Page 1 of 166
,Table of Contents PG. NR.
TOPIC 1: STRATEGIC REMUNERATION .................................................................................................................................................... 5
WORKBOOK 1: STRATEGIC REMUNERATION..................................................................................................................................... 5
INTRODUCTION........................................................................................................................................................................................5
DEFINING REMUNERATION ................................................................................................................................................................5
REMUNERATION COMPONENTS .........................................................................................................................................................6
Direct Remuneration ..................................................................................................................................................................................7
Indirect Remuneration ..............................................................................................................................................................................7
Government Initiatives ............................................................................................................................................................................ 16
Controlling Pay Increase Costs .............................................................................................................................................................. 16
Union Demands ........................................................................................................................................................................................... 16
Cost Effectiveness Of Employee Benefits ......................................................................................................................................... 16
Labour Market Conditions ....................................................................................................................................................................... 16
Changing Employee Needs ....................................................................................................................................................................... 16
Aims Of Strategic Remuneration ........................................................................................................................................................ 23
The Building Blocks Of A Remuneration Strategy .......................................................................................................................... 27
Remuneration Strategy Guiding Principles ........................................................................................................................................ 28
Analyse The Current Situation .............................................................................................................................................................. 31
Review Remuneration Policies And Objectives ................................................................................................................................. 32
Determine Gaps And Develop Strategies .......................................................................................................................................... 33
Implement And Review The Remuneration Strategy ...................................................................................................................... 33
Communicate The Remuneration Strategy ........................................................................................................................................ 33
CHAPTER 1: REMUNERATION MANAGEMENT. CHAPTER 9: GOVERNMENT AND TRADE UNION INVOLVEMENT &
RELEVANT SECTIONS IN WORKBOOK 02 ........................................................................................................................................36
FACTORS INFLUENCING REMUNERATION ................................................................................................................................. 36
Market Pay Rates ..................................................................................................................................................................................... 36
The Economy ............................................................................................................................................................................................. 37
Labour Market .......................................................................................................................................................................................... 37
Government Legislation .......................................................................................................................................................................... 37
Trade Unions ............................................................................................................................................................................................. 37
Organisation Culture And Values ......................................................................................................................................................... 37
Organisation’s Business/Sector ........................................................................................................................................................... 38
Organisation Strategy ............................................................................................................................................................................ 38
People .......................................................................................................................................................................................................... 38
Work Environment ................................................................................................................................................................................... 38
Ability Of On Organisation To Pay ...................................................................................................................................................... 38
Arguments for minimum wages .............................................................................................................................................................. 41
Arguments against minimum wages ...................................................................................................................................................... 42
Economic Factors Impacting On Remuneration ................................................................................................................................ 43
Inflation ..................................................................................................................................................................................................... 43
Minimum Wages ........................................................................................................................................................................................ 43
Pay Differentials ...................................................................................................................................................................................... 43
Trade Unions ............................................................................................................................................................................................. 43
TOPIC 2: DESIGNING REMUNERATION SYSTEMS ............................................................................................................................ 51
WORKBOOK 3: INTERNAL ALIGNMENT ............................................................................................................................................. 51
INTRODUCTION...................................................................................................................................................................................... 51
INTERNAL ALIGNMENT ....................................................................................................................................................................... 51
JOB AND EMPLOYEE BASED STRUCTRES ..................................................................................................................................... 53
JOB BASED STRUCTURES................................................................................................................................................................... 55
Legal Considerations For Job Analysis ............................................................................................................................................... 56
Job Description ........................................................................................................................................................................................ 56
Job Specification ..................................................................................................................................................................................... 57
Page 2 of 166
, Purpose Of Job Evaluation .................................................................................................................................................................... 58
Analytical Methods Of Job Evaluation ............................................................................................................................................... 59
Non-Analytical Methods Of Job Evaluation ...................................................................................................................................... 59
CHAPTER 4: EXTERNAL COMPETITIVENESS....................................................................................................................................64
EXTERNAL COMPETITIVENESS ....................................................................................................................................................... 64
THE MAKE-UP OF EXTERNAL COMPETITIVENESS.................................................................................................................... 66
Industry And Technology....................................................................................................................................................................... 67
Employer Size ........................................................................................................................................................................................... 67
Organisation Strategy ............................................................................................................................................................................ 67
Published Remuneration Surveys.......................................................................................................................................................... 68
Customised Remuneration Surveys ...................................................................................................................................................... 68
Bespoke Remuneration Surveys ............................................................................................................................................................ 68
PORTIONS OF CHAPTER 1: REMUNERATION MANAGEMENT ....................................................................................................89
TOTAL REWARDS................................................................................................................................................................................... 89
HISTORICAL SNAPSHOT .................................................................................................................................................................... 90
TOTAL REWARDS DEFINED ............................................................................................................................................................... 92
CREATING A TOTAL REWARDS STRATEGY ................................................................................................................................. 93
Business strategy and competitive dynamics – understand the business .................................................................................. 96
HR strategy ............................................................................................................................................................................................... 96
Culture/values ........................................................................................................................................................................................... 97
Social and political context ................................................................................................................................................................... 97
Employee needs ........................................................................................................................................................................................ 97
Union needs................................................................................................................................................................................................ 97
TOPIC 3: COMPONENTS OF REMUNERATION .....................................................................................................................................99
CHAPTER 5: EMPLOYEE CONTRIBUTIONS & PORTIONS OF CHAPTER 6: EMPLOYEE BENEFITS..................................99
EXPLORING PAY-FOR-PERFORMANCE ............................................................................................................................................ 99
CLARIFYING THE CONCEPT OF PAY-FOR-PERFORMANCE ..................................................................................................... 101
CRITERIA FOR PAY-FOR-PERFORMANCE PLANS AS MOTIVATOR .................................................................................... 104
OBJECTIVES FOR IMPLEMENTING PAY-FOR-PERFORMANCE PLANS .............................................................................. 105
TYPES OF PAY-FOR PERFORMANCE PLAN ................................................................................................................................... 105
Merit Pay .................................................................................................................................................................................................. 107
Piece Rate Plans ...................................................................................................................................................................................... 107
Commission Schemes ............................................................................................................................................................................. 108
Management Incentive Plan ................................................................................................................................................................. 108
Behavioural Encouragement Plan ........................................................................................................................................................ 108
Employee Referral Plans ....................................................................................................................................................................... 108
Team-based pay-for-performance (work/process teams, parallel teams, project teams) Gain sharing plans (the
scanion plan, the rucker plan, improshare) ...................................................................................................................................... 109
Profit Sharing Employee Stock Option Plans............................................................................................................................. 113
PORTIONS OF CHAPTER 6: EMPLOYEE BENEFITS & WORKBOOK 7 ....................................................................................... 124
INTRODUCTION................................................................................................................................................................................... 124
TYPES OF EMPLOYEE BENEFITS .................................................................................................................................................... 126
Protection programmes (Category 1)................................................................................................................................................. 127
Reasons For Offering Flexible Benefits .......................................................................................................................................... 134
Advantages And Disadvantages Of Flexible Employee Benefits ............................................................................................... 135
Employer Factors ................................................................................................................................................................................... 136
Probation periods ................................................................................................................................................................................... 140
Benefit Limitations ................................................................................................................................................................................ 140
Party Contributions ............................................................................................................................................................................... 140
PORTIONS CHAPTER 8: EXECUTIVE PAY AND SPECIAL GROUPS AND RELEVANT SECTIONS IN WORKBOOK 08142
INTRODUCTION................................................................................................................................................................................... 142
REMUNERATION CONCEPTS ........................................................................................................................................................... 142
EXECUTIVE PAY .................................................................................................................................................................................... 142
Guaranteed Package .............................................................................................................................................................................. 143
Page 3 of 166
, Termination And Post-Employment Payments ................................................................................................................................. 146
The Key Players In Setting Executive Pay ...................................................................................................................................... 147
Theoretical Explanations For Setting Executive Pay ................................................................................................................... 148
WORKBOOK 9: REMUNERATING THE FLEXIBLE WORKFORCE ................................................................................................ 155
INTRODUCTION................................................................................................................................................................................... 155
KEY CONCEPTS ...................................................................................................................................................................................... 155
THE CONTINGENT WORKFORCE .................................................................................................................................................... 155
Non-Executive Directors ..................................................................................................................................................................... 156
ANNEXURE A.............................................................................................................................................................................................. 165
Page 4 of 166
,Table of Contents PG. NR.
TOPIC 1: STRATEGIC REMUNERATION .................................................................................................................................................... 5
WORKBOOK 1: STRATEGIC REMUNERATION..................................................................................................................................... 5
INTRODUCTION........................................................................................................................................................................................5
DEFINING REMUNERATION ................................................................................................................................................................5
REMUNERATION COMPONENTS .........................................................................................................................................................6
Direct Remuneration ..................................................................................................................................................................................7
Indirect Remuneration ..............................................................................................................................................................................7
Government Initiatives ............................................................................................................................................................................ 16
Controlling Pay Increase Costs .............................................................................................................................................................. 16
Union Demands ........................................................................................................................................................................................... 16
Cost Effectiveness Of Employee Benefits ......................................................................................................................................... 16
Labour Market Conditions ....................................................................................................................................................................... 16
Changing Employee Needs ....................................................................................................................................................................... 16
Aims Of Strategic Remuneration ........................................................................................................................................................ 23
The Building Blocks Of A Remuneration Strategy .......................................................................................................................... 27
Remuneration Strategy Guiding Principles ........................................................................................................................................ 28
Analyse The Current Situation .............................................................................................................................................................. 31
Review Remuneration Policies And Objectives ................................................................................................................................. 32
Determine Gaps And Develop Strategies .......................................................................................................................................... 33
Implement And Review The Remuneration Strategy ...................................................................................................................... 33
Communicate The Remuneration Strategy ........................................................................................................................................ 33
CHAPTER 1: REMUNERATION MANAGEMENT. CHAPTER 9: GOVERNMENT AND TRADE UNION INVOLVEMENT &
RELEVANT SECTIONS IN WORKBOOK 02 ........................................................................................................................................36
FACTORS INFLUENCING REMUNERATION ................................................................................................................................. 36
Market Pay Rates ..................................................................................................................................................................................... 36
The Economy ............................................................................................................................................................................................. 37
Labour Market .......................................................................................................................................................................................... 37
Government Legislation .......................................................................................................................................................................... 37
Trade Unions ............................................................................................................................................................................................. 37
Organisation Culture And Values ......................................................................................................................................................... 37
Organisation’s Business/Sector ........................................................................................................................................................... 38
Organisation Strategy ............................................................................................................................................................................ 38
People .......................................................................................................................................................................................................... 38
Work Environment ................................................................................................................................................................................... 38
Ability Of On Organisation To Pay ...................................................................................................................................................... 38
Arguments for minimum wages .............................................................................................................................................................. 41
Arguments against minimum wages ...................................................................................................................................................... 42
Economic Factors Impacting On Remuneration ................................................................................................................................ 43
Inflation ..................................................................................................................................................................................................... 43
Minimum Wages ........................................................................................................................................................................................ 43
Pay Differentials ...................................................................................................................................................................................... 43
Trade Unions ............................................................................................................................................................................................. 43
TOPIC 2: DESIGNING REMUNERATION SYSTEMS ............................................................................................................................ 51
WORKBOOK 3: INTERNAL ALIGNMENT ............................................................................................................................................. 51
INTRODUCTION...................................................................................................................................................................................... 51
INTERNAL ALIGNMENT ....................................................................................................................................................................... 51
JOB AND EMPLOYEE BASED STRUCTRES ..................................................................................................................................... 53
JOB BASED STRUCTURES................................................................................................................................................................... 55
Legal Considerations For Job Analysis ............................................................................................................................................... 56
Job Description ........................................................................................................................................................................................ 56
Job Specification ..................................................................................................................................................................................... 57
Page 2 of 166
, Purpose Of Job Evaluation .................................................................................................................................................................... 58
Analytical Methods Of Job Evaluation ............................................................................................................................................... 59
Non-Analytical Methods Of Job Evaluation ...................................................................................................................................... 59
CHAPTER 4: EXTERNAL COMPETITIVENESS....................................................................................................................................64
EXTERNAL COMPETITIVENESS ....................................................................................................................................................... 64
THE MAKE-UP OF EXTERNAL COMPETITIVENESS.................................................................................................................... 66
Industry And Technology....................................................................................................................................................................... 67
Employer Size ........................................................................................................................................................................................... 67
Organisation Strategy ............................................................................................................................................................................ 67
Published Remuneration Surveys.......................................................................................................................................................... 68
Customised Remuneration Surveys ...................................................................................................................................................... 68
Bespoke Remuneration Surveys ............................................................................................................................................................ 68
PORTIONS OF CHAPTER 1: REMUNERATION MANAGEMENT ....................................................................................................89
TOTAL REWARDS................................................................................................................................................................................... 89
HISTORICAL SNAPSHOT .................................................................................................................................................................... 90
TOTAL REWARDS DEFINED ............................................................................................................................................................... 92
CREATING A TOTAL REWARDS STRATEGY ................................................................................................................................. 93
Business strategy and competitive dynamics – understand the business .................................................................................. 96
HR strategy ............................................................................................................................................................................................... 96
Culture/values ........................................................................................................................................................................................... 97
Social and political context ................................................................................................................................................................... 97
Employee needs ........................................................................................................................................................................................ 97
Union needs................................................................................................................................................................................................ 97
TOPIC 3: COMPONENTS OF REMUNERATION .....................................................................................................................................99
CHAPTER 5: EMPLOYEE CONTRIBUTIONS & PORTIONS OF CHAPTER 6: EMPLOYEE BENEFITS..................................99
EXPLORING PAY-FOR-PERFORMANCE ............................................................................................................................................ 99
CLARIFYING THE CONCEPT OF PAY-FOR-PERFORMANCE ..................................................................................................... 101
CRITERIA FOR PAY-FOR-PERFORMANCE PLANS AS MOTIVATOR .................................................................................... 104
OBJECTIVES FOR IMPLEMENTING PAY-FOR-PERFORMANCE PLANS .............................................................................. 105
TYPES OF PAY-FOR PERFORMANCE PLAN ................................................................................................................................... 105
Merit Pay .................................................................................................................................................................................................. 107
Piece Rate Plans ...................................................................................................................................................................................... 107
Commission Schemes ............................................................................................................................................................................. 108
Management Incentive Plan ................................................................................................................................................................. 108
Behavioural Encouragement Plan ........................................................................................................................................................ 108
Employee Referral Plans ....................................................................................................................................................................... 108
Team-based pay-for-performance (work/process teams, parallel teams, project teams) Gain sharing plans (the
scanion plan, the rucker plan, improshare) ...................................................................................................................................... 109
Profit Sharing Employee Stock Option Plans............................................................................................................................. 113
PORTIONS OF CHAPTER 6: EMPLOYEE BENEFITS & WORKBOOK 7 ....................................................................................... 124
INTRODUCTION................................................................................................................................................................................... 124
TYPES OF EMPLOYEE BENEFITS .................................................................................................................................................... 126
Protection programmes (Category 1)................................................................................................................................................. 127
Reasons For Offering Flexible Benefits .......................................................................................................................................... 134
Advantages And Disadvantages Of Flexible Employee Benefits ............................................................................................... 135
Employer Factors ................................................................................................................................................................................... 136
Probation periods ................................................................................................................................................................................... 140
Benefit Limitations ................................................................................................................................................................................ 140
Party Contributions ............................................................................................................................................................................... 140
PORTIONS CHAPTER 8: EXECUTIVE PAY AND SPECIAL GROUPS AND RELEVANT SECTIONS IN WORKBOOK 08142
INTRODUCTION................................................................................................................................................................................... 142
REMUNERATION CONCEPTS ........................................................................................................................................................... 142
EXECUTIVE PAY .................................................................................................................................................................................... 142
Guaranteed Package .............................................................................................................................................................................. 143
Page 3 of 166
, Termination And Post-Employment Payments ................................................................................................................................. 146
The Key Players In Setting Executive Pay ...................................................................................................................................... 147
Theoretical Explanations For Setting Executive Pay ................................................................................................................... 148
WORKBOOK 9: REMUNERATING THE FLEXIBLE WORKFORCE ................................................................................................ 155
INTRODUCTION................................................................................................................................................................................... 155
KEY CONCEPTS ...................................................................................................................................................................................... 155
THE CONTINGENT WORKFORCE .................................................................................................................................................... 155
Non-Executive Directors ..................................................................................................................................................................... 156
ANNEXURE A.............................................................................................................................................................................................. 165
Page 4 of 166
