KMS2073 Compensation & Benefits Management
KMS2073 Compensation & Benefits Management
Objectives
At the end of this unit, you will be able to:
Describe forms of pay Explain compensation objectives Describe relations between compensation systems with
Society Strategies and objectives of human resource management and development Strategies and objectives of organizations
Forms of Pay
Relational returns
Psychological in nature
Total compensation
Cash compensation/transactional
Base wages
Difference between wage and salary
Benefits
Income protection Work/life balance Allowances
A Pay Model
Three basic building blocks
Compensation objectives Policies that form the foundation of the compensation system Techniques that make up the compensation system
Compensation objectives
Guide the design of the pay system Serve as the standards for judging success of the pay system Policies and techniques are means to reach objectives
Ethics
Organizations care about how its results are achieved
4 Policy choices
Internal alignment Focus comparisons among jobs or skill levels inside a single organization Pay relationships within an organization affect an employees decision to: Stay with the organization Become more flexible by investing in additional training Seek greater responsibility External competitiveness Focus compensation relationships external to the organization: comparison with competitors Pay is market driven
Strategic Choices
Strategy refers to the fundamental directions that an organization chooses
Corporate level: What business should we be in? Business unit level: How to gain and sustain competitive advantage? Functional level: How should total compensation help gain and sustain competitive advantage?
A strategic perspective focuses on those compensation choices that help the organization gain and sustain competitive advantage
Strategic Choices
Step 4
Reassess and realign, closes the loop and recognizes that the strategy must be changing to fit changing conditions Involves periodic reassessment
Best Fit
If design of pay system
Reflects companys strategy and values Is responsive to employees and unions needs Is globally competitive Company is more likely to achieve competitive advantage
Employee contributions
Compensation strategy
Embedding compensation strategy within the broader HR strategy affects results
What practices pay off best under what conditions is an important question to be answered
Thank you