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HRM (Fach) / Compensation (Lektion)
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- Compensation In general: design of all material incentives that are officially granted by a company to its employees Three main aspects when designing: Choice of criteria for differentiation in compensation ( work requirements and effort, corporate success...) Choice of compensation form (monetary and non-monetary incentives) Determination of the compensation's amount (direct personnel costs, non-wage labor costs...)
- Goals of compensation Work performance and satisfaction Induce strategy-compliant behavior (influence the direction of work by a compensation scheme) Guarantee of compensation justice (Gleichbehandlung, motivation,...)
- Differentiation in compensation Requirement-based - equal pay for equal work Effort-based - equal pay for equal effort (a plus to regular wage) performance-based - equal pay for equal performance/sucess (revenue sharing, profit sharing, comapny value...) skill-based - equal pay for equal qualification status-based - equal pay for equal loyality or equal needs (seniority wages, hierarchical position, status...)
- monetary remuneration elements fixed remuneration elements - time pay and base salary variable remuneration elements - bonuses and equity investments income-generating asset-creating
- non-monetary components Motivation theories: non-monetary incentives ought to increase motivation as well as reduces absenteeism and fluctuation forms: allowances in kind use of grants bank insurance advisory services benefits
- Cafeteria-Systems Depending on individual preferences employees can choose from different material and immaterial goods and services Components: determination of individual budget by the company definition of the range of goods and services by the company Procedure: selection of goods and services by the employee
- Additional staff costs In general: arise in addition to direct personnel costs Legal benefits - employer's contribution on social welfare system tariff and operational additional staff costs - holiday payments Voluntary personnel costs - lay-off compensation...
- Performance-related-pay (PRP) In general: PRP give the employee an incentive to work harder as he profits from higher performance Individual optimaziation problem: effort decision depending on marginal gain and the marginal costs on an additional unit of effort
- Requirement-based compensation Compensation depends on requirements of the task (independent of actual effort) Methods of job evaluation: summary: holistic collection of work requirements analytical: distribution of work tasks into individual types of requests (Geneva scheme --> six types: knowledge, mental strains, muscle strains, responsibility, surroundings conditions) Pro: analytical methods are coherent and reproducible suitable for tasks: that require high quality and accurancy, that inply high risks, for which effort is hard measurable, for which working speed is fixed Cons: hinders innovations in work design
- Effort based compensation Basic principle: performance fairness: Performance pay as reward for actual performance above normal level Goal: increase in performance and satisfaction with work normally in addition to basic wage Types: Piece rate: the sum of the wage depends on the intensity of labor Bonus wage (quantity or quality bonus) efficiency bonus: bonus because of positive assessment
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- Performance-based compensation Pros: high instrumentality and transparency Cons: builds up high performance pressure effort for collecting data, controlling and adaption precise performance and timing targets hardly possible due to changing tasks or teamwork
- Success-related compensation Refers to various monetary and non-monetary poerformance indicators types: Revenue sharing: especially for sales and field staff of importance Profit sharing: consideration of cost and benfit company value: gains in importance due to shareholder-value approach strategic success criteria: achievementof corporate, division or employee goals
- Skill-based compensation Assumption: Corporate Success greatly depends on the development and usage of the human capital --> adjustment of qualifications to work deployment in order to minimize untapped knowlegde and skills Pros: can be used even if job performance is hard to measure encourages permanent training Cons: motivational problems when employees with different qualifications carry out the same work with the same results but are paid differently
- status-based compensation Assumption: length of service leads to higher job performance types: seniority wage hierarchical position Status (age, civil status, number of children) --> to meet the social climate or the public image Pros: simple to measure Cons: does not provide any incentive for individual improvement in performance little empirical evidence on supposed correlation between length of service and performance