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Why?
To ensure an effective compensation program that develops internal as well as external equity To keep track of personnel cost change significantly affects firms profitability Maintaining employee confidence in stability & fairness of compensation system Though administration increase systems complexity , it makes pay delivery more understandable Affect organizational budgets & makes a significant part of firms financial resources To ensure proper decisions are made among allocations to various compensation components
Compensation Committee
Small select group of 3-5 directors Significant influence on compensation received by senior management Review compensation opportunities made available to all employees Exercises almost total authority over the compensation practices of entire organization Functions include :
Periodically review & appraise the performance of CEO & top management Review compensation of competitive companies Set compensation for CEO Monitor executive perquisites and expenses Review and approve personnel-related budgets Report findings to the full board
Administration of Pay
3 steps: Providing merit or salary increase budget data & information Adjusting pay structure in line with compensation policy, the market, approved merit or salary increase budget for planned year Moving employees in the pay grade relative to level of performance, seniority & location in the pay grade
Senior Management
Common review date- date hired or promoted to present job Date of last adjustment Reason for last adjustment Location in pay grade
Compa-Ratio
Index number to do analysis of pay grade or salary range The average of the employee's actual pay divided by the pay range midpoint within the job grade Use Pay grade analysis Department analysis Relating performance appraisal rating to pay adjustments Merit Budget decisions Pay structure analysis
Control Point
Pay policy rate that reflects relationship with the market Procedure:
Evaluate the job and obtain a point score Assign rate of pay to point score which can be paid to proficient employee in job Call the dollar rate the control point of job
Range Index
Range function = actual rate of pay minimum rate of pay Maximum rate of pay minimum rate of pay A range index of 0.50 means employee is at midpoint of pay grade Managers are informed about movement of employee through pay grade
Target Salary
Combine current rate of pay, location of rate of pay and level of performance Budget and monitor the pay of an individual or all employees
Attracting workers with knowledge and skills that are in short supply
Possibility of bringing new employee at an advanced step or location Causes a conflict with current employees Solution Add some responsibility and duties to the job Separate pay structure for high demand jobs
Differences In Compensation For Regular, Temporary, Part- Time, And Full Time Employees
Regular Full Time employee hired and scheduled to work for number of hours per week and weeks per year (generally 52 weeks) Part Time Employees Scheduled to work from 20 to 32 hours per week (less than a full workweek) Temporary Employees hired to perform assignments ( generally up to 6 months)
Regular part time and temporary full time and part time employees differ from regular full time Regular part time and temporary entry level rates and pay adjustments Regular part time vacation, holiday and sick pay benefits on proportion to hours of work Medical, disability and life insurance vary across organizations Retirement programs applicable to all who work at least 1,000 hours Second party employer pay the personnel cost of temporary worker
DUE PROCESS
Carry out legal proceedings to ensure individual rights in accordance with established rules and procedures Process to protect ownership rights to jobs Process include:
Identifying and describing job requirements Training employees Assisting employees to set performance standards Active participation in performance appraisals Rewards Document Management
Areas to be Audited
Completeness and accuracy of job description Adequacy and use of performance standards for reviewing and rating employee performance Proper classification and grading of jobs Compliance with ADA requirements Pay policy lines Relationship between pay adjustments and performance and performance and current level of pay Provision of pay adjustments Analysis of base pay, ratings and pay adjustments for any kind of illegal discrimination Consistency of use of actual merit pay adjustments and funds budgeted for merit pay
Appeals Process
Need of Appeal Process
There is a body of rules that must be followed Each person has the right to voice his or her side Decisions will be made on the basis of facts Every effort will be made to treat everyone the same
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