Human Resource Management

(HRM)
Manpower planning
Increasing output per person per unit of time
Personal management
Administrative support function
Human resource management
Quality HR systems design

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The concept of
Compensation in modern
HRM
Compensation represents both the
intrinsic and extrinsic rewards
employees receive for performing
their job
Intrinsic
Extrinsic

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Intrinsic Compensation
5CORE JOB DIMENSIONS

Skill Variety
Task Identity
Meaningfulness
Task Significance
Autonomy
Responsibility
Feedback Results
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Core compensation
(Direct)

Fringe Compensation
(Indirect)

Extrinsic Compensation
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Base Pay
Hourly Pay (Wages)
Annual Pay (Salary)

Base Pay Adjustments

Cost of living Adjustments (COLAs)

Extrinsic Compensation
ELEMENTS OF CORE COMPENSATION
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 An Employees Skill Level
An Employees Effort
An Employees Level of
Responsibility

The Severity of the Working

Conditions

4 COMPENSABLE FACTORS
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Seniority Pay
Human capital theory
Merit pay
Based on performance / effort / result
Incentive pay
Attaining a predetermined objective
Pay for knowledge / Skill based pay
Range, depth, type of skill / knowledge

Pay Systems
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Promote Worker Safety and Health
Maintain Family Income
Assist Families in Crisis
Provide Assistance in Case of
Disability
Unemployment

FRINGE COMPENSATION
Legally-required benefits
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 3 Broad Categories

Protection Programs (Health Insurance)

Pay -for-Time-not-Worked (Vacation)

Services (Daycare Assistance)

Discretionary Benefits
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 Strategic Planning - Supports
business objectives
Strategic Management - Designed to
help companies distinguish between
threats and opportunities
Strategic Decisions - Guide the
activities of companies in the market

STRATEGIC ACTIVITIES
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 Competitive Strategy
Strategic Decisions
H R strategy
Compensation strategy

Recruitment and selection

Training and development
General HR tactical Compensation Management
decision Performance management
Employee relations

Specific HR Seniority pay , merit pay, incentives

(Compensation Pay for knowledge, skill based pay
Management) Broad banding, two tier pay
Decisions Discretionary benefits
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 The Planned Use of Company
Resources to Promote
Competitive Advantage
2+ Years Time Span
Choices
Lowest Cost Strategy
Differentiation Strategy

COMPETITIVE STRATEGY
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 Lowest Cost: Focus is on Being
the Lowest Cost Producer of
Goods or Services

Differentiation: Focus is on
Offering Unique Goods or
Services

COMPETITIVE STRATEGY
CHOICES
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Effective When Jobs:
Include Predictable Behaviors
Have a Short-Term Focus
Require Autonomous Activity
Focus on Quantity of Output

LOWEST COST STRATEGY

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Effective When Jobs:
Require Highly Creative Behaviors
Have a Long - Term Focus
Demand Employee Cooperation &
Independence
Involve Risk - Taking

DIFFERENTIATION STRATEGY
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 Base Pay Seniority Pay
Incentive Pay Pay-for-
Knowledge
Two-tier Pay
Skill - Based
Broad banding Pay
Merit Pay

TACTICAL PAY DECISIONS

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 Compensation and recruitment
Compensation and performance
appraisal
Compensation and training
Compensation and career development
Compensation and Labor-Management
Relations

Relationship of Compensation
Management within HRM
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 Internal Consistency

Market Competitiveness

Recognizing Individual
Contributions

COMPENSATION GOALS
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 Achieved When the Value of Each Job
is Clearly Defined
Represents:
Job Structure
Hierarchy
Achieved Using:
Job Analysis
Job Evaluation

INTERNAL CONSISTENCY
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 Represents a Companies
Compensation Policies that Fit with
its Business Objectives
Plays a Significant Role in Attracting
and Retaining Employees
Are Based on:
Strategic Analyses
Compensation Surveys

MARKET COMPETITIVENESS
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INDIVIDUAL
CONTRIBUTIONS
Pay Structures: Pay is Determined
by Employees Credentials, Job
Knowledge, and Job Performance
Pay Grades: Based on Compensable
Factors and Value
Pay Ranges: Builds on Grades,
Uses Midpoints, Minimums,
and Maximums

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STAKEHOLDERS
Are Individuals or Entities that are
Directly Affected by a Companys
Compensation Practices, Like
Employees
Line Managers
Executives
Unions
Government

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