Human resources - week 4

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  • Created by: jmf00632
  • Created on: 02-11-19 17:08
what is a key element of the employee/ employer relationship?
A core element of the employment relationship is the payment of employees.
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what is our survival linked to?
our survival is linked to what organisations are willing to trade for our work
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what is it also about?
• Also about Attracting, Retaining and Motivating employees – ARM
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what is consumer price index?
if prices go up then so do wages
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why is there a delay between consumer price index and annual wages?
– the reaction is slow because wages are on a spiral but only upwards, never downwards. if they go down employees will go bonkers
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An example of this is...
. asda threatening to sack all of their employees because they realised that they were too generous with their workforce so they need to cut back on human resources
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• how do contemporary organisations go about rewarding their employees without increasing wages? e.g.
training or free eye care treatment – total reward worth £30,000- 18,000 is wages £12,000 is everything else
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the enviro - reward strategies
globalisation has forced organisations to change their strategy and publc sector cuts
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How can we motivate and reward valued staff without increasing the pay bill?
total reward and contingency pay
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what are award strategies about?
Thus, reward strategies are about encouraging a confluence of interests between employees and the organisation
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uk historical context (rewards)
• TU and collective bargaining • The New Pay
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Strategic Reward Management (public sector)
- Public sector cuts (must find innovative ways to reward employees when on a budget)
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strategic reward (global comp)
- Global competition = tighter profit margins and harder to ARM by increasing the salaries on offer
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TOTAL Reward- - Organisations may be constraint on how much they can pay, but they are not constrained in providing employees
- career development opportunities, - flexible working patterns, or a - stimulating and pleasant working environment
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CONTINGENCY
- Salary progression and bonus payments conditional on attainment of new or increased skills; productivity (when output is easily measured)
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Thus, reward strategies are about encouraging a confluence of interest between employees and the organisation. - new pay approach
introduced in the 1980's - approach to focusing investment in employee reward, which can be located in the 'best practice' (or 'normative') tradition of thinking
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• How much should we pay each person in the organisation? – job strategic
e.g. a teacher has more responsibility than a care taker so on the scale a teacher will get paid more - this is an objective way to answer the question
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- why cant we always achieve variable pay In organizations? and why do we always have to be mindful of it?
it can be more difficult to monitor performance. the employee only has a certain amount of control over the output of their performance - it will depend on many factors, including labour market: tight and loose (wages are forced downwards)
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what is the reward man strategy? 1 out of 4 (intentionws)
1. Clear statement of intentions- • What the strategy is seeking to achieve • Which reward initiatives have been chosen in order to achieve these core objectives
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what is the reward man staregy? 2 out of 4 (results fitting)
These result in a ‘business case’ or ‘rationale’ for the chosen strategy – Does the strategy fit into everything else? such as..culture enviro - fit
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what is the reward man strategy? 3 out of 4 (ethical issues)
. Explanation of guiding principles and values- ethical issues e.g. equal pay between men and women and • Fairness in rewarding individual exceptional performance
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what is the reward man strategy? 4 out of 4- implentation plan-(who is meant to be doing whatt to ensure that all of these steps are done?
• What initiatives are being brought forward and when • Who has responsibility for their introduction • What are the costs
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the obecctives of a reward system are..... (you pay peanuts you get monkeys)
• Attract suitable candidates • Retain and motivate current employees • Achieve its ends at an acceptable cost • Enable flexibility, creativity and innovation
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obectives of a reward system - tradiotial approach - supply and demand
Attract & Retain (but not motivation) • Classical model (Adam Smith) • Labour market not much different from the market for bananas - Increased demand = price should increase - At some point, equilibrium
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the labour market - it is not much different to what.....
the market for bananas
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explain this..(labour market)
if demand exceeds the supply the price should increase; if supply exceeded demand, the reverse should happen and the price should fall; at some point demand should equal supply at an equilibrium point.’
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Economic Explanations for pay variations What are the assumptions in the classical model?
- Assumes that labour is free to choose between work and leisure- but what about monopsony (where single/small number of firms dominate the labour market)? - firms have limited discretion they have to pay what the market dictates
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Neo-institutional critique of the economy
IT IS NOT JUST ABOUT SUPPLY AND DEMAND
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the economy is also about...... 1 out of 4- Institutional forces
• precedent, unions, belief (equity), ability to pay
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the economy is also about...... 2 out of 4- presence of unemployment
• Classical model = 0 unemployment • Wages are ‘sticky’
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the economy is also about 3 out of 4 -Pay rates for occupations within localities differ
• But not just explained by differences in human capital (capabilities/experience)
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the economy is also about...managerial policies create the diff (1 out of 4
• High-paying and low-paying firms. High payers are more profitable and larger (most important determinant of top executive pay is company size)
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what are the other alternative theories that explain variation?- efficency wages (2 out of 4)
- Incentive effect; generate extra effort - Sorting effect; attract better quality applicants (Lazear, 2000 windscreen fitters study)- Directs attention to human capital (differences between similar workers in the same occupation); use wages to diffe
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what are the other alternative theories that explain variation? - rent sharing (3 out of 4)
- Return received that is in excess of the minimum needed to undertake activity
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what are the other alternative theories that explain variation?- gift exchange
Labour contracts as partial gift exchanges (Akerlof) Firms pay wages in excess of market rates as an uncontracted gift in the hope that employees reciprocate with higher effort
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what are the other alternative theories that explain variation? HTC (Human capital theory)
Individuals accumulate HCT by investing time and money in education, training, experience, etc. and this brings benefits to employers
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critique of human capital theory (HTC)
costly potential new employers to verify skills arising from training, resulting in capacity of current employer to pay below market wages. - it is a way of "locking in employees" after general skills training
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why pay systems vary (4)
1. External Labour Market (external relativities) 2.Internal Labour 3. job evaluation 4. union baragging
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why pay systems vary - External Labour Market (external relativities)
– Ensuring wages compare to external market. – Differing regional/occupational rates of pay.
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why pay systems vary - Internal Labour Market (internal differentials)
– Shielding employees from external labour market. – Response to government, e.g. CEO pay, minimum wage, gender differences
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why pay sytems vary - Job evaluation (relative worth of jobs) and issues
this does nt eliminate collective bargaining. issues of job evaluation - – Costs of implementation and adoption – Discovering over-paid workers/jobs; must give recompense to agree a change of contract/pay
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contined issues of job evaluation
– Red-circled jobs (outliers) – current employees continue to receive the same (high) pay, new employees in the post paid at the lower rate
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what is collective bargaining?
negotiation of wages and other conditions of employment by an organized body of employees.
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does collective barganing still happen?
- Until 40 years ago, was the dominant method used to determine pay- - Now, if at all, at plant or company level in the manufacturing/service sector (13% of workplaces)
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what are managers and unions negotiations based on?
based on: external labour market rates, internal pay determination mechanisms and the size of the job
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why can they use collective barg but other employees cannot?
- Because of their ‘industrial muscle’ they can sometimes ‘secure’ a better pay deal for their members than market rates would allow. e.g royal mail 9% pay increase over 3 years
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what is pay dispersion?
Pay dispersion is a concept where employers pay different amount of wages or salaries to their employees for the same skills and the same type of work.
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what is pay compression?
when you have small differences in pay regardless of experience, skills, level, or seniority.
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negatives of dispersion?
conflict over perceived inequity
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beenefits of dispersion?
– ability to use pay as a motivator
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negatives of compression?
top performers may leave if underpaid
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benefits of compresion?
– greater cooperation
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dispersion is...
competition
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compresion is.....
collaboration
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when thinking about variation of wages it is important to think about.....
about dispersion and compression of rewards/pay/compensation
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how can we use reward to motivate eployees?
pay to reward good behaviour as well as • Reward Management needs to be a coherent fit with all other polices and organizational elements (overall corporate strategy, culture, structure, appraisals, resourcing strategies etc.).
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what is total reward?
Balance between pay, benefits, work-life balance, individual growth and development, a positive workplace and future opportunities.
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what does total reward demonstarte?
– Demonstrates consideration for employee needs, leads to higher commitment and engagement. - employees feel that they have more control
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intrinsic rewards is when .....
you are motivated by your own internal improvement - relational e.g. training and communal e.g. leadership
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extrinsic rewards is when....
you are motivated internally - individually e.g. base pay and transactionaly e.g. pension pay
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What is distributive justice?
Generally with pay it is the amount that matters
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what is procedural justice?
with benefits it is the process that matters
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What are Cafeteria’ or ‘Flexible’ Benefit Schemes?
e.g. pensions, health, accident, life assurance, financial assistance e.c.t.
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benefits of a flexible benefit scheme are ..... (4)
- Work-life balance initiatives - Individual needs (appreciate benefits) - Tax benefits - Wholesale supply (cost effective)
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what are the results of these benefits?
- Improved staff retention and better motivated workforce
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what are the negatives of a flexible benefit system?
- Costly to operate - Some might prefer the cash and not the benefits (child care, but no children) - Difficult admin - Getting employees to make effective choices - Employees making mistakes - Employees’ circumstances changing
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What are the 4 types of compensation?
1. Time-based pay –Where employees on similar grades receive the same pay 2.Paying for performance – Variable Pay 3•Expectancy theory: employees will alter behavior if they believe they will be rewarded with something they value
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one more 4.
4..sorting effect- • high-performers need differentiation otherwise they leave
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What are the critiques of these compensations?
(4)
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Sisson & Storey (2000) says....... (incentive schemes)
• Incentive schemes should only be used where they are appropriate to the needs of the business (org. objectives)
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Herzberg says (pay)
• Pay is a hygiene factor NOT a motivator
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Thompson 2000 (incentives)
• Incentives are perceived by employees as tools of management control which reduces their autonomy and discretion • Leads to resentment and industrial conflict
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cox 2006
costly and lack of evidence. firms do not anticipate the cost properly
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Variable Pay – Theoretical Foundations
agency theory
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agency theory (positvies) (3)
• Employee is averse to effort • Pay can motivate employee • Incentive scheme relates performance to effort.
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Agency theories (negatives) (2)
• Difficult for employer and employee contract because observed effort is too difficult/expensive to monitor and Incentives of employer and employee are not aligned.
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what are the 2 particular problems of the agency theory?
1. Moral hazard – the incentives of the agent are different from those of the principal. Need to re-order incentives to reduce agency costs 2. Adverse selection – agents differ in their qualities
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What are the types of variable pay systems?
1.Payment by Results2.performance related pay (PRP)3.Group/Team-based pay4.Financial participation - – Employee share ownership plan (ESOP) – Profit sharing – Profit-related pay
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Critiques of variable pay (7) -
 Extinguish intrinsic motivation. -Diminish performance; narrow focus  Crush creativity.  Crowd out good behaviour.  Encourage cheating, shortcuts, and unethical behaviour.  Foster short term thinking -Perverse incentives (competition, bri
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main 2 advantages of variablle pay -IMPORTANT THINGS TO REMEMBER
Main advantage: • it helps ensure that org priorities become individual priorities • Signalling importance of particular objectives
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Reward man- IMPORTANT THINGS TO REMEMBER
• Pay comparisons are the basis of all ideas of fairness in relation to pay (Clegg, 1979) • People compare their rewards to others either formally/objectively (differentials/relativities) or by subjective comparison • People react to the amounts
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To be succ reward systems must...
1. Be in line with corporate values and culture 2. Fit with bus strat 3. Encourage desired behav 4. Integrate with other HR strategies 5. Reward results and behavior 6. Be practicable and easy to implement 7.Evolve through consultation 8. Be consis
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our survival is linked to what organisations are willing to trade for our work

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Card 4

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what is consumer price index?

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why is there a delay between consumer price index and annual wages?

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