The problems of benefit costs were discussed in Chapters 20 and 21. Based on company objective, what does the company want to pay as compensation has to be decided. Each grade has a range, which can be viewed in terms of its maximum, midpoint, and minimum. Compensation plan completes the entire process of deciding the compensation package for the employee, giving it and revising the salaries, wages and incentives with time. This leads to a spiral of changes in the evaluation of jobs, which eventually moves all jobs into a higher grade. These instructions are intended to help individual managers make sound and consistent compensation decisions regarding their employees. If the discussion at the beginning of this chapter is accurate, then turnover and retention rates should be a good indication of the labor market and of employees' knowledge of and response to changes in it. Each time an employee quits, it takes a certain amount of time to replace him or her. The question of accuracy and scope of the data provider is of critical importance when the organization uses the Internet. The turnover rate is 20%. Larger increases signal that the organization wants to retain employees and (depending on how the increases are distributed) is interested in high performance. In contrast, some organizations choose or are forced to pay less than others for the same jobs. Compa-Ratio. Using a number of surveys requires the analyst to take time to integrate the data into a coherent whole. This relationship is reciprocal, since employment needs the input of compensation in order to carry out its function. On the other hand, compensation requires many decisions that a staff group is not in a position to make. Labor Costs. The last decision is the Action Date, the date the increases are to be implemented. Second, there is an interaction between the what and the how. "Building a Strategic Partnership and HR's Role of Change Manager" Employment Relations today, Vol. The timing of these increases affects both the competitiveness of the organization in the labor market and the cost of salary increases for the year. The employees sought by these organizations tend to be less technical and often represent the secondary labor market. Top management has ultimate responsibility for the total compensation program. The organization as a whole may wish to have a compa-ratio of more or less than 1 depending on its pay level policies. The product is again the proposed wage rate for each employee. & Martoccio, J. This can lead to considerable jockeying of job tasks in an organizational unit solely to obtain the job rates that are desired. In this approach the organization has each supervisor indicate the wage change that will be assigned to each employee during the year. The compensation staff is concerned mainly with developing a framework within which to make compensation decisions, collect information for use in compensation decisions, and oversee the total process within the organization. The technical functions that compensation professionals typically carry out are performing job analysis and evaluation, conducting and analyzing wage surveys, developing and adjusting the wage structure, and of course advising line and top management on compensation matters. The job has high turnover, as in an entry level job where employees move up and do not stay long enough to be paid the composite market rate, The job has little turnover and the organizational training required is high, in which case paying the composite market rate or higher tends to guard your significant investment in these employees, a conscious decision by the organization to pay above average. This budget can be developed from the bottom up or top down. The compa-ratio indicates how the salary level of an employee or group of employees compares with the midpoint of the pay range OR with the average wage for a position in the general labor market. The major problem with line managers making these individual pay decisions is consistency. Although this staff-line conflict can never be completely solved, it can be lessened and controlled. Job Levels. Through most of this text the focus has been upon wage rates and their comparison either externally with other organizations or internally between jobs. In some organizations, however, these are not used. Generally companies have a written and documented compensation plan which is adapted and evolves as per the market conditions and competitive pressures. At this point the focus shifts to examining the cost of labor to the organization itself, and to placing that particular cost in context with other expenses and the revenues of the organization. The compensation staff provides the expertise and can do the technical aspects of compensation. Finally this is put into a budgetary format for control purposes. Likewise, no other action has such a cumulative, year-after-year effect on an employer's cash flow and financial well-being.
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