Compensation and Benefits Administration Week 10 (Part B)
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Transcript of Compensation and Benefits Administration Week 10 (Part B)
Compensation and Benefits Administration
Week 10 (Part B)Dr. Teal McAteer
Teaching ProfessorDeGroote School of Business
McMaster University
Responsibilities ofCompensation Professionals
Legislative compliance Conduct pay or wage surveys Conduct job evaluations Create links between desired rewards and
levels of performance Monitor compensation costs
Pay Surveys
Method of obtaining accurate information about pay rates for relevant jobs in other organizations
Gauge of external equity
How To Conduct A Pay Survey Specify the purpose of the survey Specify jobs to be surveyed, their descriptions or
specifications, and the information needed from survey participants
Select comparison employers for inclusion in the survey
Select a survey method and design a survey instrument
Administer the survey Analyze and communicate survey data
Job Evaluation Systems
Determine relative worth of jobs to the organization
Internal equity Central to Pay Equity
Job Evaluation Process
Collect job analysis data Prepare job descriptions and job specifications Choose compensable factors – those factors an
organization values and chooses to reward through differential pay
Develop or choose a job evaluation method Evaluate jobs
Pay Equity
Job evaluation system must be compliant with Pay Equity which considers factors of
Skill Effort Responsibility Working conditions
System must be gender neutral
Types of Job Evaluation Methods
Ranking Level description (classification method) Factor comparison Point methods Market pricing
Ranking
Orders jobs from least valued to most valued More appropriate for small organizations and
those with small numbers of jobs Advantages
Simple Quick and inexpensive
Disadvantages Entirely subjective No explicit rationale or documentation for results
Level Description(Classification Method)
Places jobs in a pre-existing hierarchy Compares jobs to descriptions of job grades Advantages
Inexpensive Readily available
Disadvantages Cumbersome
Factor Comparison
Compares jobs to key jobs on scales of compensable factors
Advantages Custom-built Easy to use
Disadvantages System becomes less accurate as key jobs change Complex Limited to manufacturing, manual, blue-collar jobs
Point Method
Jobs are compared to standardized descriptions of degrees of universal compensable factors and sub factors
Advantages Most accurate Stable over time
Disadvantages Administrative costs can be high
Market Pricing Relies entirely on the labour market to
determine how much jobs should be paid Advantages
Avoids management bias Employees paid at market value
Disadvantages Promotes instability of pay structure May lead to perceived inequities Results depend on organizations surveyed Difficult to obtain pay information about some of the
less common jobs in an organization
Key Outcome of Job Evaluation
Hierarchy of jobs in terms of their relative value to the organization
How Is Pay Assigned to Jobs?
Requires pay philosophy decision regarding Relationship of pay levels to market
Lead Lag Match
Pay Policy Line
Graphic depiction of line drawn between midpoints of salary ranges
Represents an organization’s pay level
How do Organizations Structure Pay? Typically offer range of pay Variations in pay based on different in performance,
employee qualifications and/or seniority Requires rationale for setting starting pay and for
progression through the range Jobs of similar value can be grouped into pay grades Within a pay grade, there is a pay range which defines
the upper and lower limits of pay
Assigning Pay to Persons
Shift from job-based to person-based pay system
Skill based pay systems Based on knowledge and skills individuals
develop on the job Competency based pay systems
Compensation is based on individual traits, attitude and/or behaviours individuals bring and apply to the job.
Using Pay to Motivate Employees
Pay for performance = pay is contingent on some level of performance specified by the organization
Merit pay Hinging promotion to higher-paying jobs contingent of
superior performance Incentive pay system
Pay For Performance Systems
Individual
Group
Company
Merit Promotion Straight piece rate
Group piece rate Group standard hour
plans
Profit sharing plans Cost savings plan
Compensation Administration
Ensure that compensation system is achieving its goals and that compensation costs remain within allocated amounts
Mechanisms used include: Compa-ratio Budgets Periodic audits of wages
Pay Equity
Equal pay for work of equal value Pay Equity Plan is required for each bargaining
unit and for that part of the establishment that is not in any bargaining unit
Trend – Total Rewards
Definition: Any type of reward for service/work
More options now presented to compensate/reward employees. Desired effect is to enhance ability to attract, retain and motivate employees in a very competitive market (i.e. “War for Talent”)
Total Rewards Model
Work Experience
Benefits
Compensation
Why Total Rewards
Drive for profitability (private sector) Drive for improved effectiveness/efficiency Better control of labour costs Enhanced ability to recruit, attract and retain
key staff Enhanced flexibility
Categories Of Benefits
Universal benefits Statutory benefits Discretionary benefits for employee protection Pay for time not worked Employee services
Universal Benefits
Government provided without requiring direct contributions from either employees or employers
OAS (Old Age Security) GIS (Guaranteed Income Supplement) Provincial hospital and medical plans (OHIP)
Statutory Benefits
Employer must provide under federal and/or provincial laws
CPP/QPP Workers’ compensation Employment insurance Supplementary coverage i.e. SUB plans Health insurance
Discretionary Benefits
Private pension plans Defined benefit plan Defined contribution plan Combination
Group insurance programs
Holiday And Vacation Pay
Statutory plus others
Vacations
Employee Service Benefits
Savings plans Tuition loans Recreation facilities and programs Parking privileges
Flexible Benefits Flex plans allow employees a degree of choice
in some of the benefits, with varying levels of cost-sharing by level of coverage, and an opportunity to review the choice on a periodic basis
Four types Modular plans Core plus option plans Private health services plans Cafeteria plans
Controlling Benefits Cost
Provide benefits that the majority of employees value and eliminate those in which they have no interest
Have employees contribute a certain amount toward the purchase of discretionary benefits
Group insurance Managed care of employer-provided health
benefits
Issues In The Benefits Areas
Pension issues Same-sex spousal benefits Controlling rising benefit costs Disability management New accounting methods
Benefit Cost ContainmentStrategies Contribution changes Limits Coverage changes Drugs Proactive management approach Communication, education, incentives New Plan/programs
The Work Experience
Satisfy intrinsic needs Includes elements of reward that are important
to employees and employers but are less tangible than compensation and benefits
Employees place high value on the work experience
Elements Of The Work Experience
Acknowledgement and recognition Balance of work/life Culture Development Environment