Compensation

12 Key excerpts on "Compensation"

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  Organizational Success through Effective Human Resources Management

  • Ronald R. Sims(Author)
  • 2002(Publication Date)
  • Praeger

    (Publisher)

  Chapter 10 Compensation INTRODUCTION Organizations exist to accomplish specific goals and objectives. One of the reasons employees go to work in organizations is to get money, which enables them to buy a wide variety of services and goods. It is doubtful, however, whether many employees would continue working were it not for the money they earn. Employees expect organizations to have compensa- tion systems that they perceive as being fair and commensurate with their skills and expectations (LeBlanc and Hulvey, 1998). Pay, therefore, is a major consideration in H R M because it provides employees with tangible reward for their services as well as a source of recognition and livelihood. Compensation is the H R M function that deals with every type of reward individuals receive in exchange for performing organizational tasks. Direct Compensation consists of the pay and rewards received by employees in the form of wages and salaries, incentives, bonuses, and commissions. Indirect Compensation comprises the many benefits supplied by employers, and non- financial Compensation includes employee recognition programs, rewarding jobs, and flexible work hours to accommodate personal needs. Typical ben- efits include vacation, various kinds of insurance, services like child care or elder care, and so forth. As the business environment becomes increasingly complex and global, the challenge to create and maintain effective Compensation programs, given constraints, also requires greater professional expertise, organiza- tional understanding, creativity, and vision than ever before. The system that an organization uses to reward employees can play an important role in the organization's efforts to gain a competitive advantage and to achieve 246 Organizational Success through Effective Human Resources Management its major objectives.

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  Managing Human Resources

  • Scott Snell, Shad Morris(Authors)
  • 2018(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Employees can receive stellar training, copious growth opportunities, and be completely satisfied with their work and environment, but they will not show up to work if there is no paycheck in return. 9.1 What Is Compensation? Compensation consists of three main components: direct Compensation encompasses employee wages and salaries, incentives, bonuses, and commissions; indirect compensa-tion comprises the many benefits supplied by employers; and nonfinancial Compensation includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible work hours to accommodate personal needs (see Figure 9.1). Compensation Nonfinancial • Recognition programs • Rewarding work • Organizational support • Work environment • Flexibility Direct • Wages/Salary • Incentives • Bonuses • Commissions Indirect • Benefits Compensation Components Figure 9.1 Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 320 Part 4 Implementing Compensation and Security The way these three components of Compensation are allocated sends a message to the employees about what management believes is important and the types of activities it encourages. 2 However, for an employer, Compensation constitutes a sizable operating cost.

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  Managing Human Resources for Nonprofits

  • Kunle Akingbola(Author)
  • 2015(Publication Date)
  • Routledge

    (Publisher)

  large turnover would be a major threat to the organization. The result of the strategic Compensation initiative was that the organization was able to use a mix of benefits and salary increases over two years for the counselling team to stay relatively competitive.

  Introduction

  Evidently, Compensation is one of the important tools an organization can use to influence the behavior of employees. The need to influence the behavior of employees, especially by attracting them to work for the organization, motivating them to focus their work effort on the needs of the organization, and rewarding their performance, is essential in order to achieve the goals of the organization. In effect, Compensation is central to the ability of the organization to attract, retain and motivate employees who will contribute to the strategic goals of the organization. From the point of view of employees, Compensation is the return on the investment in their education, training, and the labor input they have contributed to the organization.1 It is a form of quid pro quo of their employment relationship with the organization. In essence, an effective Compensation system serves a critical purpose for the organization and the employee at different levels.

  This chapter discusses Compensation as a strategic human resource management (SHRM) function in nonprofit organizations. The opening part of the chapter describes the elements of total rewards, the purpose of Compensation and the method of job evaluation. The middle section briefly examines Compensation in nonprofits and the case for and against incentive pay in the nonprofit sector. The final part of the chapter examines benefits and non-monetary incentives. The importance and role of Compensation as part of an integrated SHRM system is emphasized throughout the chapter.

  Compensation

  Compensation can be defined as the cash and non-cash payment employees receive from their employers in return for the service rendered to the organization. In a basic sense, Compensation is a primary legal obligation of the organization to its employees. This legal obligation underlies the employment relationship. But there is a lot more to Compensation than a legal obligation. Compensation includes other elements of pay (e.g. variable pay) that an organization offers an employee in recognition of his or her performance. Following from the introduction above, Compensation is integral to the SHRM system and should be integrated with the business strategy of nonprofits. It is vital to the efforts of nonprofits to attract, motivate and retain employees they need to achieve their mission. Moreover, Compensation is often the largest percentage of the total operating budget of nonprofits.2

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  Performance & Compensation Management

  • Surbhi Jain(Author)
  • 2020(Publication Date)
  • Society Publishing

    (Publisher)

  In most cases, this translates into a motivated and supportive workforce (Rosenthal, 2013). Organizations are now viewing Compensation as a tool that can be used to communicate exactly what is expected of employees (Farndale et al., 2008). When management is clear on how pay decisions are made, employees can understand the “why” – not just the “what” – behind their pay (Sparrow and Makram, 2015). This can build trust across the organization and improve organizational cohesion (Harrison and Lock, 2004). These trends are an indicator that the human resource management industry is paying a lot more attention to issues of Compensation management (Johnson and Clark, 2008). Previously, a very crude approach was adopted in which people were expected to be happy that they had a job at all and the salary that was given to them for working (Nica, 2015). Little attention was provided to non-monetary rewards even if the better managers and supervisors sometimes used them in order to motivate their own teams (Nath, 2011). Despite all the changes that are taking place, workers, and employers have to acknowledge the realities of a globalized world in which the old entitlements are no longer sustainable (Bruce and Daly, 2006). There was once a time when graduates in the developed and developing world could have expected to be granted jobs even before they completed their final semester (Calabrese, 1997). Now, it is not uncommon for people to wait for a decade before they can land the jobs that they really wanted at the outset (Hunter and Katz, 2012). In the meantime, people have to deal with student loans, mortgages, and a host of other expenses that are necessary Introduction to Compensation Management 55 in order to fit into our consumer society (Kasperk et al., 2011). In some cases, big business exploits workers so that wages and conditions continue to deteriorate even as those companies are prospering on the stock market (Harney and Dundon, 2006).

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  Human Resources Management

  All the Information You Need to Manage Your Staff and Meet Your Business Objectives

  • Patricia Buhler(Author)
  • 2002(Publication Date)
  • Everything

    (Publisher)

  Compensation can be critical in motivating employees. They are more likely to be motivated when they feel their contributions are being fairly and equitably rewarded. Compensation is a reward system. It reflects the employee’s value to the firm and in turn impacts his or her sense of self.

  An effective Compensation plan helps the organization attract, and retain, skilled employees. Compensation can also be used to encourage workers to learn new skills and to exhibit appropriate behavior. Employees who are rewarded for performing well will, in turn, provide good role models for others.

  An effective Compensation plan helps the organization attract, and retain, skilled employees.

  If, in an ideal organization, individual goals are aligned with organizational goals, then the organization will meet its goals when all the employees meet their goals. Rewarding employees (by providing equitable Compensation) for meeting their own goals, therefore, brings the organization closer to achieving its overall goals.

  Terminology: Wages Versus Salaries The difference between working wages and executive salaries is clearest in context, but it can be boiled down to this: Wages are determined by the work; salaries are determined by the job.

  Wages

  Wages are hourly rates. Employees are paid based on the amount of time they work. Employers must know the minimum wage required by law when determining wages. People in operating jobs are usually paid hourly rates. They must work the time to receive their wages.

  Employees are paid based on the amount of time they work. For example, if an employee is paid $6 an hour and works the following hours, the wages paid will reflect only the hours worked.

  Hourly Wages

  Hours Worked	Amount Paid
  8 hours on Monday	$48
  3 hours on Tuesday	$18
  6 hours on Wednesday	$36
  2 hours on Thursday	$12
  8 hours on Friday	$48

  In some companies, the Compensation system, also called a piece-rate system,

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  Compensation and Organizational Performance

  Theory, Research, and Practice

  • Luis R. Gomez-Mejia, Pascual Berrone, Monica Franco-Santos(Authors)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  1 Compensation AS AN EVOLVING FIELD Past, Present, and Future In their 1992 book entitled Compensation, Organizational Strategy, and Firm Performance Gomez-Mejia and Balkin lamented that “no other HRM [Human Resource Management] subfunction has been as guilty of a myopic focus as Compensation, with its well-known predilection for tools and techniques” (p. 5). Almost 20 years later we find that there has been an enormous amount of theoretical and empirical work done on Compensation issues, much of it appearing in mainstream academic journals. We believe that there are several reasons for the growth of this body of knowledge, which is critically reviewed in this book. These reasons are as follows: 1. Compensation’s central variable of interest—money—represents the most generalized medium of exchange known to humankind. This means it is an integral part of practically all transactions occurring within and across organizational boundaries. 2. Money is the quintessence of all business language, and top decision makers readily understand its significance. For example, designing staffing and training programs to select and develop employees to fit strategy may be appealing to personnel specialists but of little concern to upper management. 3. Compensation dollars have a direct impact (and in most firms the most important one) on the cost side of all financial statements. Not only does this make Compensation a very crucial tangible resource to management, but the way in which it is allocated becomes a de facto component of the firm performance calculus. While procedures have been developed in HRM (e.g., human resource accounting, utility analysis) to estimate the cost-benefit sensitivity of intangible factors, such as improving employee attitudes, honing employee skills through training programs, increasing the validity of selection methods and appraisal programs, and so on, most managers without an HRM background know little about and are less easily convinced by such data

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  Strategic Human Resource Management in the Public Arena

  A Managerial Perspective

  • John Cunningham(Author)
  • 2017(Publication Date)
  • Red Globe Press

    (Publisher)

  A raise or a bonus might be a marker of success or a form of recognition. STRATEGIC CONTEXT: An employee’s total Compensation has four components: fixed salaries, pen-sions, benefits and incentives. The Compensation mix is the relative proportion of Compensation and varies from organization to organization. The direct forms of Compensation include the fixed salaries Designing Compensation Systems to Respond to Equity Requirements 275 CO 1: USING EQUITY OBJECTIVES TO DESIGN A Compensation SYSTEM This chapter’s opening vignette illustrates the many facets of pay satisfaction and points to the structure and administration of equitable pay systems. One basic hallmark for a well-designed pay system is its ‘fairness’ and acceptability to employees. Unless the Compensation system is perceived to be fair, the system will breed mistrust and scepticism among employees. Few instruments of management evoke more powerful and complex emotions in an organization’s membership than the fairness of an organization’s Compensation policy. Perceptions of inequity evoke dissatisfac-tion, especially if people feel that others are getting the same pay when they seem to be doing less work. Such has been the case in the inequities in what women and men have been paid throughout the world. Traditionally, Compensation systems are designed to attract, retain and reward people, and in improv-ing performance, Compensation was a way of aligning a person’s worth with the organization’s strategic objectives and priorities. A person’s worth or value to an organization is, theoretically, defined by his or her competence and value. In many cases, the process of determining worth has been the subject of much debate. For example, in our early history in Western societies, men and women working side by side, doing exactly the same jobs, were paid different wages. In some cases, help wanted signs listed different rates for women and men.

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  Human Resources Management in the Hospitality Industry

  • David K. Hayes, Jack D. Ninemeier(Authors)
  • 2015(Publication Date)
  • Wiley

    (Publisher)

  While some hospitality workers consider their jobs to be fun, few people have the luxury of working just for the fun of it. In most cases, workers evaluate the entire Compensation package (see chapter 4) offered by their employer when they assess the value of what they are paid for their work and when they consider whether that pay is adequate and fair. It is important that managers ensure all employees know about their pay, but it is just as important that employees be informed about their entire Compensation package, including items such as meals, benefits, and bonuses. Naturally, most employees would like their Compensation package to be as large as possible. It may seem most employers would like employee Compensation packages to be as small as pos- sible so profits would be maximized. Experienced business professionals, however, know that it is rarely in the best interest of employers to make Compensation packages as small as possible. The reasons are twofold. First, employers who advertise positions offering below-average com- pensation packages tend to attract workers with lesser skills because those with greater skills seek higher-paying positions. Second, employers who minimize employee pay tend to lose their best workers to organizations willing to pay more. Consequently, when less-skilled workers are attracted to an organization, and when the best of an organization’s workers ultimately seek employment elsewhere, product quality and customer Compensation package: The sum total of the money and other valuable items given in exchange for work performed. Impact on HR Management I n most cases, pay is not the central issue responsible for attracting and retaining good employees. Worker pay is, however, critically important to employees and employers alike because it affects so many other business issues. In general, if workers feel they are unfairly paid, they will seek jobs they believe more equitably reward their efforts.

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  Human Resource Management

  • Greg L. Stewart, Kenneth G. Brown(Authors)
  • 2019(Publication Date)
  • Wiley

    (Publisher)

  Members of the group make the following statements. Which of the statements do you think are true? Organizations increase the value of overall Compensation by providing benefits such as insurance and retirement plans. If all members of a team are paid the same amount, some individual team members will not work as hard. Receiving an annual raise is a key moti- vator for most employees. Giving company stock to employees is a poor motivational tool. Most young people who are just gradu- ating from college are willing to work long hours in boring jobs as long as they receive high wages. T OR F T OR F T OR F T OR F T OR F Edmund D. Fountain/ZUMAPRESS.com THE BIG PICTURE Effective Organizations Develop Compensation Packages that Align Overall Human Resource Strategy with Incentives Chapter 11 discussed principles of motivation and described the concepts of pay level and pay structure. In this chapter, we extend these ideas by exam- ining specific components of Compensation packages. A Compensation package represents the mix of rewards employees receive from the organiza- tion. Money paid as wages or salary is the largest component of most Compensation packages. Some workers are paid a fixed amount for each time period, but for others the amount varies with performance. In these situa- tions, determining the percentage of pay that will depend on performance is an important Compensation decision. When pay is linked to performance, another important decision concerns whether the amount paid will depend on individual performance, the performance of a work group, or the performance of the organization as a whole. Still another part of the Compensation package is made up of employee benefits such as health insur- ance and retirement savings, and organizations must decide what proportion of employees’ Compensation will take this form.

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  The WorldatWork Handbook of Total Rewards

  A Comprehensive Guide to Compensation, Benefits, HR & Employee Engagement

  • Dan Cafaro(Author)
  • 2021(Publication Date)
  • Wiley

    (Publisher)

  2 Everything You Want to Know about Compensation (but Were Afraid to Ask)

  Compensation systems have moved from backroom systems largely run by HR into complex management systems that serve as the foundation for organizational alignment and employee motivation, as well as providing important support for job families and career pathing.

  Compensation systems are important tools for managers, HR business partners, and senior management. In large organizations with shared-services models or centralized Compensation functions, HR business partners often broker Compensation services on behalf of their business unit or division. Some organizations now allow line managers direct access to salary structures, market pricing, and incentive payout predictors in order to recommend initial hiring salaries, merit increases or incentive payout. Senior management is typically actively involved in both setting objectives for Compensation and reward systems and monitoring/evaluating results.

  In smaller organizations, HR business partners or one-person HR departments take on overall responsibility for everything from developing pay strategy to overseeing pay administration for the local employee workforce.

  The following discussion focuses on the fundamentals of Compensation systems within larger organizations. However, the concepts outlined are applicable to organizations of all types and sizes. New approaches and ideas are constantly being tested; the key, as always, is to ensure that the final system meets the organization's needs.

  THE FOUNDATION: THE Compensation PHILOSOPHY

  Successful Compensation programs are the result of well-defined and closely managed systems. A Compensation philosophy provides the foundation to ensure that each of the different programs and systems is working in harmony with the others. A Compensation philosophy should explain:

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  Human Resource Management

  • David A. DeCenzo, Stephen P. Robbins(Authors)
  • 2014(Publication Date)
  • Wiley

    (Publisher)

  The key point here is that membership- based rewards are generally extended regardless of an individual’s, group’s, or organization’s performance. In any case, performance may be only a minor determinant of rewards, despite academic theories holding that high motivation depends on performance-based rewards. Compensation Administration Why do regional managers at Bank of America in Dallas, Texas, earn more than the bank associates? Intuitively, you might say that the regional managers are more skilled and have greater job responsibility, so they should earn more. But how about regional manag- ers who specialize in commercial accounts? Should they make more or less than regional managers who supervise several branch operations? The answers to questions such as these lie in job evaluation. Job evaluation is the process whereby an organization systematically establishes its Compensation program. In this process, jobs are compared to determine each job’s appro- priate worth within the organization. In this section, we discuss the broader topic of Compensation, narrow our discussion to job evaluation methods, and conclude with a review of an increasingly controversial topic—executive Compensation. Employees exchange work for rewards. Probably the most important reward, and the most obvious, is money. But not all employees earn the same amount of money. Why? The search for this answer moves us directly into the topic of Compensation administration. The goal of Compensation administration is to design a cost-effective pay struc- ture that will attract, motivate, and retain competent employees. 10 The structure should also appear fair to employees. Fairness is a term that frequently arises in the administra- tion of an organization’s Compensation program. Organizations generally seek to pay the least possible to minimize costs, so fairness means a wage or salary that is adequate for the demands and requirements of the job.

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  Managing Compensation (and Understanding It Too)

  A Handbook for the Perplexed

  • Donald L. Caruth, Gail D. Handlogten(Authors)
  • 2001(Publication Date)
  • Praeger

    (Publisher)

  Three, money has a great potential for creating dissatisfaction and demotivation if handled inappropriately in the Compensation system. Money actually becomes a “turnoff when it is perceived to be distributed unfairly. It becomes a demotivator when it bears no clearcut relationship to performance on the job. Four, the economic portions of the Compensation package are extremely important if the organization is to attract and retain people to perform the work of the institution, but the psychological component is also extremely important in attracting, holding, and actually motivating employees. A Compensation program, then, must recognize that salaries, wages, and indirect monetary rewards form the foundation for motivation, but cannot be construed as constituting the entire Compensation package (attention will be directed to creating a motivating work environment in the following section). From a motivational and human behavior point of view, an organization must create a Compensation system that will be perceived as equitable. An equitable Compensation system, as discussed in this chapter, is one that does the following: Page 48 PSYCHOLOGICAL Compensation Compensation specialists do not devise psychological Compensation. Managers and the policies and practices of the organization are the instruments that create the system of psychological Compensation. This vital form of Compensation is frequently overlooked as salary structures are devised and systems of indirect financial rewards are constructed. And yet the bestdesigned pay structures and benefits systems are likely to fail in the absence of a psychologically sound work environment. An important element in fulfilling the purposes of a Compensation system—to attract, hold, and motivate employees—is the organizational climate of an institution. Psychological Compensation encompasses all possible nonmonetary rewards organizations provide their employees.

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