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The pay Model

The Pay Model


Policies Alignment Competitiveness Work analysis Market def Techniques Evaluation/ Job Description certification Internal structure Surveys Policy lines Pay structure Objectives Efficiency Performance Quality Customer Cost Fairness

Contributions

Merit Seniority Performan ce based Guidelines based Incentive program Cost Communication Change Evaluation

Management

Compliance

Compensation objectives

Efficiency: Improving performance , increasing quality ,delighting customers and stockholders and controlling labor cost. Equity: Fair treatment for all employees Compliance :Conforming to the various central and state wage legislations and regulation

Compensation Policies

Internal consistency: It refers to comparison among jobs or skills level inside a single organization. External competitiveness: Pay comparison with the competitors (How much and What mix) or market driven. Employee contribution: Paying for performance as it effects employee attitude and work behaviour. Management :What impact does it make on the organizational objectives.

Compensation Techniques

Internal structure: Work analysis ,Job description ,Evaluation/certification Pay structure :Market definitions ,Surveys , Policy lines Incentive programs: Senority based , Performance based and merit guidelines Evaluation :Cost ,communication ,change

Strategic Choices

A strategic perspective focuses on those compensation choices that help the organization gain and sustain competitive advantage. The difference in the firms business strategy should be supported by corresponding difference in its human resource strategy ,including compensation

Strategic Choices
What business should be in? How do we win or gain competitive advantage Corporate objectives , vision, values

Business strategies
Hr strategies Social ,competitive and regulatory env Social compensation decisions Compensation systems Employee attitude and behaviors Competitive advantage

How should HR help us win? How should total compensation help us win ?

Tailor the compensation system to the strategy


Strategy
Innovator

Business response
Product leadership Mass customization Cycle time

HR program alignment
Committed to agile , risk taking ,innovative people

Compensation system
Reward innovation Market based pay Flexible job description

Cost cutter

Operational excellence Pursue cost effective solution

Do more with less

Focus on competitors labor cost Increase variable pay Emphasize Productivity Focus on system control &work specifications

Customer focused

Deliver solution to customers Speed to market

Delight customer, exceed expectation

Customer satisfaction incentives Value of job and skills based on customer contacts

Strategic objectives

Objectives :How should compensation support the business strategy and be adaptive to cultural and regulatory pressure in global environment? Internal Alignment :How differently should the different types and levels of skills and work be paid within the organization? External competitiveness: How should total compensation be positioned against competitors? Employee contributors : Should pay increase be based on individual or team performance ,on experience or on improved skills ,on change in cost of living or on personal needs? Management: How transparent and open should the pay decisions be to all employees? Who should be involved in designing and managing the system?

Steps in formulating a total compensation strategy


Assess total compensation implications Competitive dynamics Culture/values Social/political context Employee/Union needs Map Total compensation Objectives Reassess Alignment

Realign with changes

Competitiveness
Implement strategy Design system Choose techniques Contribution Management

Developing Total Compensation strategy


1.

Asses Total compensation implications


Competitive dynamics :Understanding of the specific industry in which the organization operates and how the organization competes in the industry. Culture and values :A pay system reflects the values that guide an employers behavior and underline its treatment of employees. Social and political context :Context refer to various factors like legal and regulatory requirements ,cultural differences , changing workforce demographics ad expectations. Employee preferences/Union preference: Hr systems:

Cont
2.

Map a total compensation strategy: Objectives: Prominence-Catalyst ,playing a lead role or supportive. Internal Alignment: Flexible design, Hierarchy , Career growth. Competitiveness: How much ,what form ,work life balance. Employee contribution: Incentive to base , individual ,share group success. Management :Line ownership ,transparency , technology ,choice.

Cont..
3.

Implement strategy : Design system to translate strategy into action Choose techniques to fit strategy

Cont
4.

Reassess: Realign as condition change Realign as strategy change

Pay strategy as source of competitive advantage


1.

Align Align with business strategy Align externally with economic and sociopolitical condition Align internally with overall HR strategy

Cont..
2. 3.

Differentiate: Add value

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