CHAPTER 12

Strategic remuneration management

Session objectives Understand the nature of remuneration strategies and the decisions involved in developing a remuneration strategy Understand the components of a remuneration management system Understand the role of equity in designing a remuneration system Discuss the purpose and strategic design of salary structures

Discuss the use of salary packaging and benefits Understand the use of variable reward programs Be aware of current remuneration issues and trends in remuneration management

Session objectives (cont.)

The most visible reward for work is monetary

Strategic objectives of remuneration

Reward past performance Remain competitive in the labour market Maintain salary equity among employees Motivate future performance Control wage and salary costs Attract and retain good staff Reduce unnecessary staff turnover

Job evaluation systemsJob evaluation systems

Job ranking Job classification

Point system Factor comparison

Common methods of job

comparison

Common methods of job

comparison

The equity component

Internal

External

Individual

Process

Market relativities The market places pressure on organisations to remunerate beyond scope of work value and salary ranges Comparisons can be conducted by:– Matching jobs to those in surveys– Participating in a customised survey– Reading newspaper advertisements– Contacting employer organisations/agencies

Salary packaging and benefits

A salary package can include:A salary package can include:

Base salaryBase salary

Employee superannuation contributionsEmployee superannuation contributions

Motor vehicleMotor vehicle

Value of other fringe benefitsValue of other fringe benefits

Variable rewardsTie individual reward to organisational goals by making payment of the reward contingent on the success of the individual or group through: Incentive plans Bonus plans Profit sharing Sales commissions Share purchase/ownership plans

Current issues in remuneration Pay culture Outsourcing Remuneration differentiation Paying premiums Executive pay Flexible work practices Superannuation Global pay

Future direction of salary structures

Increasing flexibility Enterprise-level negotiation Pay linking to performance management and development programs Emphasis on non-cash components