Harmonisation and Standardisation€¦ · •define common terms used in reward management •explain the purpose of compensation or reward •explain the determination of rewards

Slide 9.1

Eugene McKenna and Nic Beech, Human Resource Management, 2nd Edition, © Pearson Education Limited 2008

UNIT 6

REWARD MANAGEMENT

Introduction to Human Resource Management

Slide 9.2


OBJECTIVES

•define common terms used in reward management

•explain the purpose of compensation or reward

• explain the determination of rewards

• explain the process of job evaluation

• understand the types of reward systems

•know the other considerations in rewards management

Slide 9.3


Definitions of common terms

• Pay• Most straightforward term

• Can include non-monetary payment, sick pay, maternity pay and pensions

• Reward• Used when systems are designed to motivate (Theory X overtones)

• Carrot and stick approach (theory X)

• Could be monetary or non-monetary

Slide 10.3

Slide 9.4


Definitions of common terms – cont.

wages

• Used to describe payments made weekly, often based on an hourly rate and/or paid in cash

• Less likely to involve fringe benefits

• Expectation of short-term thinking from employees –incentives are usually quick and precise

• Less emphasis on job security

salaries

• Used to describe payments paid monthly, based on an annual salary figure

• Normally paid directly into a bank

• Possibility of fringe benefits

• Traditionally linked with job security

• Managerial role

Slide 9.5


Purpose of compensation or reward

• Attract suitable employees.

•Equal pay for equal work

• Retain employees who perform well.

• Foster motivation and commitment.

• Create conditions where it is possible to establish

congruence between personal and organisational

goals.

Slide 9.6


Influences on Payment system

•What the organisation can afford to pay

•What other organisations are paying

•National or international rates of pay within the

organisation

• Trade unions and employees demand

• the scarcity of particular skills

•The performance of the individual

• Job evaluation (emphasising internal relativities).

• External influences (e.g. government policy on the

minimum wage).

Slide 9.7


Job evaluation

• Job evaluation is ‘a method of determining on a systematic basis the relative importance of a number of jobs.’

• Jobs are ranked according to demands made on the job holder.

• Provides a basis for a ‘fair and orderly grading structure.’

• Does not determine actual pay.

Slide 10.7

Margaret Foot and Caroline Hook, Introducing Human Resource Management, 6th Edition, © Pearson Education Limited 2012

Slide 9.8


Job evaluation

• Non-quantitative approach

• Quantitative approach

• Other approaches to job evaluation

• Advantages and disadvantages

Slide 9.9


Non-quantitative approach

• Whole job Ranking: ranking the jobs based on the

job descriptions. Jobs are then arranged based

on difficulty or value to the organisation.

• Paired comparisons

•Comparing jobs against other jobs to determine

the relative worth of each job (based on job

descriptions).

• Job classification: putting jobs into slots on a

predetermined framework of grades or classes

(with definitions).

Slide 9.10


Analytical / Quantitative approach

to Job Evaluation

• Points system: Range of Points are assigned to the

factors, such as those above. Each factor

receives a range of points. The most

important job receives the greatest number

of points.

Slide 9.11


Cont. Quantitative job evaluation

• Points system• Decide on criteria for evaluating all jobs, e.g.

• skill

• responsibility for people

• responsibility for equipment and materials

• responsibility for other employees

• mental effort

• physical effort

• working conditions.

• Each factor receives a range of points to allow for the award of maximum points. Points are aggregated.

• The importance of a factor is the weighting it receives

• Rate each job accordingly

Slide 9.12


Cont. Quantitative job evaluation

• Points system (Continued)• Advantages

• easy to understand

• can be used to explain differences between jobs and justify differences of pay.

• The use of ‘Benchmark jobs’

• Disadvantages

• contains some subjectivity – need for care over sex bias

• can be time-consuming and costly to develop.

• Assessment is static and not dynamic as it looks at a point in time

Slide 10.12

Margaret Foot and Caroline Hook, Introducing Human Resource Management, 6th Edition, © Pearson Education Limited 2012

Slide 9.13


Advantages of job evaluation

• Objective and logical.

• Fair (removes managerial bias).

• Favourably viewed by industrial tribunals.

Slide 9.14


Disadvantages of job evaluation

• Objectivity is questionable, including the choice of

benchmark jobs.

• Costly to install and maintain.

• Too bureaucratic in a world characterised by

flexibility and adaptability.

• Promotes a job demarcation mentality, out of

keeping with today’s conditions of changing job

boundaries and need for flexible job descriptions.

• Strong emphasis on the job itself leads to turning a

blind eye to performance.

Slide 9.15


Different Types of reward systems

• Time rates

• Individual payment by result (piece work)

• group incentives

• measured day work

• profit sharing

• performance-related pay or merit pay

• skill-based pay

• Cafeteria or flexible benefits system

Slide 9.16


Time rates

• When a reward system is related to the number of hours

worked it is referred to as Time rate.

• Weekly or monthly wage; the minimum wage!

• Value or worth of job could be determined by job

evaluation

• Easy to administer; labour cost can be predicted

• No differentiation between good and bad performers

on same grade ( no motivation to increase output).

Slide 9.17


Individual Payment by results (PBR)

•Links pay to the quantity of individual’s output (eg

piece work, commission received by sales people)

•Rewards extra effort .

•Advantages:

• Links pay, including commission, to output (cost adv.)

• Minimises need for supervision.

•Disadvantage:

• Increased output could, however, be at the expense

of quality.

•Difficulty in measuring output

Slide 9.18


Group Incentives

• Based o the same principles as the individual payment by results system, but focused on the collectivist approach

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•This is an individualised payment scheme.

•Pay rates are agreed for a specified level of

performance.

• management carefully monitors the level of

performance

Measured day work

Slide 9.20


Profit Sharing

•Links rewards to group outcomes like meeting set target

• With profit sharing, a bonus or payment based on

the company’s profits is given to employees.

•Linking pay to profits is said to increase the

commitment of employees.

• Bonus could be based on performance of a

department, division or organisation and it is a

percentage of profits.

• Gain-sharing applies to cost cutting rather than

profits; employees receive a proportion of the gains.

•

Slide 9.21


Performance-relatedpay schemes (Merit rating)

• links individual’s pay progression to his/ her level of

performance or competence.

•It does not relate to just the quantity of a product

produced.

•Used for mainly non-manual workers but can be used

for manual workers as well.

Slide 9.22


Skill-based pay

• Input (e.g. knowledge, competencies), as opposed

to output, is rewarded.

• Rewards employees for acquiring and utilising a

broader range of skills.

• Skill-based pay can be used to encourage desired

outcomes (e.g. multi-skilling).

• Introduction of skill-based pay requires good

planning, consultation and participation, and training

(technical and teamworking skills).

Slide 9.23


Cafeteria or flexible benefits system

• this is a type of non-monetary award.

•Selecting various packages within an overall compensation

package.

•Employees choose benefits to meet their needs from a menu of

remuneration eg life/accident insurance, medical and dental care,

care for children

•The flexible system has a number of elements; for example,

salary, holiday entitlement, private health insurance, loans at

preferential rates, company car.

•Most schemes are applicable to executive and managerial

staff.

Slide 9.24


Other considerations

• Pensions: (form of deferred pay; final salary, money

purchase and stake holder schemes).

• HRM and rewards (both extrinsic and intrinsic): a

primary consideration is to devise reward strategies

that support corporate objectives, and a sub-set of

this aim is to support high performers.

Slide 9.25


Areas to ignore

• 305 (The equal pay act 1970) – 307 (the national Minimum wage act 998)

• 322 -323

• 325 - 334

Slide 9.26


• the end of Unit 6

• END OF SEMESTER ONE

Documents

Harmonisation and Standardisation€¦ · •define common terms used in reward management •explain the purpose of compensation or reward •explain the determination of rewards