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Chapter 1 - The Pay Model

This document provides an overview of compensation management and introduces a pay model. It defines compensation, outlines different perspectives on compensation from society, stockholders, employees, and managers. It also describes forms of pay including cash compensation, benefits, incentives, and long-term incentives. The pay model structures compensation systems around strategic objectives, policies, and techniques to achieve alignment, competitiveness, and fairness while considering contributors and administration.

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627 views9 pages

Chapter 1 - The Pay Model

This document provides an overview of compensation management and introduces a pay model. It defines compensation, outlines different perspectives on compensation from society, stockholders, employees, and managers. It also describes forms of pay including cash compensation, benefits, incentives, and long-term incentives. The pay model structures compensation systems around strategic objectives, policies, and techniques to achieve alignment, competitiveness, and fairness while considering contributors and administration.

Uploaded by

Anonymous Io54FfF0S
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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COMPENSATION

MANAGEMENT
Brief Notes for Students
HRSB 353

CHAPTER 1: THE PAY MODEL


LEARNING OBJECTIVES
 Compensation – Definition
 Forms of pay

 A pay model
Compensation refers to all
forms of financial returns
and tangible services and
benefits employees
receive as part of an
employment relationship.
CONTRASTING PERSPECTIVES OF
PCERSPECTIVES
OMPENSATIONOF COMPENSATION

Society’s Stockholders’
Views – Views – creates a
measure of sense of ownership
justice

Employees’ Managers’
Views – major Views – major
source of financial expenses, to
security, entitlement, influence
and reward employee
behaviors
TOTAL RETURNS FOR WORK
FORMS OF PAY
 Cash Compensation:  Benefits: Income
Base – Salary-pay & Protection
Wage-pay

 Benefits: Work/Life
 Cash Compensation:
Merit Pay / Cost-of- Focus
Living Adjustments
 Benefits: Allowances
 Cash Compensation:
Incentives

 Long-Term Incentives
THE PAY MODEL

STRATEGIC STRATEGIC
TECHNIQUES
POLICIES OBJECTIVES

ALIGNMENT
Work Descriptions Evaluation/ INTERNAL EFFICIENCY 
Analysis Certification STRUCTURE
Performance 
Quality 
Customers
Market Surveys Policy PAY
COMPETITIVENESS Definitions Lines STRUCTURE  Stockholders 
Costs

FAIRNESS
Seniority Performance Merit INCENTIVE
CONTRIBUTORS Based Based Guidelines PROGRAMS COMPLIANCE

ADMINISTRATION Planning Budgeting Communication EVALUATION


Summary
 The model presented in this chapter provides a structure
for understanding compensation systems.
 The three main components of the model include:
 The objectives of the pay system
 The policy decisions that provide the system’s foundation
 The techniques that link policies and objectives
 Two key questions should constantly be asked:
 First, Why do it this way? There is rarely one correct way to
design a system or pay an individual.
 Second, So what? What does this technique do for us? How
does it help achieve our organization goals?
Review Questions
1. How do differing perspectives affect our views
of compensation?
2. What is your definition of compensation?
Which meaning of compensation seems most
appropriate from an employee’s view, return,
reward, or entitlement?
3. How does the pay model help organize one’s
thinking about compensation?
4. What can a pay system do for an organization?
For an employee?

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