WEB BASED COMPENSATION AND PLANNING

When learning session in the class about web based compensation and planning, compensation can be the most complex in HRM because it includes some items such base pay, merit pay, short-term and long-term incentives, perquisites, recognition awards, and attraction or retention awards that may impact the performance of employees. The base pay is based of two processes which are job evaluation and market benchmarking. Job evaluation creates an internal hierarchy of value. In the most common form of job evaluation, a set of factors is developed that reflects characteristics that add value to work in the specific organization such the education required. Market benchmarking is used to price the structure or individual jobs. Many of these surveys available electronically and can be integrated into the compensation information system. An employee is placed in the salary grade appropriate for her or his job. Each grade has a midpoint that serves as a proxy for all the jobs in that grade, and a range is built around that midpoint. The structure is adjusted each year based on market movements.

However, if the organization uses a merit pay system, then the size of performance level is difference. For example, the higher the performance then the larger increases of merit pay and the lower the place in the range of performance then the higher the increase. The short-term incentive pay includes bonuses; gain sharing; goal sharing; small-group incentives; and profit sharing. It usually has specific measures to set up prior to the beginning of the program that will drive payout. Long-term incentives are primarily based on organization stock; options to buy organization stock; or phantom can be known as make believe stock. The goal of long-term incentives is to align the interests of employees with those of shareholders and to motivate aligned performance over periods of more than one year.

Perquisites are rewards that are a function of organizational status such executive dining room; first-class or corporate jet air travel; and club memberships. Recognition awards are low-cost or no-cost awards that are retrospective. When an employee does something of note, he or she receives an award that may have little financial value but is psychologically rewarding. Attraction or retention awards are one-time awards that used to attract prospective employees to organization or persuade them to remain with organization. Compensation can also be used to motivate all employees to perform at a higher level. As systems technology has progressed, managers have become better able to enhance the performance of their direct reports and to tailor compensation and benefits programs to attract, retain, and motivate the best.