HRM3705 – COMPENSATION MANAGEMENT lecture notes

HRM3705 – COMPENSATION MANAGEMENT

STUDY UNIT 1 – Strategic Compensation: A Component of HR systems
Learning Outcomes: hyraam
2016-05-12 15:32:50
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1. Define and critically discuss the context of compensation – Compensation refers to
I am sure
all forms of financial returns and tangible services & benefits employees that aas
receive lot more detail
can be added here
part of an employment relationship. Compensation comprises of Intrinsic & Extrinsic
rewards.

2. Differentiate between tactical and strategic decisions and discuss the
relevant concepts –
hyraam
Strategic decisions: 2016-05-12 15:33:30
Guide the activities of companies in the market and are concerned with the entire
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environment in which the company operates, the resources and the people who
Examples maybe?form
the company and the interface between the two and it supports the business
objectives.
Tactical decisions:
Affect the day-to-day implementation of steps required to reach the goals of a
strategy, such as recruitment and it supports the fulfilment of strategic decisions


3. Describe how the compensation function fits into the HR department –




Bussin (2011) states that linking the remuneration to the HR functions allows for an
integrated service to the business and a greater focus on its strategies. The strategies and
goals of the remuneration function include the following:

 Developing reward policies that are appropriate and in support of the overall business
strategies


 Implementing systems and administration procedures that are effective, and that
result in reliable management information

 Providing comprehensive customer service that is professional, effective and
satisfying




Open Rubric

,There are advantages if remuneration/compensation is linked to the HR function:
 . Integrated systems


 Increased data integrity

 Improved information availability

 Improved response time

 Increased flexibility and ease of change to meet business goals

 Improved teamwork ± there is a close working relationship between
payroll administration and HR consultants

 Effective one-stop employee pay and benefits service and information centre

 Enhanced employee communication and education

 Improved customer service and satisfaction


4. Critically discuss the compensation department's main objectives –

 internal consistency -Achieved when the value of each job is clearly defined

 Market competitiveness - Definition: The pay relationship among organisations
and focuses attention on the competitive positions reflected in these relationships
• Also known as external competitiveness
• Compensation policies that fit with business objectives
hyraam
• Vital in attracting and retaining employees 2016-05-12 15:40:15
• Are based on: --------------------------------------------
• Strategic analyses Very little information. I am
• Compensation surveys hoping that these are only key
words students will use to study?
If such a question was asked in an
 recognition of individual contributions- exam much more detail would be
needed. Also see comments
• Pay Structures: pay is determined by employee’s credentials, job above. and
knowledge,
job performance

• Pay Grades: based on compensable factors and value
• Pay Ranges: builds on grades, uses midpoints, minimums, and maximums

, 5. Discuss the difference between cash compensation (direct compensation) and
benefits (indirect compensation), and define each of the direct and indirect forms
of compensation. –

Cash compensation consists of: Monetary / financial rewards.

 Core compensation : Annual/ hourly salary & Adjustments to core compensation.



Benefits consist of Non-monetary/non financial rewards.

 Discretionary Employee benefits
 Legally required benefits.




• Base pay
- Hourly pay Annual salary

• Base pay adjustments
- COLAs
- Skill-based pay
- Merit pay
- Incentive pay
- Pay-for-knowledge
- Seniority pay

,  COLAs—COLAs represent periodic base pay increases that are founded on
changes in prices as indexed by the consumer price index (CPI).

 Seniority Pay—seniority pay systems reward employees with periodic additions to
base pay according to employees’ length of service in performing their jobs

 Merit Pay—merit pay programs assume that employees’ compensation over time
should be determined, at least in part, by differences in job performance.

 Incentive Pay—incentive pay (or variable pay) rewards employees for partially
or completely attaining a predetermined work objective.

 Pay-for-Knowledge Plans—pay-for-knowledge plans reward managerial, service,
or professional workers for successfully learning specific curricula

 Skill-based Pay—skill-based pay is used mostly for employees who perform
physical work and increases these workers’ pay as they master new skills




Three Broad Categories of Benefits

 Protection programs—provide family benefits, promote health, and guard
against income loss caused by such catastrophic factors as unemployment,
disability, or serious illness

 Paid time-off—provides employees with pay for time when they are not working

 Services—provides such enhancements as tuition reimbursement and day care
assistance to employees and their families


Legislation Designed to:

• Promote worker safety and health
• Maintain family income
• Assist families in crisis
• Provide assistance in case of
• Disability
• Unemployment, for example Unemployment Insurance Fund (UIF)