Section

1

The Environment
of Human Resource
Management 1

Section
Jobs and
Labor 121

Chap t e r

11

2

Section

3

Talent
Development 279

Section
Compensation
399

4

Section

5

Employee
Relations 527

Total Rewards and
Compensation

Learning Objectives
After you have read this
chapter, you should be
able to:
LO1 Identify the three
general components
of total rewards and
give examples of
each.

LO2 Explain the major laws
governing employee
compensation.

LO3 Outline strategic
compensation
decisions.

LO4 Understand the
challenges of
managing global
compensation
systems.

LO5 Illustrate the steps in
developing a base pay
system.

LO6 Describe how
individual pay rates
are set.

What’s Trending in

Total Rewards and
Compensation

Employers should offer the types of compensation that recognize and motivate employees who work hard and contribute to the company’s success.
Organizations should offer competitive compensation that enables them
to attract and retain good workers. Here’s what’s currently trending in the
area of total rewards and compensation:
1. There are a number of ethical issues related to compensation. Higherpaid employees can sometimes misbehave, employers can work together to limit pay, and compensation itself can prompt worker greed.
2. When pay decisions are viewed as inappropriate or unfair, ­lawsuits
can occur. There is growing concern about litigation targeting the
­misclassification of employees, overtime pay, and other wage ­violations.
3. Identifying situations that require employers to pay workers for their
time is a challenge. Managers should understand the conditions that
trigger payment of wages. These include shorter meal and rest breaks,
donning required equipment and uniforms, and other work-related
activities. In addition, proposed changes in overtime regulations may
significantly impact employees and companies.
4. Setting reasonable pay to get competent employees is an ­important
­component of compensation management. To remain fair and
­competitive, ­employers have to use different sources of internal
and external salary information to determine how much employees
should be making. Some ­companies are paying employees above the
­traditional minimum amounts to ­attract competent workers some states
are even enacting laws that set ­minimum wage levels higher than the
federal wage.

400

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in p
...

...
over.
Economic Recessions During trying economic times, many organizations address shortfalls in revenue by reducing employment-related expenses. This may include reducing the quantities and amounts of raises given to employees. Layoffs and
reductions in force may be other strategies used to lower costs. Managers and HR
professionals should consider the potential negative impact of these approaches and
use them sparingly because employee job dissatisfaction and turnover can occur if
such strategies are implemented on a long-term basis.
Gender Pay Gap Despite laws prohibiting pay discrimination on the basis of sex
(as discussed in Chapter 3), there is a persistent pay gap between men and women
in the workplace. The wage gap is wider in some industries than others. However,
women appear to have gained some ground in recent years. The pay differences
between women and men seem to be decreasing generationally, with Millennials experiencing a greatly diminished pay gap. But the pay differences tend to increase in
utive-level positions.82 Continued monitoring of organizational pay levels and
properly managing women’s career progress are ways to address these concerns.

Summary
•

•
•

The concept of total rewards has become a
crucial part of HR management and includes
compensation, benefits, work-life balance
practices, and performance and talent
management.
Compensation provided by an organization can
come directly through base pay and variable
pay and indirectly through benefits.
The Fair Labor Standards Act (FLSA), as
amended, is the major federal law that affects

•
•

pay systems. It requires most organizations
to pay a minimum wage and to comply with
overtime provisions, including appropriately
classifying employees as exempt or nonexempt
and as independent contractors or employees.
A continuum of compensation philosophies
exists, ranging from an entitlement philosophy
to a performance philosophy.
When designing and administering
compensation programs, internal and external

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.