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Matakuliah : J0124/Manajemen Sumber Daya ManusiaTahun : 2007/2008
MODUL 16 Compensation Strategies &
Practices
Bina Nusantara
Learning OutcomesAfter studying this chapter, the students shouldbe able to :• Identify two types & components of compensation • Discuss four strategic compensation design issues• Define job evaluation & discuss four methods of performing
it• Outline the process of building wage & salary system
Bina Nusantara
Outline • The Nature of Compensation• Compensation System Design Issues• Perceptions of Pay Fairness• Legal Constraints on Pay Systems• Development of a Base Pay System• Pay Structure• Issues Involving Pay Increases
Bina Nusantara
Nature of Compensation• Compensation is what employees receive in exchange for
their contribution to the organization
Compensation
Direct Indirect
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Compensation System Design Issue
• Compensation philosophies * entitlement orientation * performance orientation• Compensation approaches * traditional approach * total reward approach• Decisions about compensation level• Competency-based level• Individual vs team rewards
Bina Nusantara
Perception of Pay Fairness
• Procedural & distributive justice in compensation
• Pay openness
• External equity
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Legal Constraints on Pay Systems
• Minimum wage• Child-labor provision• Computer-related occupations• Overtime provisions• Compensatory time off• Independent contractor regulations• Equal pay & pay equity
Bina Nusantara
Development of a Base Pay System
• Job evaluation * ranking method * classification method * point method * factor comparison
• Legal issues & job evaluation
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• Pay surveys
Wages & salaries survey
Formal Informal
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Pay Structures• Different pay structure• Establishing pay grades• Broadbanding• Pay range• Individual pay• Rates out of range• Pay compression
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Issues Involving Pay Increases• Pay adjustment matrix
• COLA
• Seniority
• Lump-sum increases
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Closing• Compensation can be divided into direct & indirect
compensation• When designing & administering compensation program,
behavioral aspects must be considered• There are several factors in determining salary rates• An effective pay system requires that changes continue to
be made as needed