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COMPENSATION Third Canadian Edition Milkovich, Newman, Cole

COMPENSATION Third Canadian Edition Milkovich, Newman, Cole. Chapter 13 Budgets and Administration. Managing Labour Costs. Labour Costs. Employment. Average cash compensation. Average benefit cost. +. =. x. Core. Base Pay. Variable Pay. Contingent. Managing Labour Costs.

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COMPENSATION Third Canadian Edition Milkovich, Newman, Cole

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  1. COMPENSATIONThird Canadian EditionMilkovich, Newman, Cole Chapter 13 Budgets and Administration

  2. Managing Labour Costs Labour Costs Employment Average cash compensation Average benefit cost + = x Core Base Pay Variable Pay Contingent

  3. Managing Labour Costs • controlling employment: head count and hours • controlling average cash compensation costs

  4. Controlling Salary Costs: Top Down • current year’s rise • ability to pay • competitive market • turnover effects • cost of living

  5. Three Distinct but Related Concepts and Their Measures Personal Expense Budget Employee’s cost of living Goods/service markets price changes Labour market wage changes Consumer Price Index Pay Surveys

  6. Controlling Salary Costs: Bottom Up • instruct managers in compensation policies and techniques • distribute forecasting instructions and worksheets • provide consultation to managers • check data and compile reports • analyze forecasts • review/revise forecasts and budgets with management • conduct feedback with management • monitor budgeted versus actual increases

  7. Inherent Controls • range maximums and minimums • broad bands • compa-ratios • variable pay • analyzing costs of wage proposals

  8. The Compensation Communication Cycle Defining the Objectives What are the goals? Evaluating the Program Obtaining the Information Was the program successful? What is the current situation? Conducting the Sessions Developing the Strategy How should the sessions be implemented? What is the best overall approach? Determining the Media What “tools” are most appropriate?

  9. job descriptions job evaluation market data collection and analysis pay structure development incentive plan design performance appraisal system salary management administration procedures benefit plans Compensation Components Communicated to All Audiences

  10. Conducting Formal Communication Sessions for Various Audiences

  11. Structuring the Compensation Function • centralization – decentralization • flexibility within corporate-wide principles • reengineering and outsourcing

  12. Conclusion • pay administration includes control of how managers decide individual employees’ pay and of overall costs of labour • the salary budgeting and forecasting processes impose additional controls • pay systems are tools that must be evaluated in terms of usefulness in achieving an organization’s objectives

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