Compensation: Methods and Policies

CHAPTER 11- COMPENSATION Methods and Policies Determination of Individual Pay Manage must talk to two questions in order to determine how employees be paying. First, how one employee is paid relative to another employee within the alike(p) company and performing the same job junction. Second, if the pay is different, then on what basis was this distinction determined-experience, skills, performance, seniority, higher(prenominal) performance, merit or some other basis.Organizations apply pay differentials to bonk employees different contribution to the organization, to communicate a changed emphasis on weighty job roles, skills, and knowledge, to emphasize the norms of the organization without having employees change jobs, that is promotion, to avoid violating the internal uprightness norms and to recognize market changes amid jobs (page 328).Methods of Payments 1)Flat Pay Unionized firms normally use the single flat rate of pay order by corporate bargaining rather than diff erential rates of pay. These firms still recognize the differences between employees seniority and experience but choose not to recognize these variations when scope wage rates. 2) Payment for Time Worked This is the most common way employees are paid in the form of wages (nonexempt and hourly paid) or net income (exempt and annually or monthly paid).Pays flock be adjusted upward(a) in 4 ways namely general increase crossways the board, exclusive merit increase base on performance, cost of existent adjustment (COLA) and seniority. 3) Variable Pay bonus Compensation. Based on multinational and global competitive, American businesses have now increasingly turned to multivariate pay plans as an attempt to link pay to performance and productivity to be competitive internationally.Pay methods can be flexible and can be built into the variant compensation plan by pickings a total compensation approach which include the following terzetto elements namely base pay (serves as pla tform for variable pay), variable pay ( gainsharing, winsharing, lumpsum tributees, individual flexible pay, etc) (page 330). inducing compensation is a method of paying employees on the basis of their output either individually, to the work throng or on an enterprisewide basis. 1) Merit Incentive is pay related to the individual performance.Traditional merit is pay from a higher base net income after the annual performance evaluation. 2) Individual Incentive This is the oldest form of bonus plan where individuals are paid for units produced. The following forms are included down the stairs this method piecework, production bonus and commission. Piece work can be straight piece work (sawing mill) or standard-hour plan (mechanic shop). Production bonus refers to employee hourly rate plus a bonus when the employee exceeds the standards (page332).Commission is based on the percentage of sales in units or dollars. 3) Team Incentive This includes the entire groups incentive used to build the team culture. 4) Organizational Incentive Reward based from shared profits generated by the employees efforts or coin saved from the employees efforts to reduce cost (page 346). 5) Garnishing Incentive These are companywide group incentive plans that unite employees to improve organizational effectiveness through a monetary formula for distributing organizationwide gains (page 356. )