View Full Document Right Arrow Icon
Value-added compensation can also be called value-chain compensation. In order to increase productivity and reduce labor costs, HRM are increasingly turning to compensation packages based on the pay-for-performance standard. This standard means that employers tie employee pay to results. This increases motivation and reduces labor costs. The difficulties with instituting the pay-for-performance standard is that it is hard to establish the size of the pay increase, when to pay it, and to determine the employee’s output in a service industry. The issue of when to make these payments is also difficult as it will affect motivation and a certain amount of jealously and resentment from the other employees may arise. If employees believe that they are being paid fairly for the value of the work performed, then a state of pay equity is attained and this has a dramatic effect on motivation. Employees who feel that they are being paid what they are worth are motivated whereas those who believe the opposite are likely to be unmotivated and less productive.
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
The main differences between hourly employees and salaried employees are that the latter are paid a fixed amount calculated on a weekly, bi-weekly or monthly basis and receive certain benefits whereas the former are compensated only for the hours they work. Salaried employees normally receive benefits such as health care and insurance benefits whereas hourly employees only receive pay for hours worked. The compensation of employees is affected by their exempt or nonexempt classification in accordance with the Fair Labor Standards Act. The Fair Labor Standards Act (FLSA) states that nonexempt employees covered by the Act must receive 1.5 times their regular pay for working overtime in excess of 40 hours a work week. Exempt employees not covered under the Act for the overtime provision are normally white-collar workers. The Department of Labor determines if the employee is exempt or not based on the employee possessing independent judgment and other salient factors. The wages for a job are determined by internal and external factors which form the wage mix. The wage mix combines internal factors, such as the employer’s ability to pay and external factors such as the going rate for that job to create the mix upon which salaries are determined. The internal factors that affect the wage mix include the compensation strategy of the employer, the job’s worth , the value attached to the particular employee and the employer’s ability to pay. Some firms do not have a proper compensation plan and so wages are determined by the subjective view of the business owners as to what the individual should be paid. Thus, the wage will be considerably influenced by the labor market or collective bargaining by unions. The external factors that can determine the wage mix include the labor market conditions, area wage rates, cost of living
Background image of page 14
Image of page 15
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page13 / 28

Value added compensation can also be called value chain...

This preview shows document pages 13 - 15. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online