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2. What are the cultural issues or beliefs related to compensation in your organization? 3. What is the eligibility requirement for vacation? 4. Is there a cap to limit the amount of vacation accrued? 5. Are employees permitted to substitute sick leave for vacation? 6. How is unused accrued vacation treated? 7. Can employees contribute sick leave to other employees, and if so, what are the limits? 8. How is employee communication regarding compensation and benefits delivered in your organization? 9. Describe the health insurance program provided by your organization? 10. Are dependents covered, and if so, in part or in full? 11. Are domestic partners covered? 12. What are the eligibility requirements for health insurance and other benefits? 13. requirements for coverage? Dental Vision Disability Employee Assistance Program Life Insurance Other wellness benefits Flex benefit plan Other benefits 14. What is the pension or retirement plan? 15. What is the vesting period? 16. Can employees contribute? 17. Can pretax dollars be put into some form of deferment plan? 18. What holidays are paid and who is eligible for them? 19. What is the vacation schedule, and how is it earned?
20. Is there a formal compensation program? 21. How are wages set? 22. Are formal salary ranges set? 23. If formal salary ranges are set, are they made public to employees? 24. How are jobs rated? 25. How frequently are jobs re-evaluated or updated? 26. Are any salary surveys used? If so, which ones? 27. Are pay ranges revised as a result of these surveys? How frequently? 28. Who in your organization (what position) administers the compensation program? 29. Are merit increases given, and if so, are they integrated with performance evaluation? 30. Is there a bonus system, and if so how is it structured?
Relocation Policy, Short-Term Assignment Policies, Benefit Car Policies and other.
The compensation and benefits designs new adjustments to the compensation strategy and the compensation policy as the organization does not lose its competitive advantage on the job market.
Compensation Strategy
Compensation Strategy Key Content Pay Market Strategic Position Setting Compensation Consultants and Compensation Strategy Compensation Strategy building Competitive Advantage Why is compensation strategy important?
does not explain the detail of the compensation scheme and the details of the individual compensation components, but it sets the general guidelines for the compensation components and sets the priorities to be implemented over the period of the HR Strategy implementation.
The high performance corporate culture and the high performance Human Resources organization have to be supported by the compensation strategy, which is designed to be business driven strategy and with the right compensation tools, which motivate employees to go the extra mile and rewarding the real successes.
and better career opportunities to keep the motivation system balanced. When the organization defines its basic compensation goals, it can continue with structuring the main compensation decisions formulated in the compensation strategy.
Competitiveness
The competitiveness of the compensation is another important compensation decision. The organization can decide to be aggressive with the compensation strategy and it can set the aggressive position on the pay market, but this strategy is extremely expensive for the organization and it has to balance it with high margin on the products and services. On the other hand, the organization can choose to offer the career and development opportunities, it can increase the responsibilities of the individual employees and it can balance aim to the lower level of the compensation on the pay market. The decision about the competitiveness of the compensation strategy is extremely important as it has a huge impact on the costs of the organization and it requests the right setting of other HR Processes.
Internal Structures
The organization does not have to follow the same pay market and the same level for all the job positions. It is extremely important compensation decision to be included in the compensation strategy. The organization can decide about making huge pay differences across different units or it can decide about the different pay level for the experts and managers as it protects the know how.
Administration
The administration is a tough compensation decision in the compensation strategy as it sets the roles and responsibilities of Human Resources, managers, top managers in the compensation processes.
The organization can decide about preferring the decentralized compensation model, when the manager decides most issues and pay increases, but Human Resources is in a danger of not keeping the total personnel expenses budget. In the centralized compensation strategy, the HR Managers are the main decision makers and the employees and managers do not feel the comfort of the free decision.
Knowing the competitors on the job market is extremely important for Human Resources. HR Recruiters have to analyze, which companies are sourcing the organization and the HR Front Office has to monitor, what companies hire new employees from the organization. The compensation strategy has to be set as the organization can compete with the competitors on the pay market and the compensation strategy has to be inspired by their compensation strategies. The employees from the competitors working for the organization are usually open to help and they can provide the excellent information, which can save many discussions in determining the right compensation strategy.
identify groups of specific job positions, which will be evaluated and positioned on the pay market differently. The general pay market position is simple, it is easy to explain, the organization uses just one, but the organization loses the flexibility in the setting of the compensation strategy and this can lead to many exceptions in the compensation policy as the key groups of employees are not protected by the compensation policy in general and the managers will ask for the increased protection by using the exceptions. The general pay market position can be more expensive than more pay market positions as the system tends to set the system to protect the key employees and the key job positions and the rest of the populations benefits from it.
and to provide the information about the best practices in the compensation and benefits area. The compensation consultant should never decide about the final compensation strategy, but can provide the useful feedback and advice in the process of designing the compensation strategy. The excellent compensation consultant always asks the clients about the feedback and how the solutions work in practice to have the experience to build on. The compensation consultant can see a new creative solution in one company, which can help to build the HR competitive advantage in another organization. The compensation consultant can help to design the state-of-the-art compensation strategy and can save huge costs to the organization in the future.
Human Resources Management. The employees are the assets of the organization and the competitive advantage in Human Resources Policies can generate a huge impact into the net profits and overall performance and profitability of the organization. The competitive advantage in compensation area usually generates a huge portion of the overall competitive advantage in HR Management.
It is quite dangerous to set the pay market position too high as the organization has to carry the increased costs and eats more from the margins on the products and services. The organization cannot make quick changes and the recession can be deadly dangerous for the organization as it carries higher costs to keep the processes operating and functional. The competitors have a better and bigger space to decrease the personnel costs in bad times. The higher competitive position on the pay market can be used in the time, the organization grows dramatically and it needs the best talents from the job market and there is no time to decide about the key job positions in the organization and all employees are treated to be of the same importance. Keeping the long term higher pay market position is suitable just for the companies in the modern industries, with high margins and the companies with the excellent brand name being known for employing the best of the best.
Competitive advance through strategic pay market position for key job positions
The competitive advantage in compensation can be set just for the key job positions in the organization. This solution is cheaper as the rest of the population can be kept in line with the median of the pay market or it can be below the median as the whole organization keeps the median in general. But, the organization has to be able to reach the consensus about the key job positions in the organization. Setting the key job positions is the painful procedure for Human Resources getting the consensus from the top management is a bit mission impossible, but HR has to accomplish this procedure successfully as the key job positions are identified and Human Resources can set the right compensation strategy for the key job positions.
The differentiation in the compensation strategy and setting the different pay level for the key job positions is quite usual for the larger organizations as they save the personnel expenses and they are able to protect the key employees. It does not protect the key employees automatically, but it support the managers and other HR Processes as the employees feel pretty satisfied with their salaries. The competitive advantage for the key job positions is usually the best pay strategy for the mature organizations, which does not grow aggressively and are purely focused on the product innovations. The key employees bring the innovations and the rest is paid fair enough for their job content.
The compensation strategy differentiates the organization on the job market and builds the attractiveness of the company for the top talents. They love to be hired by the attractive organization, they do not like to be hired by the average company offering the same conditions as any other average organization in the industry.
management and differentiates the employees as the successful ones are not motivated to search for a new job opportunity. The good compensation strategy does not provoke employees to search the web job boards during the working hours, it makes them to focus on delivering the results as they can be highlighted and they feel the highlight in their salaries. The successful compensation strategy gains the competitive advantage and can speed up the innovation processes and improve the performance management practices in the organization.
externally and fully aligned with the policies and the compensation strategy internally. The recruitment of the best top talents from the job market cannot be based on exceptions from the compensation policy. The recruitment and staffing processes have to be supported and backed by the excellent compensation strategy as the HR Recruiters can offer the competitive conditions to the right talents from the job market and they are able to identify the key job positions, where the compensation strategy allows to be more aggressive against the pay market. The job candidates are extremely sensitive to the salary package offered in the Job Offer letter and the compensation and benefits department should measure the number of failures in the job offer acceptations. It is the extremely important sign of the wrongly set compensation strategy, when the job candidates do not accept the job offers made by the organization.
Top management needs an outstanding compensation plan. The executive management is responsible for the delivery of the business results to shareholders. They represent the company to the outside world. They handle the strategic initiatives. They are in a risky position. Their job contract can be cancelled within minutes. They want the protection. The executive compensation plan has a highly motivating component, and it guarantees the income protection in case of the job cancellation.
Clear focus on profits generation Long-term orientation of the compensation scheme Motivation of manager by high bonuses Non-cash focus of the compensation (stock options, shares, share phantom schemes) Risk Management Balanced Scorecard implemented into the Compensation Scheme
The executive compensation scheme has to support goals given by shareholders. The executives take risks of failing. They have to be over-compensated for meeting goals. They should receive an enormous extra bonus for exceeding the expectations (goals given by shareholders). The balance in the compensation has to be in favor of exceeding goals. The HR Professionals have to support the CEO in setting the executive compensation scheme, which support the top management in pushing the organization. The top managers have to make tough decisions. They have to be compensated for overcoming the stress, the pressure of the line management and employees complaints about constant changes in the business operation. Human Resources has to understand the main business goals. HR has to help in setting the executive compensation and alignment with the performance based compensation for the rest of the organization.
Compensation Policy
The compensation policy is the basic document, which drives the detail of the compensation practices in the organization. As the compensation strategy sets the high level compensation goals of the organization, the compensation policy describes the details of the individual compensation components, their behavior and their role in the compensation scheme of the organization.
Salary Surveys
The salary surveys are extremely powerful compensation and benefits benchmarking tool. They are important for the setting right compensation strategy and for following and
monitoring the desired pay market. The salary survey is provided by the external compensation consultant, who gather the compensation information and salary details about the individuals, match the information and provides feedback about the pay market and pay structures back to the participating organizations.
The salary surveys are always based on the proper job evaluation methodology, which is standardized across the industry as the compensation consultant can compare the jobs with the same job size as the job titles are not the suitable for the salary comparisons. The company has to choose the right and suitable job evaluation methodology and this know how is usually provided by the compensation consultants for free.
The salary surveys provide the information about the new trends in the compensation and benefits area and many surveys bring the additional information like the average number of employees per manager, the average length of service for the company, the number of promotions and many other.
initial salary survey and will provide the help, when Human Resources prepares the salary survey results presentation.
function, they fail and they do not support the goals of the organization, they just allow the employees to earn more. The art of developing the sales incentives plans takes several years of learning and measuring the results achieved. The senior manager of the Sales function usually knows, what has to be achieved, but does not know, how to achieve that by using the incentive plans, which are cost-efficient and not hurting the future of the organization. The sales incentive plan has to be fair to the whole organization. The employees in the Back Office and the support functions should not feel the internal unfairness. They understand, that the sales representatives have to be motivated by the additional compensation component, but it should be aligned with the overall compensation scheme and the compensation strategy applied in the whole organization.
for the first incentive scheme in the organization, but the compensation consultants should not be invited later in the process as they can set a generic incentive scheme, which does not fully support the goals of the organization. The organization should develop its internal know-how for the development of the incentive schemes.