7.10 Summary

Human Resources departments develop compensation packages that align with the goals and rewards of an organization, paying workers for completed work, and providing incentives to motivate employees. Before developing compensation philosophies, there are basic aspects of compensation packages that need to be addressed. These include determining an organization’s compensation philosophy and analyzing whether the pay scale reflects the importance of various job titles. It also includes, within the organization, is it competitive enough to attract and retain employees, abides by laws, and keeps in line with labour market changes. There are different compensation policies that organizations can choose from, including market, market plus, and market minus philosophies, and each organization’s philosophy depends on its core values and objectives.

Job evaluation is the process of determining the relative worth of jobs to establish a pay structure. It helps to determine if pay is fair among employees and can be done through different methods, such as job ranking systems, job classification systems, and point-factor systems. After a job evaluation is completed, pay grading is performed to set the pay scale for specific jobs or types of jobs. This can be done by developing a variety of pay grade levels and assigning each job a pay grade. It it may have downsides such as a lack of motivation for employees to work harder.

This text discusses different compensation strategies that organizations can use, including skill-based pay, competency-based pay, broad banding, and variable pay systems. The text also highlights three theories related to pay: equity theory, expectancy theory, and reinforcement theory. The equity theory focuses on employees’ perception of pay fairness compared to others. The expectancy theory suggests that employees will work harder if they expect a favourable outcome. Finally, the reinforcement theory explains how rewards can motivate employees to continue with desired behaviours in the future. The text concludes that understanding these theories can help organizations make better decisions when developing pay systems.

Canadian laws related to pay prohibit discrimination in pay systems, and require adherence to pay equity and employment standards acts. Pay equity means equal pay for equal work, and equal pay for work of equal value. Employment standards acts regulate employee rights and responsibilities, including minimum wage, vacations, leaves of absence, and record keeping. Unions are regulated by federal and provincial legislation, and negotiate with employers for higher wages. Labour codes provide guidance for unions and employers in negotiating contracts, strikes and lockouts, health and safety, and labour standards.

Employee benefits are a valuable asset to employers to attract and retain top talent. Benefits include insurances, security through income, time off, educational supports, financial rewards, and employee assistance. Employee benefits have goals that meet the organization, society and employee goals. Some of the benefits are mandatory, and they are provided by the employer due to the laws and the provincial regulations. These include Canada and Quebec pension plans, Employment Insurance, leaves without pay, and those that are governed by the Employment Standards. Other benefits are voluntary and are at the discretion of the employer. Many different benefits can be offered by the employer, such as health benefits, life insurance, extended health insurance, employment income, disability insurance, retirement benefits, RRSP, Tax-Free Savings Accounts, and paid time off.