Human Resource Management Lecture-28. Job Pricing.
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Transcript of Human Resource Management Lecture-28. Job Pricing.
Job AnalysisJob Analysis
Job EvaluationJob Evaluation Pay SurveysPay Surveys
Pay StructurePay StructurePay Pay
PoliciePoliciess
Individual PayIndividual Pay
Implementation, Communication, Monitoring
Performance Appraisal
Pay is a statement of an employee’s worth by an employer.
Pay is a perception of worth by an employee.
Employee compensation refers to all forms of pay or rewards going to employees and arising from their employment.
It consists of 2 partsDirect financial payments Indirect financial payments
Wages– generally refer to hourly
compensation paid to operating employees; the basis for wages is time.
Salary– is income that is paid an
individual not on the basis of time, but on the basis of performance.
Compensationof
Employees
ExtrinsicRewards
Hourly WagesSalary
Monetary BonusesRewards Commissions
Pay Incentives
InsuranceRetirementPaid Vacations
Benefits Food ServicesCredit UnionRecreation
RecognitionIntrinsic Promotion OpportunitiesRewards Working Conditions
Interesting Work
Desire formore Pay
Pay Dissatisfaction
Performance
Strikes
Grievances
Search for job
LowerAttractiveness
of job
Absenteeism
Turnover
Job Dissatisfaction
Absenteeism
PsychologicalWithdrawal
DispensaryVisits
Poor MentalHealth
Phase:-1. Evaluate every job to ensure internal equity based on each job’s relative worth.
Phase:-2. Conduct wage and salary surveys to find the rates paid in the labour market.
Phase:-3. Price each job to determine the rate of pay based.
The “Big Three”Attract qualified employment
applicantsRetain qualified employees,
while discouraging retention of low performing
Motivate employee behavior toward organization objectives
Ensure Equity Reward Desired Behavior Control Costs Comply With Legal Regulations Facilitate Understanding
Achieve external competitivenessSupport organization priorities
Strategy and goalsCulture and values
Easy to administer
Conduct a salary survey of what other employers are paying for comparable jobs
Employee committee determines the worth of each job in your organization through job evaluation
Pay Grade Structure for Job-Based System
Rs 10,000
Rs 30,000
Rs 50,000
Corporate Policy LineCorporate Policy Line
MidpointMidpoint
250 350 450 550 650 Job Evaluation Points
MaximumsMaximums
Pay Grade WidthPay Grade Width
Mo
nth
ly P
ay
Prevailing WagesAbility to PayCost of LivingProductivityBargaining PowerJob RequirementsGovernment Laws
Equity Theory Description
–Pay should be based upon contributions made by the Employees. Higher effort should be rewarded with higher pay.
Application to Compensation
–Pay should be tied to the performance level of individual Employee
OutputsInputs < Outputs
Inputs
OutputsInputs =Outputs
Inputs
OutputsInputs > Outputs
Inputs
Under-reward
Equity
Over-reward
Person BPerson A
Balancing Internal and External Equity
Internal External
Pay EquityPay Equity
PayDifferentials
•Market
PayCompression
AdvantagesAdvantagesAttracts better employeesAttracts better employeesMinimizes voluntary turnoverMinimizes voluntary turnoverFosters strong culture and competitive Fosters strong culture and competitive superiority superiority
DisadvantagesDisadvantagesAdditional compensation costsAdditional compensation costsSense of entitlementSense of entitlement
AdvantagesAdvantages Higher quality of human resources at Higher quality of human resources at
midrange of market-driven compensation midrange of market-driven compensation costscosts
DisadvantagesDisadvantages Does not attract higher performersDoes not attract higher performers Turnover will vary with labor demands of Turnover will vary with labor demands of
competing firmscompeting firms
AdvantagesAdvantages Lower compensation costsLower compensation costs Useful in labor markets where Useful in labor markets where
unemployment is highunemployment is high
DisadvantagesDisadvantages Lower-quality employeesLower-quality employees Low morale/job satisfactionLow morale/job satisfaction Higher turnover; especially Higher turnover; especially
among high performersamong high performers
Conditions Necessary for Perceptions of Pay Fairness
Internal consistencyExternal competitivenessEmployee contributions
Evaluate the worth of jobs.Negotiate starting salaries.Recommend pay raises and
promotions.Notify HRM department of job
changes.