Compensation Management

This document provides study material and solved assignments on Compensation Management. It covers topics such as labor market challenges, external competitiveness factors, job analysis methods, cost containment strategies, performance appraisal techniques, and more. The document is divided into two parts, with each part containing answers to multiple questions.

Running head: COMPENSATION MANAGEMENT
Compensation management
Name of the Student
Name of the University
Author Note

COMPENSATION MANAGEMENT
Table of Contents
Part A:........................................................................................................................................3
Answer to question 1:.................................................................................................................3
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................4
Part B:.........................................................................................................................................5
Answer to question 1:.................................................................................................................5
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................5
Answer to question 4:.................................................................................................................6
Answer to question 5:.................................................................................................................6
Answer to question 6:.................................................................................................................7
Answer to question 7:.................................................................................................................7
Answer to question 8:.................................................................................................................7
Answer to question 9:.................................................................................................................8
Answer to question 10:...............................................................................................................8
Answer to question 11:...............................................................................................................9
Reference list:...........................................................................................................................10

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Part A:
Answer to question 1:
A similar challenge is faced by both the countries in terms of supply and demand on
labor market. With Japan being the third largest economy and the labor system under
pressure, the employment market lacks elasticity and mobility. The legal framework of
employment is rigid with the gradual reformation of law. The labor standard law and other
legislations have been implemented. One of the important features of labor market of Japan is
employing more contract and temporary workers (Harris et al.). Japan and Germany has
several laws applicable to while governing employment relationship. The employment law of
Germany is particularly applicable to the foreign national who are working in Germany. One
of the common employment practices for foreign national in Japan and Germany is that
labors are employed on a temporary basis. Employees in both the countries are entitled to all
the statutory projections with the statutory regulations of country include provisions such as
maternity pay, sick pay, holiday pay and bonus payments. Japan and Germany has a
minimum pay provide by minimum wage Law and Minimum wage act.
Answer to question 2:
External competitiveness is affected by number of factors and they are listed below:
Labor factors- The labor factors comprised of nature of supply and nature of demand
faced in the labor market. Competitiveness of labor market determines the competitiveness in
the wage rate paid to laborers. An increase in demand of labor in the market than supply
would push up the wage rate and a decrease in demand as against supply would pull down the
wage rate (Spina et al.).

COMPENSATION MANAGEMENT
Organization factors- The role played by individual manager, size of organization,
strategy implemented and industry in which the market is operating also determines the
competitiveness of the pay level.
Product market factors- These factors include level of product demand and degree of
competition. Pay in level of employees is determined by the competition prevailing in market
as an intense competition would drive up the wage rate and vice versa. On other hand, an
increase in product demand would require organization to hire more labors and thereby
increasing the pay (La Forgia et al.).
Answer to question 3:
Job analysis can be done by following ways that would help in ensuring its
effectiveness and they are as follows:
 Employees should complete a questionnaire of job analysis.
 Employees should provide the log sheets describing information of their job and the
full time they spend doing one job.
 Employees should be asked about specific questions concerning their responsibilities
and roles.
 The jobs should be compared with other jobs in the job family, job grade and
department indicating its position in the pay scale.
 The results of job analysis should be matched by updating the job description and
developing an accurate overview of the position.

COMPENSATION MANAGEMENT
Part B:
Answer to question 1:
The perspective of present value shifts the comparison of initial offers to the
consideration of merit increase, promotions and present bonuses. In some cases, the future
value stream of earnings is sold by using its present value. Employees are told that large
future increase in pay will help in offsetting the relatively low starting offers. For
computation, employees are required to analyze their future pay increase in offsetting the
lower initial pay (Almadi et al.).
Answer to question 2:
Differential is the difference in grades that helps in supporting the movement in career
through the organizational structure. It is the difference in pay scale of employees and as rule
of thumb, manager and employees is offered a pay difference of 15% (Noe et al.). Some of
the factors determining the differential in pay are working conditions, wage rate, available
skill level in the market and human capital.
Answer to question 3:
Cost containment strategies are the business practice that helps in maintaining the
expense level for preventing and reducing unnecessary expenses and improving profitability
thereby. It is suggested by the strategies of cost containment that there is variation in role of
employer in providing health care to employees (Kang et al.) Some of the strategies of cost
containment that is trending the industry are as follows:

COMPENSATION MANAGEMENT
 Telemedicine- This solution helps in slashing the cost by avoiding claims on part of
both employees and employer. Most of the cost burden has been shifted by employer
to employees with increasing health insurance premium.
 Transparency in price- Price is regulated by making transparency in pricing of the
claims as the relationship between employer, employees and insurance company is
complex.
 Population health management- Companies are able to combat high costs in treatment
of chronic diseases by claiming data and looking at demographic factors.
Answer to question 4:
The policy decision that is addressed by every employer on the left side of pay model
includes external competitiveness, internal consistency, and contribution of employees and
administration of pay system. The compensation objective is affected by policies of internal
consistency as the decision of employee to stay in organization is dependent upon pay
relationship. External competitiveness helps in ensuring that the pay is sufficient to retain and
attract employees (Kang et al.). Furthermore, the work behavior and attitude of employees is
affected by emphasizing on the contribution of employees. The policy of administration
system is designed for achieving the overall objectives.
Answer to question 5:
One of the most effective measures of performance appraisal is behaviorally anchored
rating scale that is a combination of rating scale and evaluation of traditional essay.
Performance and behavior of employees are analyzed using this method by evaluating the
overall performance. Employees are anchored as good, average and poor depending upon the
performance of employees. This method is considered as effective compared to others as it is
not time consuming and does not involve multiple raters as other method.

COMPENSATION MANAGEMENT
Answer to question 6:
The motivated behavior and performance of employees is influenced by continuous
and immediate behavior. The theory emphasizes on cultivating a behavior norm associated
with effort of high work by reinforcing behavior with the attitude that is positive. Employees
are rewarded and make payment by reviewing on annual basis. Theory says that for
rewarding employees, it is not required to use pay for motivating. Reinforcement of structure
of pay related reward makes employees look forward to their improved skills and
performance coupled with structure of new salary (Islami et al.)
Answer to question 7:
Some of the characteristics of executive in accordance with the exemptions of Fair
Labour standard act are as follows:
 The employee must be able to regularly and customarily direct the work of other full
time employees such as two or more.
 Employees must be able to perform their primary duties such as managing a
customarily recognized subdivision or department of employees and managing the
enterprise (Swearingen).
Answer to question 8:
The three objectives of using balance sheet approach for determining the wages for
expatriates are as follows:
 Employees under this approach are ensured of maintaining their home purchasing
power while being on the international assignment that is temporary. This helps in

COMPENSATION MANAGEMENT
maintaining the standard of living of expatriate at the same level throughout the
assignment.
 The objective is to maintain purchasing power of assignee by adjusting the calculation
of balance sheet that take into account the fluctuation of exchange rate and inflation.
It intends to facilitates easy repatriation and maintain equity with peers of home
country.
 Irrespective of prevailing wage rate in any country, the approach is used for
facilitating easy mobility to the future destination.
Answer to question 9:
Difference between Health maintenance organization (HMO) and preferred provider
network (PPO) are listed below:
This organization helps in ensuring that patients
are provided restricted coverage to a particular
physician group.
PPO on other hand offers the facility to patients
to choose any physician either inside or outside
the network.
For receiving HMO coverage, patient needs to
refer to an in network specialist.
There are network of providers under this plan.
No coverage is offered outside the network and
lower premium costs are incurred (Eze).
Higher premium cost is incurred under this plan.
Answer to question 10:
Improved productivity through sharing (Improshare) is a plan that helps in sharing
productivity with employees. For production of each unit, production unit is calculated. The
next step requires splitting of gains realized by working efficiently from employees and

COMPENSATION MANAGEMENT
employer. The portion of employees is shared among workers. Although employee
participation is compatible with the process, it does not require such participation ()
Answer to question 11:
Ranking is the easiest and simplest method of evaluating job where job performed by
employees are ranked from highest to lowest depending upon the quality and value of
organization.
Advantages of ranking in job evaluation:
 The method used for evaluation is not scientific and is based on judgment and hence,
judgment might involve biases.
 Ranking system needs to be redone by evaluator for every position or new job that is
created.
Disadvantages of ranking in job evaluation:
 In event of little job classification, this method is considered effective in small
organization.
 Easily understandable by employees.

COMPENSATION MANAGEMENT
Reference list:
Almadi, Madi, and Philip Lazic. "CEO incentive compensation and earnings management:
The implications of institutions and governance systems." Management Decision 54.10 2016:
2447-2461.
Anstey, Edgar, T. F. Riggar, and James Walker. Staff appraisal and development. Routledge,
2017.
Eze, Chimdindu Ifeanyi. THE EFFECT OF COMPENSATION MANAGEMENT IN
ORGANIZATIONAL PERFORMANCE. Diss. Godfrey Okoye University Ugwuomu-Nike,
Enugu, 2018.
Harris, Oneil, J. Bradley Karl, and Ericka Lawrence. "CEO compensation and earnings
management: Does gender really matters?." Journal of Business Research 98 2019: 1-14.
Islami, Xhavit, Enis Mulolli, and Naim Mustafa. "Using Management by Objectives as a
performance appraisal tool for employee satisfaction." Future Business Journal 4.1 2018: 94-
108.
Kang, Haiying, and Jie Shen. "International Performance Appraisal Policies and
Practices." International Human Resource Management in South Korean Multinational
Enterprises. Springer, Singapore, 2017. 113-140.
La Forgia, Ambar, Jared Lane K. Maeda, and Jessica S. Banthin. "Are Integrated Plan
Providers Associated With Lower Premiums on the Health Insurance
Marketplaces?." Medical Care Research and Review 75.2 2018: 232-259.
Noe, Raymond A., et al. Human resource management: Gaining a competitive advantage.
New York, NY: McGraw-Hill Education, 2017.

COMPENSATION MANAGEMENT
Spina, Damiano, et al. "Understanding user behavior in job and talent search: An Initial
Investigation." Proc. SIGIR Wrkshp. eCommerce 2017.
Swearingen, Michael H. Participative management: an analysis of its effect on productivity.
Vol. 13. Routledge, 2017.
Wang, Xiu Li, et al. "Cloud computing in human resource management (HRM) system for
small and medium enterprises (SMEs)." The International Journal of Advanced
Manufacturing Technology 84.1-4 2016: 485-496.