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Purposes, roles and process:

Purpose:

Strategic:

Helps the organisation achieve its business objectives by linking employees’ behaviours to organisational goals.

Administrative:

Source of information for employee decisions such as training and rewards administration.

Communication :

Inform staff on expectations and current performance. The communication process includes clarifying expectations, setting objectives, identifying goals, providing feedback, and reviewing results.

Developmental:

Avenue to improve staff performance; facilitate career development.

Roles:

Senior management:

Champion and support PM Process Communicate, engage and achieve buy-in

Manager:

Values PM as two-way discussion

Recognise and reinforce strong performance

Identify and encourage improvement

employees:

Take ownership and work towards achieving goals

Keep track of progress and regularly communicate with Manager

HR

Develop and manage system, incl. policies, procedures, timelines & record keeping.

Train supervisors & employees.

Advise, assist and mediate on PM issues.

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Step 1: Define performance outcomes for company, division and department

The company needs to clearly define its goals (for the year) to support the company mission and strategies.

similar goals cascade downwards, with departments setting goals to support the company’s overall mission and goals.

Step 2: Develop employee goals, behaviour, and actions to achieve outcomes

A clear definition of job duties and responsibilities (Job Analysis) and expected outcomes must be established.

Both Manager and Employee meet to :

• Establish performance goals, aligned with company goals

• Set performance evaluation criteria

• Set development plans to enhance employee’s skills

• Establish resources needed to meet goals

• Identify supports and barriers to achieving goals

Step 3: Provide support and ongoing performance discussions

Employees:

Produce results, display behaviours & work on development needs, as agreed on earlier:

Commitment to goal achievement Communication with manager on any support required to achieve goals

Managers:

Assess and give feedback on employee’s progress towards achieving the goals

Review goals if needed

Identify strengths, weaknesses and any improvement needed of employees

Provide support and remove barriers to help employee achieve goals

Step 4: Evaluate performance

Managers prepare for assessment discussion and complete the performance appraisal form.

Employees prepare for the assessment discussion and in some companies, complete a self-appraisal.

Managers and employees meet to discuss the employee’s performance for the assessment period

Step 5: Identify improvements needed

Set groundwork for next year’s cycle by:

Identifying potential goals for next year

Suggesting development opportunities

Step 6: Provide consequences for performance results

Use performance rating for systems that reward people for their contributions

Provide career development opportunities for staff

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Performance appraisal methods ensure:

A systematic process is used to evaluate an employee’s performance against pre-determined goals.

An objective way to assess and improve an employee’s performance through timely feedback, thereby increasing the future potential of the employee and adding value to the company.

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• Unwillingness of line managers to handle PM responsibilities – seen as distraction.

• PM process and appraisal forms are complicated, time consuming and challenging to complete.

• Lack of time is given even if PM process and appraisal forms are well planned and structured.

• Managers and employees are reluctant to engage in candid performance discussions.

• Issues with ability of line managers:

o Difficulties in balancing roles as ‘judge’ and ‘coach’.

o Fear of giving negative or corrective feedback.

o Lack of skills → subjective feedback/decisions.

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CASH COMPENSATION

Base Salary: Cash compensation that an employer pays for the work performed.

Merit Increases: Increments to base salary, based on performance.

Annual Wage Supplement (AWS): A single annual payment to employees that supplements the total amount of annual wage earned; commonly known as 13th month bonus.

Short-Term Incentives:

Incentive payments tied to performance of individual employee, team, business unit or combination of all three; usually one-time payment (e.g. performance bonus).

Long-Term Incentives:

Focus on employees’ efforts on multiyear results (e.g. stock options).

Fixed compensation

• Compensation that does not vary according to employees’ performance or results achieved.

• E.g. Base salary, AWS

Variable Compensation

• Compensation that changes directly with the level of employees’ performance or results achieved.

• E.g. Performance bonus

Benefits:

Social Securities:

Both employer and employee make monthly contributions to the Central Provident Fund (CPF).

Insurance:

These benefits protect employees from financial risks in daily life (e.g. medical and life insurance).

Allowances:

A recurring amount paid to employees, to make up for short fall and/or to attract and retain employees. E.g. transport allowance and hot skills allowance.

Work-Life Strategies:

Measures that employers put in place to help employees manage work responsibilities and personal needs. This will help to raise employees’ work productivity. E.g. flexible work arrangements.

Health & Wellness Benefits:

Programs that employers put in place to allow employees to claim medical expenses arising from visits to the doctor, dental expenses and other health related programs to support health and well-being of employees. E.g. dentist, gym classes, or as part of the employer’s Flexible Benefits program

Relational returns

Relational returns are non-financial returns that have substantial effect on employees’ behaviour.

Total rewards (advantages)

Increased Flexibility

Improved Recruitment and Retention Enhanced Profitability

Reduced Turnover Cost

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COMPENSATION OBJECTIVES

Efficiency

• Improving performance, increasing quality, delighting customers and stockholders, controlling labour costs.

Fairness

• Fair treatment for all employees by recognising both employee contributions and employee needs.

• Procedural fairness - the process used to make pay decisions is equally important

Ethics

• Organisation cares about how results are achieved.

• Managing pay sometimes creates ethical dilemmas (e.g. manipulating results to ensure bonus payout, misusing statistics used to measure competitors’ pay rates, recommending pay programmes without addressing their expected costs and returns etc.).

Compliance

• Conforming to a country’s compensation laws and regulations

Internal Alignement

Internal equity

Access internal jobs relative contributions to the organisation's business objectives.

External Competitiveness

Pay comparisons with competitors.

Two-fold objectives:

- Ensure pay is sufficient to attract and retain employees.

- To manage labour cost to remain competitive

Employee contributions

need to understand the basis of judgement in performance based pay in order for them to accept that their pay is fair.

Management

Ensure that the right people get the right pay for achieving the right objectives in the right way

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Benchmarking survey:

Systematic process of collecting and making judgements about the compensation paid by other employers.

Competitive intelligence

Design the survey

Who should be involved

How many employees to be included

Interpret survey results to construct a market pay line

Survey data verification to ensure jobs are matched correctly.

Best practices:

Make sure management is supportive

use reputable sources

Becautiious with free online information

Make sure the surveys are matched with the desired labour market and job category

Characteristics of a good salary survey

Adhere to data privacy rule in collecting and reporting of data.

Adequate sample size

contain timely data

Have no secrets

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ORGANISATIONAL FACTORS:

Industry and technology:

Labour intensice industries tend to pay lower than the technology.

Professional services are paid higher.

employer size

large organisation tend to pay more than small setups in the same industry

Organisation strategy:

outsourcing - process where companies contract out non-core activities to another company to free up cash, resources and time for activities that the company holds a competitive advantage.

Off shoring - is the moving of certain business or processes to foreign countries to lower costs or to take advantage of the more favourable economic conditions in that country.

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lag policy

pays below market( or competition)

may hinder the compnay ability to attract potential employees.

Lead polivy

above the market

attract and retain employees easily,

Match policy

pays at a similar level to the market

level equal to its competitors to attract the applicants.

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Pay structure:

Market Pay Line is represented by the company’s benchmark jobs on the horizontal axis (x axis), with market rates paid by companies/competitors on the vertical axis (y axis)

Two-point method using the market rate for the lowest and highest paid jobs.

Regression Analysis is usually the preferred approach

market line = company policy line (depend on lead lag and match)

Pay range - min mid max

Range penetration:

1st - 0 - 25

2nd - 25 - 50

3rd - 50 - 75

4th - 75 - 100

Merit Increase

• Time-tested tool of employee motivation

• Promote healthy competition among employees

• To attract and retain high performers.

Benefits Pitfalls

• Difficult to evaluate performance effectively

• Emphasis on individual performance may compromise team spirit.

• Possible employee conflict and non-motivation issue.