8) CHRA Set I Drills. Compensation Administration by Zarate. Chapter I. HREAP Reviewer. HR terms.

Summary

This script discusses various aspects of employee compensation, including direct and indirect rewards, base and variable pay, and the objectives of compensation. It differentiates between wages and salaries and explains the importance of job analysis, description, and evaluation. The script also covers economic theories on wages, such as the subsistence theory, and the factors influencing pay rates, emphasizing the dynamic nature of the labor market.

Takeaways

• 💼 Compensation refers to the monetary value given for work performed, which includes salary, wage, benefits, and other forms of payment.
• 📈 Variable pay is linked to performance accomplishments, such as bonuses or incentives, and is distinct from base pay which is fixed.
• 🎁 Benefits are indirect rewards, either mandated by the government or provided voluntarily by employers, and include things like insurance and vacation leaves.
• 🎯 The objectives of compensation are to retain high-performing employees, achieve high productivity, satisfy legal pay requirements, and reduce turnover.
• 🔍 There are two main classifications of compensation: direct (monetary value like salary and bonuses) and indirect (non-monetary like benefits).
• 📊 Job evaluation is the process of determining a job's worth, which is crucial for establishing fair and competitive pay structures within an organization.
• 🌐 External competitiveness ensures that an organization's compensation is in line with industry standards to prevent employees from seeking opportunities elsewhere.
• 📉 The subsistence theory suggests that if wages fall below a certain level, it can lead to a decrease in population and labor supply, which may eventually increase wages.
• 🏛️ The iron law of wages indicates a tendency for wages to remain at a subsistence level, as coined by Ferdinand Lasalle, emphasizing the minimum necessary for survival.
• 🤝 Bargaining Theory, developed by John Davidson, highlights the importance of workers' bargaining power in determining wage levels, suggesting that stronger worker negotiation leads to higher wages.
• 📚 Educational attainment is a key factor in determining pay rates, often considered more important than experience and skills, and serves as a baseline for qualifications in the labor market.

Q & A

What is the term used to describe the monetary value given for work performed by an employee?

Compensation is the term used to describe the monetary value given for work performed by an employee.

Which type of pay is not considered one of the three basic types of compensation?

Invariable pay is not considered one of the three basic types of compensation.

What is the term for pay given to an employee for the actual work rendered, usually in the form of salary or wage?

Base pay is the term for pay given to an employee for the actual work rendered, usually in the form of salary or wage.

What is variable pay and how is it linked to performance?

Variable pay is linked to actual accomplishments in performance such as bonuses or incentives based on a target sales quota or target productivity.

What are benefits in the context of employee compensation?

Benefits are indirect rewards which may either be government-mandated or voluntarily given by the employer.

What are the objectives of compensation, according to the script?

The objectives of compensation include retaining high-performing employees, achieving high productivity, satisfying pay requirements in accordance with the law, and reducing employee turnover.

What are the two classifications of compensation mentioned in the script?

The two classifications of compensation mentioned in the script are direct compensation and indirect compensation.

What is the definition of direct compensation?

Direct compensation is defined as an actual monetary value paid to an employee, which can be in the form of salary, wage, bonuses, incentives, commissions, and other performance-based pay.

What is indirect compensation and what does it include?

Indirect compensation refers to non-monetary aspects of compensation, including benefits packages such as hospitalization and life insurance plans, sickness and vacation leaves, car plans, and educational grants.

Which policy affects compensation that is not mentioned in the script?

Social and political issues are not mentioned as policies that affect compensation in the script.

What is internal alignment in the context of compensation policies?

Internal alignment is a policy that addresses possible pay comparison among employees with related or similar tasks, ensuring that employees are paid according to their contribution to the organization.

How does external competitiveness affect compensation packages?

External competitiveness ensures that the organization's compensation package is at par with those of their competitors, preventing employees from transferring to competing organizations.

What is job analysis in the context of compensation?

Job analysis is defined as the process of determining all the information specific to a particular job.

What is the subsistence theory and its implication on wages?

The subsistence theory implies that if actual wages fall below the subsistence level, the population will decrease, leading to a lower labor supply and an increase in wages, which can result in famine, starvation, and disease.

What is the iron law of wages and its relation to the minimum wage?

The iron law of wages is the tendency of wages to remain fixed at a subsistence or minimum level. It suggests that wages cannot fall below the minimum because workers will not be able to work.

Who is David Ricardo and how is he related to the iron law of wages?

David Ricardo is a British Economist who used terms natural price and market price of Labor to explain the iron law of wages.

What is the difference between wages and salary according to the script?

Wages and salary have differences in how often they are paid, how they are computed, and in general who receives them.

How are salaries and wages typically paid according to the script?

Salaries are typically paid semi-monthly or on a fixed period, while wages are paid daily, weekly, or more often than semi-monthly. However, both can be paid once a month.

Is the labor market static or dynamic, as mentioned in the script?

The labor market is dynamic, meaning employees can freely move from one employer to another and employers can hire, fire, or rehire as they choose.