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Strategic Compensation: A Component of Human Resource Systems

This document provides an overview of compensation systems and strategic human resource management. It discusses the core elements of compensation including base pay, benefits, and performance-based pay. It also outlines strategic compensation goals like internal consistency, market competitiveness, and recognizing individual contributions. Finally, it examines how compensation fits within the broader context of human resources and business strategy, with the goals of attracting top talent and aligning pay with organizational objectives.

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M.Usman Nasir
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153 views21 pages

Strategic Compensation: A Component of Human Resource Systems

This document provides an overview of compensation systems and strategic human resource management. It discusses the core elements of compensation including base pay, benefits, and performance-based pay. It also outlines strategic compensation goals like internal consistency, market competitiveness, and recognizing individual contributions. Finally, it examines how compensation fits within the broader context of human resources and business strategy, with the goals of attracting top talent and aligning pay with organizational objectives.

Uploaded by

M.Usman Nasir
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter 1

Strategic Compensation: A Component of Human Resource Systems

What Is Compensation
Compensation represents the rewards employees receive for performing their job, are either:
Intrinsic- Psychological

mindset Extrinsic- monetary and nonmonetary rewards

5 Core Job Dimensions

Skill variety- job requires person to perform different task Task identity- complete an entire job Task significance-impact on others lives or work of other people

Autonomy- Amount of freedom, independence

Feedback- direct information, job outcomes

Elements of Core Compensation


Base Pay
Hourly pay Annual salary

Base pay adjustments


COLAs- (cost-of-living adjustments) periodic base pay increases on changes in prices as indexed by consumer price index (CPI) Skill-based pay- master new skills Pay for knowledge- successfully learning specific curricula Merit pay-based on job performance Incentive/variable pay- partially or completely attaining predetermined work objective Seniority /longevity pay- periodic additions to base pay according to the length of service

Four Compensable Factors

An employees skill level


An employees effort An employees level of responsibility The severity of the working conditions

Fringe compensation or employee benefits


1. Legally-Required Benefits Federal
Assist families in crisis Provide assistance in case of
Disability Unemployment

Discretionary Benefits
Three Broad Categories
Protection programs

Pay -for-time-not-worked
Services

A historical perspective on compensation: Road toward strategic compensation


Scientific management practices: control labor cost Time and motion studies: Analyzed the time it took employees to complete their jobs Welfare practices: motivate employees to minimize employee desire for union representation

Strategic Vs Tactical Decisions


Strategic decisions - Guide the activities of companies in the market Tactical decisions support the fulfillment of strategic decisions Strategic management - Entails judgments that direct a company toward achieving specific goals Strategic planning - Supports business objectives

Competitive Strategy
The planned use of company resources

2+ years time span


Choices

Lowest cost strategy Differentiation strategy

Competitive Strategy Choices


Lowest Cost: Focus on being lowest cost producer/ seller of goods or services Differentiation: Focus on offering unique goods or services

Lowest-Cost Strategy
Effective when Jobs

Include predictable behaviors


Have a short-term focus Require autonomous activity Focus on quantity of output

Differentiation Strategy
Effective when Jobs:
Require highly creative behaviors Have a long-term focus Demand cooperation & independence Involve risk-taking

Compensation professionals goals


How Hr professionals fit into the corporate hierarchy
Line employees
Directly involved in producing companies goods or delivering their services

Staff employees
Support the line functions

HR practices, how compensation fit into the HR departments


Recruitment

Career development
Labor- management relations Employment termination Insuring legal compliance

Selection

Performance appraisal
Training

Employment Termination
Two Types:

Involuntary
Severance pay: amounts to several months pay

Terminated Laid - off

Voluntary Quit Retired


Pension programs Early retirement programs

The Compensation Departments Main Goals


Internal consistency Market competitiveness Recognizing individual efforts

Internal Consistency
Achieved when the value of each job is clearly defined among all jobs within a company Represents:

Job structure Hierarchy


Achieved using:

Job analysis- process of gathering documenting and analyzing information in order to describe jobs Job evaluation- recognize differences in relative worth among a set of jobs

Market Competitiveness
Compensation policies that fit with business objectives Vital in attracting and retaining employees Are based on:

Strategic analyses-analysis of companys external market (competitors) Compensation surveys collect and analyze competitors content and internal factors (financial conditions, marketing, HR)

Individual Contributions
Pay Structures: Pay is determined by employees credentials, job knowledge, and job performance Pay Grades: Based on compensable factors and value Pay Ranges: Builds on grades, uses midpoints, minimums, and maximums

Stakeholders of the compensation systems


Compensation professionals are responsible for:
Employees Line managers Executives Unions Government

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