STRATEGIC COMPENSATION
A Human Resource Management Approach
Chapter 6
Building Market-Competitive Compensation Systems
Prepared by Johnny Hanes
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7-1
What Is External Competitiveness?
External competitiveness refers to pay relationships among organizations - an organization’s pay relative to its competitors.
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What is Pay Level?
Pay level refers to the average of the array of rates paid by an employer: (base + bonuses + benefits + value of stocks) / number of employees.
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What are Pay Forms?
Pay forms are the various types of payments, or pay mix, that make up total compensation.
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7-4
Pay Level and Pay Mix: Two Objectives
Control Costs
Attract and Retain Employees
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Pay Level Decisions Impact Labor Cost
Number of Employees
Labor Costs
=
Pay Level
x
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7-6
What Shapes External Competitiveness?
LABOR MARKET FACTORS Nature of Demand Nature of Supply
PRODUCT MARKET FACTORS Degree of Competition Level of Product Demand
EXTERNAL COMPETITIVENESS
ORGANIZATION FACTORS Industry, Strategy, Size Individual Manager
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Organization Factors
Industry and Technology Employer size People’s preferences Organization strategy
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Market-Competitive Pay Systems
Is a company’s compensation policy Fits imperatives of competitive advantage Key role in recruitment and retention
Copyright © 2011 Pearson Education, Inc....