Employee compensation

Employee compensation refers to all forms of pay or rewards going to employees and arising from their employment. It includes direct financial payments and indirect payments.

Pay factors

Pay factors includes: Legal, Union, Policy and Equity.

Some important compensation laws

Fair labor standards act

Equal pay act

Title VII of the civil rights act

Age discrimination in employment act

Americans with disabilities act

Family and medical leave act

How employers establish pay rates

1. Conduct a salary survey

2. Employee committee determines the worth of each job

3. Group similar jobs into pay grades

4. Price each pay grade by using wage curves

5. Develop rate ranges

Incentive plans

Individual incentive programs: give performance-based pay to individual employees who meet their individual performance standards.

Team or group incentive plans: companies often want to pay groups on an incentive basis, such as when they want to encourage teamwork.

Incentives for managers and executives: stock option is the right purchase a specific number of shares of company stock at a specific price during a period of time.

Incentives for salespeople: most companies pay their salespeople a combination of salary and commissions.

Merit pay: any salary increase awarded to an employee based on his or her individual performance.

Profit-sharing plan: most employees receive a share of the company’s annual profits.

Employee stock ownership plan: a corporation contributes shares of its own stick – or cash to be used to purchase such stock – to a trust established to purchase shares of the firm’s stock for employees.

Gain sharing plans: want to encourage improved employee productivity by sharing resulting financial gains with employees.