Human Resource Management
By Laura Portolese Dias
© Laura Portolese Dias 2011, published by Flat World Knowledge
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© Laura Portolese Dias 2011, published by Flat World Knowledge
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Chapter 6
Compensation and Benefits
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Learning Objective
1. Be able to explain the goals of a
compensation plan.
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Goals of a Compensation Plan
• A compensation package includes
– Pay
– Healthcare
– Benefits
• WorldatWork Certifications in the area of
compensation
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Goals of a Compensation Plan
• A compensation plan should
– Attract new candidates
– Motivate people to stay with the organization
– Improve morale, motivation, and satisfaction
– Reward performance
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Goals of a Compensation Plan
• Appropriate compensations plans also
– Can create better customer service
– Add to the bottom line, as fairly compensated
employees
– Provide indirect cost savings
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Learning Objectives
1. Be able to explain the internal and external
considerations of compensation package
development.
2. Know how to develop a compensation philosophy.
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Developing a
Compensation Package
• Basic compensation questions to address
– From the employee’s perspective, what is a fair wage?
– Are wages too high to achieve financial health in your
organization?
– Do managers and employees know and buy into your
compensation philosophy?
– Does the pay scale reflect the importance of various
job titles within the organization?
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Developing a
Compensation Package
• Basic compensation questions to address
– Is your compensation good enough to retain
employees?
– Are state and federal laws being met with your
compensation package?
– Is your compensation philosophy keeping in line
with labor market changes, industry changes, and
organizational changes?
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Developing a
Compensation Package
• Compensation considerations
– Regional factors
– Lower or higher strategy?
– Pay scales
– Balance of salary and other rewards
– Pay increases
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Developing a
Compensation Package
• Compensation strategies
– Market compensation policy
– Market plus
– Market minus
• Reasons for choosing one strategy over
another
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Learning Objectives
1. Explain types of job evaluation systems and
their uses.
2. Be able to define and discuss the types of pay
systems and factors determining the type of
pay system used.
3. Know the laws relating to compensation.
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Types of Pay Systems
• Job evaluation systems
– Paired comparison
– Job classification system
– Hay Profile Method
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Types of Pay Systems
• Pay systems
– Pay grade levels
– Going rate model
– Fit model
– Other considerations
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Types of Pay Systems
• Pay Theories
– Equity theory
– Expectancy theory
– Reinforcement theory
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Types of Pay Systems
• Desirable traits of incentive
compensation plans
– Communicated
– Attainable but challenging
– Easily understandable
– Tied to company goals
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Types of Pay Systems
• Laws relating to pay
– Comparable worth
– Equal Pay Act
– Fair Standards Labor Act
– Federal Unemployment Tax
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Learning Objective
1. Explain the various types of benefits that can
be offered to employees.
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Other Types of Compensation
• Mandated compensation
– Social Security
– Medicare
– Unemployment
– Workers’ Compensation
– COBRA
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Other Types of Compensation
• Voluntary compensation
– Incentive pay systems
– Medical insurance
– 401(k) plans
– Paid time off
© Laura Portolese Dias 2011, published by Flat World Knowledge
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