pensation:AnOverviewchapter10pensationDealswitheverytypeofrewardindividualsreceiveinexchangeforperformingorganizationaltasksMajorcostofdoingbusinessChiefreasonwhymostindividualsseekemploymentAnexchangerelationshipFinancialpensationDirectFinancialpensationConsistsofthepayanemployeereceivesintheformof:wagessalariesbonusesmissionsIndirectFinancialpensationConsistsofallfinancialrewardsnotincludedindirectfinancialpensation–i.e.,benefits:pensionsinsurancepaidtimeoffemployeeservicesObjectiveofpensationTocreateasystemofrewardsthatisequitabletotheemployerandemployeealikeThedesiredoueisanemployeewhois:AttractedtotheworkMotivatedtodoagoodjobfortheemployerApensationsystemshouldbe:(*focusofthischapter)Adequate*Equitable*BalancedCost-effectiveSecureIncentive-providing*AcceptabletotheemployeeLaborMarketEconomyGovernmentUnionsExternalInfluencesonpensationpensationandanInternationalLaborForceIssuesthataffectthepensationstrategiesoforganizationspetinginaglobalmarket:GlobalwagedifferentialsvergingontheextremeMovingAmericanemployeestoforeignlocationsEmployinglocal(foreign)managersandworkersMovingforeignworkerstotheUnitedStatesfortrainingorworkassignmentsGovernmentInfluences:WageControls

andGuidelines:

(1of2)WageStabilizationAct(1942)DefenseProductionAct(1950)EconomicStabilizationAct(1970)GovernmentInfluences:WageControls

andGuidelines:(2of2)Wagefreezes–forbidwageincreasesWagecontrols–limitthesizeofwageincreasesWageguidelines–voluntarylimitsonwageincreasesGovernmentInfluences:WageandHourRegulationsFairLaborStandardsAct(FLSA)of1938minimumwageovertimeexemptworkersnonexemptworkerschildlaborrecordkeepingrequirementsEqualPayActof1963EqualPayActof1963EstablishedtheconceptofequalpayforequalworkProhibitswagedifferentialsbasedongenderbetweenmenandwomenperformingessentiallythesameworkinorganizationsskilleffortresponsibilityworkingconditionsparableWorthAttemptstoprovethatemployerssystematicallydiscriminatebypayingwomenlessthantheirworkisintrinsicallyworth,versuswhattheypaymenwhoworkinparable(equallyvaluable)positions–andtoremedythissituation.CivilRightsAct(1964)AgeDiscriminationAct(1967)FederalWageGarnishmentAct(1970)Davis-BaconAct(1931)ServiceContractAct(1965)Walsh-HealyAct(1936)GovernmentInfluence:OtherPayLegislationInternalInfluencesonpensationOrganizationSizeOrganizationAgeLaborBudgetWhoMakespensationDecisionsPayandMotivationMotivation–setofattitudesandvaluesthatpredisposesapersontoactinaspecific,goal-directedmanner:thedirectionofbehavior(workingtoreachagoal)thestrengthofbehavior(howhardorstronglytheindividualwillwork)SocialparisonTheoriesExpectancyTheoryReinforcementTheoriesNeedsTheoriesHerzberg’sTwo-FactorTheoryTheoriesofMotivationPayandEmployees’SatisfactionPaySatisfaction–referstoanemployee’slikingforordislikeoftheemployer’spensationpackage(includingpayandbenefits)ler’sModel–thedistinctionbetweentheamountemployeesreceiveandtheamounttheythinkothersarereceivingistheimmediatecauseofpaysatisfactionordissatisfactionPaydissatisfactionisafunctionofsiximportantjudgments:AdiscrepancybetweenwhatemployeeswantandwhattheyreceiveAdiscrepancybetweenaparisonoueandwhattheygetPastexpectationsofreceivingmorerewardsLowexpectationsforthefutureAfeelingofdeservingorbeingentitledtomorethantheyaregettingAfeelingthattheyarenotpersonallyresponsibleforpoorresultsPayandEmployees’ProductivityStudiesindicatethatifpayistiedtoperformance,theemployeeproducesahigherqualityandquantityofworkThekeytomakingpensationsystemsmoreeffectiveistobesurethattheyaredirectlyconnectedtoexpectedbehaviorspensationDecisions(1of3)Pay-LevelDecisionExaminespayrelativetoemployeesworkingonsimilarjobsinotherorganizationsObjectiveistokeeptheorganizationpetitiveinthelabormarketPaysurveyisthemajortoolusedinthisdecisionpensationDecisions(2of3)Pay-StructureDecisionExaminespayrelativetoemployeesworkingondifferentjobswithintheorganizationInvolvessettingavalueoneachjobwithintheorganizationrelativetoallotherjobsJobevaluationistheapproachusedpensationDecisions(3of3)IndividualPayDeterminationExaminespayrelativetoemployeesworkingonthesamejobwithintheorganizationPay-LevelStrategiesHigh-PayStrategyLow-PayStrategyparable-PayStrategyFactorsAffectingtheChoiceofPayStrategyThemotivationandattitudesheldbymanagementTheethicalandmoralattitudeofmanagementThedegreetowhichanorganizationcanattractandretainpersonnelTheorganization’sabilitytopayPaySurveysTechniquesandinstrumentsusedtocollectdataaboutpensationpaidtoemployeesin:ageographicareaanindustryanoccupationalgroupObtainingvalid,reliableinformationaboutpayiscriticaltocreatingapensationsystemthatsupportscorporategoalsGovernmentSourcesProfessionalandTradeOrganizationsSurveysConductedbyOtherOrganizationsSurveysbyJournalsSourcesofPaySurveysCriticalIssuesDeterminingtheUsefulnessofPaySurveys:ThejobscoveredWhowillbesurveyedThemethodusedTheinformationgatheredPayStructureDecisionAninternalpayhierarchyBasedonasystematicparisonbetweentheworthofonejobandtheworthofanotherJobEvaluation–theformalprocessbywhichtherelativeworthofvariousjobsintheorganizationisdeterminedforpaypurposesparisonofJobEvaluationSystemsparisonBasisNon-Quantitativeparison(JobasWhole)Quantitativeparison(PartsofFactorsofJobs)JobversusjobJobrankingFactorparisonJobversusscaleJobgradingorclassificationPointsystemDegreesofFactorExampleofEvaluationPointsforInsuranceClericalJob(500-pointsystem)PAYJobEvaluationPoints100150200250300350monthlysalary(000)87654321IIIIIIIVVPayClassesPayCurvePayClassesandPayCurvePAYJobEvaluationPoints80120160200240280320monthlysalary($000)8765432140IIIIIIIVVVIVIIPayClassesPayClassGraphwithRangeofPayDelayeringandBroadbandingDelayeringAreductionofthetotalnumberofjobsResultsinaflatterjobstructureCanincreaseflexibilityEmployeescanmoveamongawiderrangeofjobswithoutadjustingpaywitheachmoveBroadbandingCollapsesmultiplesalarygrade