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Flashcards in Determining The Pay Level Deck (42)
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1
Q

How is external competitiveness expressed in practice? (2)

A

(1) setting a pay level that is above, below or equal to that of competitors
(2) determining mix of pay forms relative to those of competitors

2
Q

What is external competitiveness?

A

It refers to pay relationships among organisations- an organisation’s pay relative to its competitors.

3
Q

What is pay level?

A

It refers to the average of the array of rates paid by an employer.

4
Q

What is the array of rates?

A

(base+bonus+benefits+value of stocks)/no. of employees

5
Q

What are pay forms?

A

The various types of payments, or pay mix, that make up total compensation.

6
Q

Both pay level and pay mix decisions focus on ____ (2)

A

(1) controlling costs

(2) attracting and retaining employees

7
Q

Why do pay level decisions impact labour costs? What is the formula?

A

Other things being equal, the higher the pay, the higher the labour cost. Labour cost= Pay level x No. of employees.

8
Q

What are the pay decisions? (2)

A

(1) why would a company pay more than another?

(2) what would justify a pay level that is above whatever the minimum amount is required to attract and retain?

9
Q

What are the reasons to the pay decisions? (5)

A

(1) employees are more productive
(2) employees are more innovative
(3) employees are better trained
(4) employees are less likely to quit- saves recruitment and training costs
(5) company may pay less to differentiate non-financial returns (e.g. more challenging projects)

10
Q

What are the pay level decisions?

A

(1) different companies set different pay levels. They may choose to pay above or below what others are paying for the same job- believe that staff are more productive or better trained
(2) a single company may set a different pay level for different job families

11
Q

How does a company compare to the market?

A

It depends on what competitors it compares to and what pay forms are included.

12
Q

As employees, you should look at ____ rather than base pay.

A

Total compensation

13
Q

What shapes external competitiveness?

A

(1) labour market forces
(2) product market forces
(3) organization factors

14
Q

What are labour market forces?

A

(1) competition in the labour market for people with various skills
(2) labour demand and supply

15
Q

What are product market forces?

A

(1) competition in the products and service markets- affects financial status of the company
(2) determine an organization’s ability to pay

16
Q

What are some examples of product market forces?

A

(1) product demand

(2) degree of competition

17
Q

What is product demand?

A

Puts a lid on the maximum pay level that an employer can set.

18
Q

What is degree of competition?

A

In highly competitive markets, employers are less able to raise prices without loss of revenues.

19
Q

What are organization factors?

A

Characteristics unique to each company and its employees.

20
Q

What are examples of organization factors?

A

(1) industry/technology
(2) company size
(3) people’s preferences
(4) organization’s strategy

21
Q

What is the industry/technology factor? (org)

A

Labour intensive v technology-intensive

22
Q

What is the company size factor? (org)

A

Large companies pay more- more power in the industry to dictate the prices, demand and revenue.

23
Q

What are people’s preferences? (org)

A

Understand what pay forms employees prefer.

24
Q

Why is it important to understand what pay form employees prefer? (org)

A

More satisfaction = more retention = lower labour costs

25
Q

What is organization strategy? (org)

A

Some adopt a low-wage, high services strategy.

26
Q

What are the other relevant market factors? Explain.

A

(1) occupation- skills, knowledge and qualifications
(2) geography- willingness to relocate, commute or become virtual employees
(3) competitors- other employees in the same product/service and labour markets

27
Q

What are the competitive pay policy alternatives?

A

(1) pay with competition (match)
(2) lead policy
(3) lag policy
(4) varying policies
(5) employer of choice
(6) shared choice

28
Q

How to pay with competition (match)?

A

Attempts to ensure an organization’s

(1) wage costs are approximately equal to those of its product competitors
(2) ability to attract potential employees will be approximately equal to its labour market competitors

29
Q

What is the disadvantage to paying with competition?

A

May not have a competitive advantage.

30
Q

Why do companies choose to pay according to market rule?

A

To avoid addressing the unions’ claim that they are not paying equally and fairly.

31
Q

What is lead policy?

A

Distinguishes a company from the competition by compensating employees more highly than most competitors.

32
Q

What is the advantage of lead policy? (2)

A

(1) maximises the ability to attract and retain quality employees
(2) minimises employee dissatisfaction with pay

33
Q

What is the disadvantage of lead policy?

A

If used only to hire new employees, may lead to dissatisfaction of current employees.

34
Q

What is the lag policy?

A

Distinguishes a company from the competition by compensating employees less than most competitors

35
Q

What is the disadvantage of lag policy?

A

May hinder a firm’s ability to attract potential employees.

36
Q

When is lag policy at an advantage?

A

If pay level is lagged in return for promise of higher future returns.

37
Q

What are the advantages of lag policy?

A

(1) increase employee commitment
(2) foster teamwork
(3) increase productivity

38
Q

Employers have ____ pay policies.

A

More than one.

39
Q

Pay policies may vary for _____. (2)

A

(1) different occupational families

(2) different forms of pay

40
Q

What is an employer of choice?

A

Companies compete based on their overall reputation as a place to work, beyond pay level and mix.

41
Q

What is shared choice?

A

(1) begins with traditional options- lead, meet or lag

2) second part- offer employees choices in the pay mix (within limits

42
Q

What does offering the employees choices in the pay mix aim to do?

A

Give employees more say in the forms of pay received.