Deck 10: Compensation: an Overview

Question 1

What is the difference between direct and indirect financial compensation?

Answer 1

Compensation can be defined as reward every individual receive for performing organizational task. It is one of the major cost of doing business for businesses. Employees trade labor and loyalty for financial and non-financial compensations. Financial compensation is of two types i.e. direct and indirect. Direct financial compensation consists of salaries, wages, bonuses or commission. Indirect financial compensation includes all kind of insurance, vacations, childcare etc.
Major difference between financial and non-financial compensation are

Question 2

Pay for each individual in the United States is set relative to three groups. Name them and explain why each is important.

Answer 2

Compensation can be defined as reward every individual receive for performing organizational task. It is one of the major cost of doing business for businesses. Employees trade labor and loyalty for financial and non-financial compensations. Setting compensation or pay structure is one of the toughest job, where HR tries to satisfy both employee and employer.
Pay for particular group is set relative to three group
1. Group A : Employees working in similar job in other organization
2. Group B: Employees working in different job in same organization
3. Group C: Employees working on similar job within organization
1. Group A: It can also be called as pay level decision. Here manager benchmarks pay of people working inside organization with those working in other organization. Here Manager can adopt three type of strategy i.e. high pay strategy, low pay strategy and comparable pay strategy. High pay strategy helps to attract top talents to the organization while low pay strategy helps to reduce salary bill. Comparable pay strategy helps to attract decent talents to organization. The choice of strategy reflects attitude and motivation of manager. If manager has high need then he might opt for high pay strategy, if otherwise, he might choose low pay strategy. This group also explains degree to which organization can attract and retain employee. This shows organization's ability to pay
2. Group B: It can also be called as pay structure decision. In this company constructs pay hierarchy or structure. This can be constructed by using job evaluation method. Essentially, job evaluation relates the amount of pay for each job to the extent to which job contributes to organizational growth.
3. Group c: It can also be called as individual pay decision. Here manager looks into two individuals who are working at same level. Key question for manager is whether both should be paid similar pay or not. If both are paid different, what is the basic for it. This is very important parameter as both these individual would be working together and at some point both would know each other salary. This might create challenges for HR to explain.

Question 3

What is pay satisfaction? Why is it so difficult to measure it and relate it to a compensation system?

Answer 3

Satisfaction can be defined as attitude of liking or disliking something. It can also be defined as fulfilment of once expectation or wishes. Satisfaction differs from individual to individuals. Hence once liking might not be others liking.
Pay satisfaction can be defined as employees liking or disliking of employers compensation package which includes pay and benefits. Even through there are multiple research around pay satisfaction, it is not definitive. Recent study has shown that there is weak correlation between pay level and employee job satisfaction. One reason might be because pay satisfaction is subjective in nature. Pay structure which is satisfying to one might not be satisfying to other. Other reason is that sheer complexity of reward system which is made up of components like base pay, bonus, benefits etc. Hence while measuring, one has to take account of large number of variables which makes it very difficult to measure it.

Question 4

Linking pay and productivity has been around since the days of the Babylonians. How much do we really know about the relationship?

Question 5

What is the difference between equal pay and comparable worth? Why are these concepts so important?

Question 6

In locating a new office that would employ about 300 employees, how would compensation play a role in making the decision for where the new office should be located?

Question 7

How would you go about deciding if a pay survey you wanted to buy had the necessary characteristics to be useful to your organization?

Question 8

Define the pay-structure decision. What is the job evaluation and how does it help managers build a pay structure?

Question 9

Do you believe that outsourcing is here to stay, or is it a passing fad? Explain.

Question 10

Define the term broadbanding. How does it relate to traditional job evaluation outcomes like pay ranges and classes?

Question 11

In your view, is comparable worth a legitimate strategy for determining job compensation?

Question 12

Are the director of Twin Oak's HR department, what recommendations would you make to James Bledsoe?

Question 13

From an HRM perspective, what are the challenges of implementing comparable worth?