HRM textbook

382 PART 4 COMPENSATION
employees, it s essential that they know what s expected of them, and that they get
continuing constructive feedback about their performance. Incentives will be a component
of every compensation package. Employers will have to be creative about providing
rewards like stock ownership options to provide young talent with the opportunity to
create retirement wealth through their employment. And nonfinancial rewards including
personal recognition will grow in importance as supplements to financial rewards.
That last point highlights the trend toward viewing rewards not just in terms of pay,
incentives, and benefits, but as total rewards. As noted earlier, total rewards encompass the
traditional compensation components, but also things such as recognition and redesigned
more challenging jobs (as we discussed in this chapter), telecommuting programs,
health and well being programs, and training and career development (discussed in
Chapters 8 and 10). Some employers distribute annual total rewards statements to
employees, to help them appreciate the full range of rewards that they are receiving. 109
Improving Productivity through HRIS
Automating Strategic Compensation Administration
Traditionally, employers used spreadsheets to administer annual pay raise decisions,
and many still do. The human resource department creates individual spreadsheets
for each manager. The managers then record salary increase recommendations for their
subordinates on these spreadsheets. The human resource team then compiles the spreadsheets
by unit, department, division, and, finally, company-wide to add up who was
spending what. This is a labor-intensive and costly process.
Today, companies more often use server-based intranet compensation planning
programs to keep track of who is spending what. 110 This Web-based method has many
advantages. The employer can quickly update its compensation programs (such as how
much is available, and how much each manager can allocate) without having to modify
the software on individual managers computers. Automating the system reduces costs
by eliminating manual processes. For example, one company estimated that it cost
about $35 to complete a single manual compensation transaction (such as combining
the raise budgets for two departments), but about $16 if it automated this process.
Using a centralized application saves money in other ways. For example, employers
often assign pay raise budgets to all their managers, only to find that (once the various
department budgets all come together) the total accumulated raises are excessive. This
generally doesn t happen with automated systems.
R E V I E W
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.
CHAPTER SECTION SUMMARIES
1. In establishing strategic pay plans, managers first need to
understand some basic factors in determining pay rates.
Employee compensation includes both direct financial
payments and indirect financial statements. The factors
determining the design of any pay plan include legal,
union, company strategy/policy, and equity. Legal considerations
include, most importantly, the Fair Labor
Standards Act, which governs matters such as minimum
wages and overtime pay. Specific categories of employees
are exempt from the act or certain provisions of the act,
particularly its overtime provisions. The Equal Pay Act of
1963 and the Employee Retirement Income Security Act
are other important laws.
2. The process of establishing pay rates while ensuring
external, internal, and procedural equity consists of five
steps: conducting a salary survey, determining the worth of