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COMPENSATION

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COURSE GOALS
Course
CLO Descriptions
goals
[1] [2] [3]

Explain concepts and importance of compensation and compensation management,

CLO 1.1
G1 compensation system, pay model in an organization
CLO 1.2 Explain different compensation strategies

Explain the concepts of internal consistency; market-competitive compensation systems, steps

CLO 2.1
to design pay level, pay mix and pay structure; person-focused pay,

Discuss the major factors that shape internal pay structures; factors affect decision on pay level
CLO 2.2
and pay mix.
G2 CLO2.3 Discuss different pay level policies and pay mix policies, pay-for-performance plan

Discuss factors influencing choice of benefit package and various benefit options and issues
CLO2.4
related to designing and administering the benefit program

Discuss different aspects of managing compensation: cost, added value, communication and
CLO2.5
change.
CLO3.1 Apply theories to evaluate compensation management practices of organizations
G3
CLO3.2 Propose solutions to solve problems related to compensation management problems
Create a good team and work effectively together to complete the group assignments and
CLO 4.1
G4 group discussion.
CLO 4.2 Communicate effectively in English about issues related to compensation management

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COURSE ASSESSMENT
Assessment Percentage
Description Time
methods (%)
[1] [2] [3] [6]
Class participation points will be based on general class attendance, contribution in
class and compliance with the class rules delineated below.

Students must attend more than 80% of contact hours in order to be accepted to the
Week 1-
Class Participation final examination. Students are expected to read all materials in advance and 10%
Week 13
participate actively in the discussion of articles, topics or case studies. Marks will be
allocated according to the degree and quality of participation

Individual The mid-term exam consists of short answer questions.

assignment/Midterm Week 6 20%
examination The mid-term examination will account for 20% of the total grade.

Students are required to work in groups of 4 to 6 student each, briefly describe and
analyze selected cases.
Group Assignment Week 11, 12 20%
Groups are expected to do a report and a presentation. Evaluation will be based on
both presentation and written report (approximately 50%, 50% accordingly)

Final exam of 90 minutes. Students have permission to take the final exam when they
University
Final Exam attend more than 80% of the total classes and hand in both individual and group 50%
schedule
assignments on time.

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LEARNING RESOURCES
◆ Course book:

◆ Milkovich, G.T., and Newman, J.M., Gerhart, B. (2014), Compensation, 11th ed.,
McGraw Hill Irwin, Inc., Boston.

◆ Reference books:

◆ Long, R. J. (2013), Strategic compensation in Canada, 5th Edition, Nelson Education

Limited., Canada.
◆ Rose, M. (2014), Reward Management, Kogan Page Limited, USA.

◆ Other required materials and information:

a. NEU’s eBooks and documents at http://lic.neu.edu.vn:2048/menu: Emerald Insight,

IG Publishing eBook and ProQuest Central
b. NEU’s eBooks and documents at http://aep.neu.edu.vn:2048/menu

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ACTIVITY 1 (compulsory)
◆ Search, read and write a short report of what do you really learn
form these remuneration reports:
◆ Total Remuneration Report by Mercer- Talentnet (most updated and recent
ones)
◆ International market by Hays Group (or Hays – Korn Ferry)
◆ Other: Tower Watson,…

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ACTIVITY 2 (optional)
Week 4-5
◆ Present a Pay structure of a company that you know
◆ How many sub-structure do they have in it?
◆ Explain which one is job-based or competency-based? Why?
base pay:
- thang bng lng, quy ch lng (regulatons show the rule we pay)
- bng tính lng: bng excel (ly t ban nhân s)
-.

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UNIT
1

INTRODUCTION

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Learning Objectives
After studying Chapter 1, students should be able to:
1. Explain concepts and importance of compensation and compensation management,
compensation system, pay model in an organization
2. Explain how perceptions of compensation differ among society, employees, and
managers.
3. Discuss the difference between direct and indirect compensation and define each of
the direct and indirect forms of compensation defined.
4. Explain the three main objectives of a pay model.
5. Understand the notion of competitive advantage and how it relates to compensation.
6. Be able to distinguish empirical research from surveys and opinions.
7. Understand how the pay model integrates objectives, techniques, and strategy.
8. Understand the concept of a compensation strategy, where it comes from, how it
relates to the organization’s situation, and why the concept has value.
9. Illustrate the relationship between the pay system and each of the strategic issues
discussed.
10. Realize there is not yet consensus on the concept of strategy.
11. Understand the difference between transactional and relational returns.

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1.1 BASIC CONCEPTS AND TERMINOLOGIES

◆ Concepts and importance of compensation and compensation system
◆ Contrasting Perspectives of Compensation
◆ Direct and indirect forms of compensation

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-wage: pay for

performance (500/pc)
-salary: pay for job Pay mix
value and competency
(monthly) compensation package

Compensation refers to all

forms of financial returns
and tangible services and
benefits employees
receive as part of an
employment relationship.

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Contrasting Perspectives of
Compensation

Society Stockholders’
Views Views
Cost:
- people
- technology +
facilities/ machinery

Employees’ Managers’
Views Views

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Total Returns for Work

Total Returns

Relational Returns
Total Compensation
Learning
Recognition Opportunities
& Status
Benefits Employment
Security
Challenging
Work
Cash Compensation
Income Allowances
Protection

Long-term Work/Life
Base Focus
Incentives
Merit/Cost
of Living Short-term
Incentives

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Forms of Pay
◆ Cash Compensation: ◆ Benefits: Income
Base is the cash compensation that an employer pays for
the work performed Protection monetary rewards
- Base wage tends to reflect the value of the work or skills and - Benefits: including income protection, work/life services, and
generally ignores differences attributable to individual employees allowances, are also part of total compensation
- Some income protection programs are legally required
Eg: social, unemployment, health insurance,...
◆ Cash Compensation:
◆ Benefits: Work/Life
Merit Pay / Cost-of-
Living Adjustments Focus non-monetary rewards
Programs that help employees better integrate their work and life responsibilities
- Merit increases are given as increments to base pay and are based on performance -> An assessment (or include time away from work (vacations, jury duty), access to services to meet
rating) of recent past performance is made, with or without a formal performance evaluation
- In contrast to merit pay, cost-of-living adjustments give the same increases to everyone, regardless of specific needs (drug counseling, financial planning, referrals for child and elder
performance. care), and flexible work arrangements (telecommuting, nontraditional schedules,
-Finally, companies may also use merit bonuses. As with merit increases, merit bonuses are based on a nonpaid time off).
performance rating but, unlike merit increases, are paid in the form of a Jump sum rather than becoming (a

◆ Benefits: Allowances
permanent) part of the base salary.

◆ Cash Compensation:
Allowances often grow out of whatever is in short supply,
Incentives flexible, not legally required
Eg: lunch, transportation
< text book p15 > Pay system objectives
- attract and retain employees
- motivate performance
◆ Long-Term Incentives - promote skills and knowledge development
Long-term incentives are intended to focus employee efforts on multiyear results.
- shape corporate culture
Typically they are in the form of stock ownership or options to buy stock at a fixed price (thus leading - reinforce and define structure
to a monetary gain to the degree the stock price later goes up)
- determine pay costs

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STRATEGIC STRATEGIC
TECHNIQUES
POLICIES OBJECTIVES

Work Descriptions Evaluation/ INTERNAL

ALIGNMENT Analysis Certification STRUCTURE <text book p19>

which job/position get to be paid highest to lowest EFFICIENCY

• Performance
COMPETITIVENESS Market Surveys Policy PAY • Quality
• Customers
Definitions Lines STRUCTURE

• Stockholders
• Costs
Seniority Performance Merit INCENTIVE
CONTRIBUTORS Based Based Guidelines PROGRAMS
FAIRNESS
COMPLIANCE
ADMINISTRATION Planning Budgeting Communication EVALUATION

1.2. THE PAY MODEL

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Corporate objectives
Business unit
strategic plans, HR strategies
strategies
vision, and values

What business How do we win (gain How should HR

should we be in? competitive advantage) in help us win?
those businesses?

How should total Social, competitive, Strategic

compensation help and regulatory compensation
us win? environment decisions

Compensation
systems
Strategic Choices
Employee
attitudes and
behaviors
1.3. Compensation strategy
Competitive
advantage
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Strategic Alignment

VISION/MISSION
CORE BELIEFS
DESIRED CULTURE
BUSINESS OBJECTIVES

REWARD
PLANS

PERFORMANCE

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Generic Business-level Strategies

◆Innovator
◆Cost Cutter
◆Customer Focused
<text book p43>

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Which Pay Decisions Are Strategic?

A strategic perspective
focuses on those
competitive choices that
help the organization gain
and sustain competitive
advantage.

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Strategic Compensation Decisions

◆Objectives
◆Alignment
◆Competitiveness
◆Contributions
◆Administration

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