STRATEGIC
COMPENSATION
A Human Resource Management Approach
Chapter 1:
Strategic
Compensation: A
Component of Human
Resource Systems
Copyright © 2015 Pearson Education, Inc.
1-1
Learning Objectives
1. Describe what compensation is and give at
least three examples of core compensation
practices and at least three examples of
employee benefits practices.
2. Summarize at least two historical events in the
evolution of compensation practice leading to
the current strategic compensation era.
3. Discuss at least two differences between
strategic and tactical compensation.
Copyright © 2015 Pearson Education, Inc.
1-2
Learning Objectives
4. Name and summarize the goals of
compensation professionals.
5. Identify the stakeholders of the compensation
and summarize their stake in the work
compensation professionals perform.
Copyright © 2015 Pearson Education, Inc.
1-3
Learning Objective 1
Describe what compensation is and give at
least three examples of core compensation
practices and at least three examples of
employee benefits practices.
Copyright © 2015 Pearson Education, Inc.
1-4
What Is Compensation?
• Compensation represents the rewards
employees receive for performing their job.
They are either:
– Intrinsic: intrinsic compensation represents
employees’ critical psychological states that
result from performing their jobs.
– Extrinsic: extrinsic compensation includes
both monetary and nonmonetary rewards.
Copyright © 2015 Pearson Education, Inc.
1-5
Components of Total
Compensation
Copyright © 2015 Pearson Education, Inc.
1-6
Elements of Core Compensation
Base pay
- Hourly pay
- Annual salary
Base pay adjustments
- COLAs
- Seniority pay
- Merit pay
- Skill-based pay
- Incentive pay
- Person-focused pay
Copyright © 2015 Pearson Education, Inc.
1-7
Base Pay
Compensable factors
• An employee’s skill level
• An employee’s effort
• An...