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Course Summary
Compensation and benefits management must balance many factors when creating effective programs.
Economy and Society
It is generally agreed that the economic environment of compensation has the strongest impact on the outcome of the pay of individual workers.
The economic environment has been affected recently by major changes in the supply and demand for labor. Demographic changes to the workforce, specifically changes in the ethnic diversity, exit of Baby Boomers, and entry of Millennials and Generation Z into the workforce are especially having an impact. These changes, coupled with the values of younger workers, have created a significant transformation in the nature of today's labor force.
The demand for labor is likewise changing. The move to a service society has made many of the traditional middle-class skills obsolete. There is an increasing dichotomy in the demand for labor between the high skilled and the low skilled, such that movement from one to the other is increasingly difficult.
Matching these diverse trends is the job of the labor market.
Type of Organization
One of the most important, but sometimes least considered, influences on compensation decisions is the organization itself. The size, age, type of business, management structure and philosophy, technology, and power structure all influence the compensation program that the organization requires. There needs to be a fit between the type of organization and the type of compensation program. Organizations within multiple industries should consider having separate compensation programs for each industry.
Although some organizations are seriously restricted in at least some compensation decisions by the environments in which they operate, the typical organization has a good deal of leeway in compensation decisions. It can adjust its compensation program according to shifts in the competitive market.
Technology
The changes in technology have led to different compensation programs for different types of workers. Some respond well to variable pay systems, others resist them.
The Internet has simplified employer-employee communication. Now, many employees can answer their own compensation and benefits questions by logging onto their organization's website from home or work. This increased communication requires special attention to what data is offered and who has access to it.