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Compensation and Benefits Administration Week 10 (Part B)


Compensation and Benefits Administration Week 10 (Part B) Dr. Teal McAteer Teaching Professor DeGroote School of Business McMaster University Issues In The Benefits ... – PowerPoint PPT presentation

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Title: Compensation and Benefits Administration Week 10 (Part B)

Compensation and Benefits Administration Week 10
(Part B)
  • Dr. Teal McAteer
  • Teaching Professor
  • DeGroote School of Business
  • McMaster University

Responsibilities of Compensation 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
  • 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
  • Select a survey method and design a survey
  • Administer the survey
  • Analyze and communicate survey data

Job Evaluation Systems
  • Determine relative worth of jobs to the
  • 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

  • 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
  • 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 organizations pay level

How do Organizations Structure Pay?
  • Typically offer range of pay
  • Variations in pay based on different in
    performance, employee qualifications and/or
  • Requires rationale for setting starting pay and
    for progression through the range
  • Jobs of similar value can be grouped into pay
  • 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
  • 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
External Influences
Internal Influences
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
  • 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
  • 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
  • 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 Containment Strategies
  • 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