One of the differences that is not formally part of Figure 11-1 is that rewards can be either intrinsic or extrinsic. Procedural justice is the perceived fairness of the process and procedures used to make decisions about employees, including their pay.
Market Competitiveness and Compensation
Third quartile: Strategy above the market (Employer places salary scales so that 25% of other companies pay above and 75% pay below). For example, some employers with comprehensive benefit programs or broad-based incentive programs may choose a first-quartile strategy so that their total compensation costs and levels are not too high.
Competency-Based Pay
Some employers hire illegal immigrants at below-market rates because of the large number of individuals who want to work in the United States. Market Lead Strategy The third quartile strategy uses an aggressive "market lead" approach. This strategy generally allows the company to attract and retain enough workers with the required skills and to be more selective in hiring. Available financial resources, competitive pressures and market availability of employees with different abilities are external factors.
In summary, using a competency-based system requires a significant investment of time and management commitment.
Individual versus Team Rewards
A competency-based system must also recognize or certify employees when they acquire certain competencies and then verify the maintenance of those competencies.
Global Compensation Issues
For example, in some less developed countries, pay levels for graded professionals can range from $15,000 to $30,000 per year, while individuals with the same qualifications in Europe and the United States are paid $50,000 to $80,000 per year. Lower-skilled local workers can earn as little as $300 per month in less developed countries, while comparable employees earn $1,800 to $2,500 per month in the United States and Europe. These large compensation disparities have led to significant "international outsourcing" of jobs to lower-wage countries.
The shift of call center and information technology (IT) jobs to India and manufacturing jobs to China, the Philippines and Mexico are examples.
Compensating Expatriates
This process requires tailoring the compensation approach to suit the needs of the central organization while providing the right incentives and benefits to drive motivation at local units.39 For example, Cox Communications has developed a variable pay framework that provides flexibility to HR -professionals offer. to adapt compensation policies to suit the needs of local workplaces, and although this program is used locally, it serves as a positive benchmark for other international companies.40 Total rewards can also be used to motivate employees in diverse global environments because HR professionals can combine packages with the best practices of other nations to develop appropriate compensation strategies.41.
LEGAL CONSTRAINTS ON PAY SYSTEMS
Fair Labor Standards Act (FLSA)
Employers are required to pay overtime for hourly work to comply with the FLSA. Employees in positions classified as non-exempt salaries are covered by the overtime provisions of the FLSA and must therefore be paid overtime. The FLSA does not require employers to pay overtime for salary-exempt jobs, although some organizations have implemented policies to pay a flat rate for extended hours of overtime.
Its provisions set overtime pay at one and one-half times the regular rate of pay for all hours over 40 per week, except for employees not covered by the FLSA.
Independent Contractor Regulations
Acts Affecting Government Contractors
It deals only with federal construction projects and requires that the "prevailing" wage be paid on all such projects. The prevailing wage is determined by a formula that takes into account the rate paid for a job by most employers in the appropriate geographic area. Two other acts require firms with federal supply or service contracts over $10,000 to pay a prevailing wage.
Legislation on Equal Pay and Pay Equity
State and Local Laws
Garnishment Laws
Lilly Ledbetter Fair Pay Act
Prior to the law's passage, individuals had to file wage discrimination complaints with the EEOC within a 180- or 300-day deadline, which was based on the state where the person was employed. This new legislation effectively negates any statute of limitations for filing a complaint, so wage discrimination claims can now be made at any time after the alleged misconduct.56.
DEVELOPMENT OF A BASE PAY SYSTEM
Employers want their employees to perceive their pay level as appropriate relative to pay for jobs performed by others in the organization. Often employees and managers make comments like "This job is more important than that job in another department, so why are the two jobs paid about the same?" Two general approaches to valuing jobs are available: job evaluation and market pricing. Both approaches are used to determine the values of jobs relative to other jobs in an organization and are discussed next.
Valuing Jobs with Job Evaluation Methods
Although not perfect, the point method of job evaluation is generally better than the ranking and classification methods because it quantifies job elements. Other job evaluation methods There are several job evaluation methods available that are used for different reasons. The ranking method is a simple system that ranks jobs, from highest to lowest, based on their value to the organization.
Legal Issues and Job Evaluation Because job evaluation affects employment, particularly the pay of individuals, some legal issues raise concerns.58 Critics have charged that traditional job evaluation programs place less emphasis on the knowledge, skills, and working conditions of many female-dominated jobs in office and clerical areas. than on the same factors for male-dominated jobs in craft and production areas.
Valuing Jobs Using Market Pricing
An additional advantage of market pricing is that it allows the employer to communicate to employees that the compensation system is truly "market-linked," rather than being sometimes distorted by internal issues. Employees often see a reward system developed using market prices as "obviously valid" and as more objective than a reward system developed using traditional job evaluation methods.61. Disadvantages of market prices The biggest disadvantage of market prices is that wage survey data for many occupations are limited or cannot be collected in a methodologically reliable manner.
For these and other types of jobs, the debate over the use of job evaluation versus market pricing is likely to continue, as there are pluses and minuses to both approaches.
Pay Surveys
A closely related issue is that the responsibilities of a specific position in a company may differ slightly from those of the 'matching' position identified in the research.62. Participants: Does the survey cover a realistic sample of employers with whom the organization competes for employees? Broad base: Includes survey data from employers of different sizes, industries and locations.
Job Matches: The survey contains job summaries so that appropriate matches can be made to job descriptions.
PAY STRUCTURES
Pay Grades
Pay Ranges
The nature, culture and structure of the organization are considerations in determining how many and which pay structures to have. A problem with broadband is that many employees expect a promotion to be accompanied by a salary increase and movement to a new pay grade. As a result of removing this grade progression, the organization may be seen to offer fewer upward promotion opportunities.
An additional concern identified by a research study on broadband provision of IT jobs is that it can significantly affect salary levels and costs.
Individual Pay
Instead, the employee's salary may be raised until the salary range can be adjusted upward to bring the employee's grade pay grade back up. Green-circled employees An individual whose salary is below the limit set for a job is a green-circled employee. In general, it is recommended that the individual in the green circle receive salary increases fast enough to reach the minimum wage level.
Wage compression occurs for a variety of reasons, but the most important involves situations in which labor market wage levels rise faster than workers' actual wage adjustments.68 In response to a shortage of particular job skills in a market highly competitive jobs, managers may occasionally have to pay higher amounts to hire people with those scarce skills.
DETERMINING PAY INCREASES
Wage Compression A major problem facing many employers is wage compression, which occurs when wage differentials between individuals with different levels of experience and performance become small. Also suppose that some good analysts who have been with the firm for several years started with $55,000 and received 4%. These current employees may still be earning less than the $70,000 paid to attract and retain new, less experienced analysts from outside.
Performance-Based Increases
Using salary adjustment matrices bases adjustments in part on a person's comp ratio, which is the salary level divided by the midpoint of the salary range. That movement often depends on the person's performance, as assessed in an appraisal, and on the person's position in the salary range, which also has some relation to experience. According to the chart shown in Figure 11-13, if Employee J is rated as Exceeding Expectations (3) with a comparison ratio of 89, that individual is eligible for a 7% to 9% raise.
Second, as employees move up the salary range, they must show higher performance to achieve the same percentage increase as those lower in the range performing at the "meets performance expectations" level (see Figure 11-13).
Standardized Pay Adjustments
You have recently been given the responsibility to update all company job descriptions to comply with the Fair Labor Standards Act (FLSA) classifications. The organization experienced a severe financial downturn that led to increased employee dissatisfaction and turnover, as well as the departure of the firm's CEO. Reorganizing the organization's compensation policies was one of the key areas targeted for improvement by the firm's leadership.
Based on your experience at Scripps Health, identify some ways performance-based payment systems should be developed.
Pay for Performance Enhances Employee Management at Scripps HealthC A S E
Pat Gurren, “Managing Compensation and Benefits in Turbulent Times”, Workspan Weekly, april 2009, www.worldatwork.org/. Om dit model te bekijken, ga naar WorldatWork Total Rewards Model: Strategies to Attract, Motivate, and Retain Employees, http://www.worldatwork.org/. Total Rewards: The Employment Value Proposition”, Workspan, oktober Success Factors, “3 Steps to Building a Pay-for-Performance Culture”, Workforce Management (speciaal advertentiesupplement).
Kay Gilbert, "The Role of Job Evaluation in Determining Equal Value in Courts: Tool, Weapon, or Obfuscation Device?".
