HRM3705 - Compensation Management SUMMARY STUDY NOTES (2022 EXAM PREP).

HRM3705 - Compensation Management SUMMARY STUDY NOTES (2022 EXAM PREP). Study Unit 1: Strategic Compensation: A Component of Human Resource Systems Compensation refers to all forms of financial returns and tangible resources and benefits employees receive as part of an employment relationship. They are either:  Intrinsic—intrinsic compensation represents employees’ critical psychological states that result from performing their jobs.  Extrinsic—extrinsic compensation includes both monetary and nonmonetary rewards. Compensation is the single most important cost in many organisations. Personnel costs can be as high as 60% of total costs in certain types of manufacturing environments and even higher in some service organisations. However, this means that the effectiveness with which compensation is allocated can make a significant difference in gaining or losing a competitive edge/ advantage. The compensation system Downloaded by: juneymay | Distribution of this document is illegal S - The study-notes marketplace 2 | P a g e Five Core Job Dimensions  Skill variety—the degree to which the job requires the person to perform different tasks  Task identity—the degree to which a job enables a person to complete an entire job from start to finish  Task significance—the degree to which the job has an impact on the lives or work of other people  Autonomy entails the amount of freedom, independence, and discretion the employee enjoys in determining how to perform the job.  Feedback—the degree to which the job or employer provides the employee with clear and direct information about job outcomes and performance p Elements of Core Compensation  Base pay  Hourly pay  Annual salary  Base pay adjustments COLAs  Skill-based pay  Merit pay  Incentive pay  Pay-for-knowledge  Seniority pay There has been an evolution in remuneration. Overall developments in remuneration have resulted in a significant change in the way that employees are rewarded. Traditionally, employees were rewarded by hours worked or the number of years they had served an organisation. Salary administration was extremely bureaucratic, organisations were hierarchical and specialised, and remuneration played no part in an organisation’s strategic objectives. Core Compensation  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 S - The study-notes marketplace Downloaded by: juneymay | Distribution of this document is illegal S - The study-notes marketplace 3 | P a g e  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. Four Compensable Factors  An employee’s skill level  An employee’s effort  An employee’s level of responsibility  The severity of the working conditions Discretionary Benefits Three Broad Categories:  Protection programs—provide family benefits, promote health, and guard against income loss caused by such catastrophic factors such as unemployment, disability, or serious illness  Paid time-off—provides employees with pay for time when they are not working are not working  Services—provides such enhancements as tuition reimbursement and day care assistance to employees and their families Legally-Required Benefits Legislation Designed to:  Promote worker safety and health  Maintain family income Assist families in crisis  Provide assistance in case of -Disability or Unemployment, for example Unemployment Insurance Fund (UIF) Strategic Activities  Strategic decisions: - guide the activities of companies in the market - are concerned with the entire environment in which the company operates, the resources and the people who form the company and the interface between the two and it supports the business objectives  Strategic management—entails judgments that direct a company toward achieving specific goals  Strategic planning—supports business objectives Tactical decisions: – affect the day-to-day implementation of steps required to reach the goals of a strategy, such as recruitment –it supports the fulfilment of strategic decisions S - The study-notes marketplace Downloaded by: juneymay | Distribution of this document is illegal S - The study-notes marketplace 4 | P a g e Competitive Strategy Competitive advantage refers specifically to a company’s ability to maintain market share and profitability over a sustained period of several years. Competitive strategy: –The planned use of company resources  Technology  Capital Competitive Strategy Choices  Lowest Cost: focus on being lowest cost producer/seller of goods or services  Differentiation: focus on offering unique goods or services to the public goods or services to the public. Selected HR strategies that fit two major types of Business Strategies HR Strategies Overall Cost Leadership  Sustained capital investment and access to capital  Explicit job descriptions  Detailed work planning and access to capital  Intense supervision of labour  Tight cost control requiring frequent, detailed control reports  Low cost distribution system and Detailed work planning  Emphasis on technical qualifications and skills, and Emphasis on job-specific training  Low-cost distribution system and Structured organisation and responsibilities  Products designed for ease in manufacture training and Emphasis on job-based pay  Use of performance appraisal as a control device manufacture Differentiation  Strong marketing abilities  Product engineering and Strong capability in basic  Broad job classes and Loose work planning  Emphasis on individual-based research  Corporate reputation for quality or technological leadership S - The study-notes marketplace Downloaded by: juneymay | Distribution of this document is illegal S - The study-notes marketplace 5 | P a g e  Amenities to attract highly pay and Use of performance appraisal as development tool skilled labour, scientists, or creative people.