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19 Cards in this Set

  • Front
  • Back

Constraints of Compensation Strategy


Labour Market

Product/Service Market


Employment Standards Legislation

Legislation that sets minimum standards for pay and other conditions of employment

Human Rights Legislation

Legislation that prohibits discrimination in hiring or employment on the basis of race, ethnic origin, religion, gender, marital status, or age

Trade Union Legislation

Legislation that defines the rights of parties involved in a collective bargaining relationship

Labour Market Constraints

Constraints on compensation strategy flowing from the relative levels of demand and supply for particular occupational groups

Product/Service Market Constraints

Constraints on compensation strategy caused by the nature of the product/service market in which the firm operates

Types of Legislative Constraints on Compensation System

Employment Standards

Human Rights

Trade Union

Steps in the Compensation Strategy Formulation Process

1. Define Required Behaviour

2. Define Role of Compensation

3. Determine the Compensation Mix

4. Determine Compensation Level

5. Evaluate Proposed Strategy

How do you define the required behaviour?

Membership - costs of turnover, affective commitment vs. continuance commitment

Task - Simple or complex? Supervision?

Citizenship - Importance of cooperation, Importance of ideas?

Technical Ladder

Defined progression of skills development to keep work interesting and provide opportunities for higher compensation

How do you define the role of compensation?

Consider what intrinsic rewards vs. compensation are needed for the organization. Also what role extrinsic rewards other than compensation will help. Example: chicken-processing plant only needs to stimulate membership behaviour so compensation through pay is the only motivating role necessary

How do you determine the compensation mix?

Determine mix of base, performance, and indirect pay and how each component will be structured... for example will the foundation of the base pay be determined through market pricing or job evaluation

How do you determine the Compensation Level?

Determine whether organization will lag, match, or lead

Define hybrid compensation level

A compensation-level strategy that varies across employee groups or compensation components

How do you evaluate the proposed compensation strategy?

Use three basic screens:

1. Affordability

2. Legality

3. Employee attraction

If it can't pass all screens, the strategy is a nonstarter

Define contingent workers

Workers not employed on a permanent full-time basis

Define job sharing

Two workers who share one full-time permanent job

Why do executives make so much?

Answer relies in primarily in bonuses and incentives

Firm size, less hierarchal levels produce less pay, not always rational

Decisions for CEO pay

1. The amount of performance pay relative to base pay and indirect pay

2. The amount of short-term performances vs. long term pay.

3. The nature of the performance itself

4. The specific performance indicators used as the criteria for performance pay.

5. The stringency of the performance criteria

6. The time period used as the performance period for the incentive