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Establishing a Pay Structure

and Rewards

Shahla Gahramanova
UNEC, Department of
Economics and Business Administration
shahla.gahramanova@gmail.com
gahramanovas@gmail.com
Decisions involved in establishing a
pay structure.
Unplanned approach
 unfairness, dissatisfaction of employees
 rates that are either overly expensive or
 so low that positions are hard to fill
Two main aspects:
 job structure and
 pay level.
Qnunvericiliyin tələbləri Bazarın tələbləri Təşkilatın məqsədləri
Bərabər iş üçün bərabər  Əmək bazarı  Yüksək keyfiyyətli işçi
ödəniş heyət
 Məhsul bazarı
Minimum əmək haqqı  Xərclərə nəzarət
Overtime üçün ödəniş  Bərabərlik və ədalətlilik
Uşaq əməyindən ist.  Hüquqi uyğunluq
Məhdud-sı
Legal Requirements for Pay
 Product Markets
 Labor Markets
 Employee Judgments about Pay
Fairness
Overtime Pay
 The overtime rate under the FLSA is
one and a half times the employee’s
usual hourly rate, including any
bonuses and piece-rate payments
Overtime-ın hesablanması
Not everyone is eligible for
overtime pay!

Under the FLSA, executive, professional, administrative,


and highly compensated white-collar employees are
considered exempt employees, meaning employers
need not pay them one and a half times their regular
pay for working more than 40 hours per week.
Additional exceptions apply to
certain occupations
 outside salespersons,
 teachers, and computer professionals
and computer professionals (if they
earn at least $27.63 per hour)
Economic Influences on Pay
Employees compare their pay and contributions
against several yardsticks:
 What they think employees in other organizations earn
for doing the same job.
 What they think other employees holding different jobs
within the organization earn for doing work at the same
or different levels.
 What they think other employees in the organization
earn for doing the same job as theirs.
Job Structure: Relative
Value of Jobs
АННОТАЦИЯНАУЧНОЙ СТАТЬИ ПО ЭКОНОМИКЕ И
ЭКОНОМИЧЕСКИМ НАУКАМ, АВТОР НАУЧНОЙ
РАБОТЫ — МУРАВЬЕВА КСЕНИЯ НИКОЛАЕВНА

Инвестиции в человеческий капитал — это затраты, произведенные


в целях будущего увеличения производительности труда работников
и способствующие росту будущих доходов как отдельных носителей
капитала, так и общества в целом. К инвестициям в человеческий
капитал относят расходы на поддержание здоровья, на получение
общего и специального образования; затраты, связанные с поиском
работы, профессиональной подготовкой на производстве,
миграцией, рождением и воспитанием детей, поиском экономически
значимой информации о ценах и заработках и т. д. Для работника
экономический эффект инвестиций выражается в его доходах. Для
фирмы, вкладывающей деньги в развитие персонала,в повышении
производительности труда. Для общества в целом — в поддержании
конкурентоспособности национальной экономики и росте ВВП.
https://cyberleninka.ru/article/n/investitsii-v-chelovecheskiy-kapital-2

INVESTMENTS IN HUMAN CAPITAL


Investments in human capital are the costs incurred in the future in
order to increase the labor productivity of workers and to promote the
growth of future income both of a separate capital owners and society
as a whole. Investments in human capital include the expenses of
health maintenance, receiving the general and special education, the
expenses connected with job hunting, training at a work place,
migration, child-rearing, searching of economically significant
information on the prices and earnings, etc. Economic benefit to the
employee is his income. It is improving productivity for a firm that
invests in staff development. Maintaining the competitiveness of the
national economy and GDP growth is for society as a whole.
Questions for Discussion
 Define the term job analysis. Job analysis is a systematic exploration of the activities
surrounding and within a job. It defines the job’s duties, responsibilities, and
accountabilities.
 Identify the six general techniques for obtaining job analysis information. The six
general techniques for obtaining job information are observation method, individual
interview method, group interview method, structured questionnaire method, technical
conference method, and diary method.
 Describe the steps involved in conducting a job analysis. The steps involved in
conducting a job analysis include: (1) understanding the purpose of conducting the job
analysis, (2) understanding the role of jobs in the organization, (3) benchmarking
positions, (4) determining how to collect job analysis information, (5) seeking clarification
wherever necessary, (6) developing the first draft of the job
 description, and (7) reviewing the draft with the job supervisor.
 Explain job descriptions, job specifications, and job evaluations. Job descriptions
are written statements of what the jobholder does (duties and responsibilities); job
specifications identify the personal characteristics required to perform successfully on
the job; and job evaluations use job analysis information to establish a compensation
system.
 Describe how job analysis permeates all aspects of HRM. Job analysis permeates all
aspects of HRM in that almost everything that HRM does relates directly to the job
Questions for Discussion
 Describe how job analysis permeates all aspects of HRM. Job analysis permeates all
aspects of HRM in that almost everything that HRM does relates directly to the job analysis
process. Recruiting, selection, compensation, performance appraising, employee training
and career activities, and safety and health requirements, for example, are affected by the
job analysis, which identifies necessary skills, knowledge, and abilities.
 Explain flexible scheduling alternatives. Compressed work weeks allow employees to
work longer hours in a day and fewer days in a work week; flex time allows employees to
schedule the time they begin and end their eight-hour working day as long as core hours
are covered; job sharing allows two people to divide one job; and telecommuting enables
employees to use information technology to work outside the office.
 Describe the importance of human resource planning. Employment planning is the
process by which an organization ensures that it has the right number and kinds of people
capable of effectively and efficiently completing tasks that directly support the company’s
mission and strategic goals.
 Define the steps involved in the human resource planning process. The steps in the
employment planning process include formulating a mission statement.
 Identify elements of job enrichment that contribute to employee morale and
productivity. Skill variety, task identity, task significance, autonomy, and feedback all
contribute to employees feeling that their work is meaningful.
What’s on the Menu?
Homework
 Chapter IV. Analyzing and designing jobs Noe+ p.120 (Cenzo)
 HR related movie: Human Resources Manager; The Intern, Up in the
Air. Watch and be ready for discussion for the next class.
 Chapter V. Planning Human Resources
 Discussion: Discuss the relative merits of internal versus external
recruitment. Give an example of a situation in which each of these
approaches might be particularly effective.
 Go to http: www.hrclub.az
 Simulation case for the next class
 Ethical rules from Thomson Reuters
Noe p.150 Thinking ethically. Citizens First?
Learning Objectives
1. Discuss how to plan for human resources needed to carry
out the organization’s strategy.
2. Determine the labor demand for workers in various job
categories.
3. Summarize the advantages and disadvantages of ways to
eliminate a labor surplus and avoid a labor shortage.
4. Describe recruitment policies organizations use to make
job vacancies more attractive.
5. List and compare sources of job applicants.
6. Describe the recruiter’s role in the recruitment process,
including limits and opportunities.
The Process of Human Resource
Planning
Organizations should carry out human resource planning
so as to meet business objectives and gain a competitive
advantage over competitors.
 Human resource planning compares the present
state of the organization with its goals for the future
and
 Then identifies what changes it must make in its
human resources to meet those goals.
Figure 5.1: Overview of the
Human Resource Planning Process
Forecasting
Forecasting attempts to determine the supply and demand
for various types of human resources to predict areas
within the organization where there will be labor shortages
or surpluses.

Three major steps to forecasting are:


1.Forecasting the demand for labor
2.Determining labor supply
3.Determining labor surplus or shortage
Forecasting the Demand for Labor
Trend Analysis Leading Indicators
Constructing and applying Objective measures that
statistical models that accurately predict future
predict labor demand for labor demand:
the next year, given  actions of competitors
 changes in technology
relatively objective
 trends in the composition of the
statistics from the previous workforce and
year.  overall population.
Table 5.1: Transitional Matrix (Sample)

Transitional matrix: a chart that lists job categories held in one period and shows the
proportion of employees in each of those job categories in a future period.
Goal Setting and Strategic
Planning
 The purpose of setting specific numerical goals is to focus
attention on the problem and provide a basis for measuring the
organization’s success in addressing labor shortages and
surpluses.
 The goals should come directly from the analysis of supply and
demand.
 For each goal, the organization must choose one or more human
resource strategies.
 Organizations should retain and attract employees who provide a
core competency (what makes it better than
competitors)
Options for reducing a surplas

Downsizing Pay
Demotions
reductions

Transfer Work Hiring


sharing freeze

Natural Early
Retraining
attrition retirement
Addressing a Labor Shortage
Temporary
Overtime Outsourcing
employees

Retrained Turnover New external


transfers reductions hires

Technological
innovations
Table 5.2: HR Strategies for Addressing
a Labor Shortage or Surplus
Recruiting Human Resources
Any activity carried on by the organization with the
primary purpose of identifying and attracting potential
employees.

The goal of recruiting The goals of selection

Eencouraging qualified Deciding which candidate


people to apply for jobs. would be the best fit.
Personnel Policies
Internal versus external recruiting

Lead-the-market pay strategies

Employment-at-will policies

Image advertising
Recruitment Sources
External labour market

Direct Applicants

Referrals
Sources

Advertisements in
Newspapers and Magazines

Electronic Recruiting

Employment Agencies

Colleges and Universities


Succession planning
Exhibit 5-2. Sample Replacement Chart
P.116 from Cenzo
Recruiting Human Resources
Any activity carried on by the organization with the
primary purpose of identifying and attracting potential
employees.

The goal of recruiting The goals of selection

Eencouraging qualified Deciding which candidate


people to apply for jobs. would be the best fit.
Personnel Policies
Internal versus external recruiting

Lead-the-market pay strategies

Employment-at-will policies

Image advertising
Recruitment Sources
External labour market

Direct Applicants

Referrals
Sources

Advertisements in
Newspapers and Magazines

Electronic Recruiting

Employment Agencies

Colleges and Universities


Implementing and Evaluating the
HR Plan
 When implementing the HR strategy, the organization
must hold some individual accountable for achieving the
goals.
 That person must also have the authority and resources
needed to accomplish those goals.
 Regular progress reports should be issued.
 The evaluation of results should not only look at the
actual numbers, but should also identify which parts of
the planning process contributed to success or failure.
 Image advertising, such
as in this campaign to
recruit nurses, promotes
a whole profession or
organization as opposed
to a specific job opening.
 This ad is designed to
create a positive
impression of the
profession, which is now
facing a shortage of
workers.
Recruitment Sources: Internal
Sources
Job Posting: the process of communicating
information about a job vacancy:
 On company bulletin boards
 In employee publications
 On corporate intranets
 Anywhere else the organization communicates with
employees
Advantages of Internal Sources
1. It generates applicants who are well known to
the organization.
2. These applicants are relatively knowledgeable
about the organization’s vacancies, which
minimizes the possibility of unrealistic job
expectations.
3. Filling vacancies through internal recruiting is
generally cheaper and faster than looking
outside the organization.
One in Three Positions Are
Filled with Insiders
Evaluating the Quality of a
Source
 A ratio that expresses the  Find the cost of using a
Yield ofRatios
percentage applicants who Cost recruitment
particular Per Hire source for
successfully move from one a particular type of vacancy.
stage of the recruitment and  Divide that cost by the number
selection process to the next. of people hired to fill that type of
 By comparing the yield ratios vacancy.
of different recruitment  A low cost per hire means that
sources, we can determine the recruitment source is
which source is the best or efficient.
most efficient for the type of
vacancy.
Table 5.3:
Results of a Hypothetical
Recruiting Effort
Test Your Knowledge
A public accounting firm of 250 employees realizes
they have a surplus of 15 support personnel (not
auditors). What should they do?
A. Hire temporary workers
B. Offer early retirement
C. Downsize people in those positions
D. Wait for attrition and implement a hiring freeze for those
positions
N təşkilatı uzun müddətdir ki, işçi qıtlığı problemi ilə üzləşib və bu problemi
həll etmək üçün daha çox muzdla və müvəqqəti işə götürmə üsuluna
üstünlük verir. İRİ şöbəsi isə bu cür yanaşmanın işçilərin motivasiyasına
mənfi təsir etdiyini düşünür və rəhbərliyi bir sıra vəzifələr üzrə daimi işçilərin
işə qəbul edilməsinin daha doğru olacağına inandırmağa çalışır. Siz İRİ
şöbəsinin rəhbəri olaraq rəhbərliyin qarşısında bu məsələni qaldıraraq onu
müvafiq arqumentlərlə inandırmağa çalışın.

 Muzdlu işçilər daha çox əmək haqqı tələb edir


 Adaptasiya çətindir
 Təşkilata bağlılıq yoxdur
 Əlavə işlərə cəlb etmək olmur
 İnformasiya təhlükəsizliyi məsələsi
 Daha az təcrübəli işçi götürüb az maaş verərək yetişdirmək...
Recruiting Exercise (1 of 2)

You are the regional HR director of the restaurant chain


(e.g., Ruby Tuesday’s or TGI Fridays) and responsible for
recruiting all staff for the restaurants in your region. One of
the stores in your region needs to hire servers.

1. What knowledge, skills, and abilities are required for the positions
you are recruiting?
2. Will your sources of applicants be internal, external, or both?
Explain.
3. What recruiting strategies will you use?
4. What metrics will you use to measure your success?
Summary
 The first step in human resource planning is personnel forecasting. Through trend
analysis and good judgment, the planner tries to determine the supply and demand for
various human resources.
 The next step is to determine the labor demand for workers in various job categories.
Analysis of a transitional matrix can help the planner identify which job categories can
be filled internally and where high turnover is likely.
 To reduce a surplus, downsizing, pay reductions, and demotions deliver fast results
but at a high cost in human suffering that may hurt surviving employees’ motivation
and future recruiting.
 To avoid a labor shortage, requiring overtime is the easiest and fastest strategy.
 Internal recruiting generally makes job vacancies more attractive because candidates
see opportunities for growth and advancement.
 Lead-the-market pay strategies make jobs economically desirable.
 Internal sources are usually not sufficient for all of an organization’s labor needs.
 Through their behavior and other characteristics, recruiters influence the nature of the
job vacancy and the kinds of applicants generated.
Exercises
 Task on finding out the reason for employee turnover
(students have similar case in p. 20)
 Case about job description
 Speak about the training costs and how they are spent in
vain without proper HR planning
 Organizations try to anticipate labor surpluses far enough
ahead that they can freeze hiring and let natural attrition
(people leaving on their own) reduce the labor force.
1. Information input—Where and how a worker gets information
needed to perform the job.
2. Mental processes—The reasoning, decision making, planning,
and information processing activities involved in performing the
job.
3. Work output-The physical activities, tools, and devices used by
the worker to perform the job.
4. Action ships with other persons—The relationships with other
people required in performing the job.
5. Job context—The physical and social contexts where the work
is performed.
6. Other characteristics—The activities, conditions, and
characteristics other than those previously described that are
relevant to the job.
Task:training and development
Assume you are an HR director with a staff of seven people. A
departmental objective is for all staff members to become
professionally certified within a year. Using Internet resources of HR
associations such as www.shrm.org and www.WorldatWork.org,
develop a table that identifies four to six certifications that could be
obtained by your staff members, and show the important details for
each certification.
Case (It’s good for for employee relations and HR
communication)

As human resources manager during a


company reorganization, you must tell
six employees that they will lose their
jobs.