ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
1. What is the difference between absolute and relative pay with regard to motivation?
Absolute pay satisfies physiological and security needs, while relative pay satisfies social and esteem needs, the latter having a greater impact on pay satisfaction and motivation.
2. Why is job analysis information, discussed in Chapter 2, necessary before job evaluations can be performed?
Job analysis information gives compensation specialists an understanding of the jobs and their compensable factors, and of what the key jobs in the organization are. Without job analysis information, even the simpler approaches to job evaluation -- job ranking and job grading -- would be difficult or impossible to do correctly.
3. Suppose when you interview new employees, you ask them what they think is a fair wage or salary. If you hire them, you pay them that amount as long as it is reasonable and not below minimum wage laws. What problems would you expect?
Again, pay dissatisfaction is highly likely. Although the recruits may have been glad to receive the pay asked for, when they learn that others with similar jobs are getting paid more, dissatisfaction may result. In turn, performance may suffer, unionization or strikes may occur, and the attractiveness of the job is likely to decline. Absenteeism, turnover, psychological withdrawal, and other negative effects may occur. 4. Assume your company has a properly conducted compensation program. If a group of employees asks you why they receive different hourly pay rates even though they perform the same job, how would you respond?
All employees should be within the same rate range. Within the rate range, seniority, performance,
productivity, and experience may justify paying different workers different wage rates.
5. Why is the point system superior to all other systems? Discuss the advantages and disadvantages of this system.
The point system is more precise than other methods because it can handle critical factors in more detail. This increased accuracy gives the organization greater assurance that workers are fairly compensated. The disadvantage of the point system is that it is more time- consuming, therefore, more difficult and costly to develop initially.
6. If you are told to find out what competitors in your area are paying their employees, how would you get this information without conducting a wage and salary survey?
Published wage and salary surveys can be obtained from HRSDC, Canada Human Resource Centres, consultants, associations, or possibly from other firms that have already gathered this information.
7. Even after jobs are first priced using a wage-trend line, what other challenges might cause you to adjust some rates upward?
The prevailing wage rate, union pressure, scarcity of recruits, wage and salary policies, minimum wage laws, and exceptional employee performance may lead to wages above the wage trend line.
8. Since financial incentives give employees feedback for good performance and they relate pay to performance, why do most companies pay wages and salaries rather than financial incentives? Several powerful reasons exist to explain the limited use of incentives. The lack of clear-cut standards or measures to evaluate performance is a common reason. Beyond that, there are complexities in the administration of incentive systems, concerns about the
Chapter 9 Compensation Management
impact of uncontrollable forces impacting results, union resistance, and concern that only one aspect of performance will be addressed.
9. Explain the difference between "equal pay for equal work" and "equal pay for work of equal value" and the implications of the difference for a human resources manager.
"Equal pay for equal work" has been part of the Canadian Labour Code for some time. It means that employers have to pay male and female workers the same wages if they perform substantially similar work. Exceptions: where valid seniority and merit pay systems have been adopted.
"Equal pay for work of equal value" is a newer concept included into the Canadian Human Rights Act. It makes it illegal to discriminate on the basis of job value (or content). Four criteria are to be used for job evaluation - - skill, effort, responsibility, and working conditions -- and they are used as a composite measure.
Since the Canadian Human Rights Act is relevant only to organizations under federal jurisdiction, only human resources managers of these organizations have to pay attention to it. However, in several provinces, all human resources managers have to follow the requirements of their specific pay equity laws.
10. Under what circumstances are pay differentials justified?
The Equal Wage Guidelines of the federal legislation define seven "reasonable factors" that can justify differences in wages:
(1) performance differences (as measured by a formal appraisal system)
(2) seniority (based on length of service) (3) red-circling (because of job re-evaluation) (4) rehabilitation assignments
(5) demotion pay
(6) phased-in wage reductions (7) temporary training positions
These factors justify a difference in wages only if they are applied consistently and equitably. It must be clearly demonstrable that existing wage differences are not based on sex.
11. Why is it so important to explain to employees the performance-reward relationship?
If performance is fairly and equitably rewarded, employees tend to experience job satisfaction (not as it had been believed: that happy (satisfied) workers perform well).
12. In what ways does the total reward model differ from the regular compensation approach?
It is defined as the use as rewards of everything an employee values in an employment relationship. It requires a reward system tailor-made for the organization. A regular compensation approach tends use a one-fits-all model, with pay scales and same benefits for all.
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ANSWERS TO CRITICAL THINKING QUESTIONS
1. Suppose you manage a small business with thirty employees. You discover that some people are much more motivated by money and others are motivated by security. To those who want more money, you offer an incentive plan in which their income is determined by their results. The other employees have a fair salary. What problems might arise? The other employees, who do not desire money as strongly, may feel discriminated against because they do not have an opportunity to earn more money. The result is likely to be pay dissatisfaction.
2. "Money is a strong motivator" and "in surveys on what employees want from their job, money ranks 5 or lower." How can you reconcile these two statements?
Employees tend to see money from different points of views. On the one hand, it fulfills basic needs, on the other hand it is seen as a status symbol (see discussion on absolute and relative levels of pay on p. 331).
3. Obviously, profit-sharing plans are not an option as an incentive plan in non-profit and government organizations. Can you think of incentive plans that will fulfill a similar function?
Cost reduction plans, like the Scanlon plan, would fit both types of organizations (see discussion on p. 350).
4. "Minimum wages increase unemployment." Please comment on this statement often made by economists. Do you agree?
There is no conclusive evidence one way or the other. Some economists used data to show that an increase in minimum wages resulted in higher unemployment in certain geographic areas, but critiques point out that other causes could account for this rise. A recent study by another group of economists could not find any evidence of a negative impact of minimum wages, i.e., increased unemployment. So: it's a draw.
5. How should a HR manager find out what employees value as rewards? Is it acceptable to ask employees directly? Discuss. Are other methods preferable? Which? Why?
The best and most valid method is to ask employees directly what they prefer. There is nothing wrong with the direct approach. It provides the employee with the feeling of being involved in the reward process and gives the supervisor individual feedback. Other methods used could be focus groups or, on a larger scale, a survey. These two approaches have the disadvantage of providing only general information. This may be useful for an overview of what types of rewards are valued. However, to be effective, individual preferences are needed.
Chapter 9 Compensation Management
ETHICS QUESTION
Comments to Instructors
There is no right or wrong answer to this question. It is for class discussion purposes.
WEB RESEARCH
Comments to Instructors
These exercises have been designed for students to demonstrate their computer and Internet skills to research the required information. Answers will vary.