Employee compensation and benefits are basically divided into four categories:
1. Guaranteed Pay – monetary (cash) paid by an employer to an employee based on employee/employer relations. The most common form of guaranteed pay is the base salary.
2. Variable Pay – monetary (cash) reward paid by an employer to an employee that is contingent on discretion, performance or results achieved. The most common forms are bonuses and sales incentives.
3. Benefits – programs an employer uses to supplement employees’ compensation, such as paid time-off, medical insurance, company car, and more.
4. Equity Based Compensation – a plan using the employer’s share as compensation. The most common examples are stock options.

Guaranteed Pay

Guaranteed pay is a monetary (cash) reward.
The basic element of the guaranteed pay is the base salary, paid based on an hourly, daily, weekly, bi-weekly or a monthly rate. The base salary is typically used by employees for ongoing consumption. Many countries dictate the minimum base salary defining a minimum wage.
Individual skills and level of experience of employees leave room for differentiation of income-levels within the job-based pay structure.
In addition to base salary, there are other pay elements which are paid based solely on employee/employer relations, such as 13th salary, seniority allowance, and more.

Variable Pay

Variable pay is a monetary (cash) reward that is contingent on discretion, performance or results achieved. There are different types of variable pay plans, such as bonus schemes, sales incentives (commission), overtime pay, and more.
An example where this type of compensation plan is prevalent is the real estate industry and real estate agents. A common variable pay plan might be the sales person receives 50% of every dollar they bring in up to a level of revenue at which they then bump up to 85% for every dollar they bring in going forward. Typically, this type of plan is based on an annual period of time requiring a "resetting" each year back to the starting point of 50%. Sometimes this type of plan is administered so that the sales person never resets and never falls down to a lower level.

Benefits

There is a wide variety of employee benefits, such as paid time-off, insurances (life insurance, medical/dental insurance, and work disability insurance), pension plan, company car, and more.
A benefit plan is designed to address a specific need and is often provided not in the form of cash.
Many countries dictate different minimum benefits, such as minimum paid time-off, employer’s pension contribution, sick pay, and more.

Equity Based Compensation

Equity based compensation is an employer compensation plan using the employer’s shares as employee compensation. The most common form is stock options, yet employers use additional vehicles such as Restricted Stock, Restricted Stock Units (RSU), Employee Stock Purchase Plan (ESPP), and Stock Appreciation Rights (SAR).
The classic objectives of equity based compensation plans are retention, attraction of new hires and aligning employees’ and shareholders’ interests.

Summary

CHAPTER 6: ORGANIZATIONAL STRUCTURE (Topic Facilitation Summary)

     People work for many reasons, and to understand this, we must know why people are motivated to work.

     Motivation is the individual's desire to show the behavior and might be thought of as the "will do" factors influencing the display of work-related behaviors. Work motivation is define as the conditions which influence the arousal, direction, and maintenance of behaviors relevant in work settings.

     There are four problems facing the understanding of behavior:

1.                  Diversity of reasons

2.                 Stereotypes

·                     internal state (motivation as a personal trait)

·                     external state (conditions of the work environment and the job)

           3.  Different reasons for behaviors at different times

           4.  Different behaviors in the work setting that are of interest

THEORIES OF WORK MOTIVATION

1. Need Theories

·                     Need Hierarchy Theory (Maslow) - as lower needs were satisfied, the individual shifted his or her concern to higher order needs.

          *Physiological Needs (basic needs)

          *Safety Needs (protection)

          *Social Needs (needs for belonging)

          *Ego Needs (self-esteem)

          *Self-Actualization (need for realizing one's own potentialities)

·                     ERG Theory (Alderfer) - more than one need may operate at one time and satisfaction of a need may or may not lead to a progression to the next higher need.

          *Existence Needs (physical existence)

          *Relatedness Needs (interpersonal needs)

          *Growth Needs (needs for personal development and improvement)

·                     Need for Achievement (McClelland and Atkinson) - addressed achievement-oriented activity.  This is influenced by the result of a conflict between two opposing tendencies, the tendency to achieve success (n-Ach) and the tendency to avoid failure (n-AF).

2. Balance Theories

·                     Equity Theory (J. Stacy Adams) - if a comparison is equitable, no tension exists; the individual is satisfied and should have little desire to change the outcome/input ratio. Inequity creates tension and, with it, a desire by the individual to reduce the tension by altering one or more elements of the ratios to bring the comparison back to equality. Examples of inequality are underpayment and overpayment.

·                     Consistency Theory (Korman)

        *Balance Notion (states that individuals will engage in and find satisfying those behaviors which  maximize their sense of cognitive balance or consistency. They will be motivated to perform in a manner consistent with their self-image).

          *Consistency Notion (predicts that high self-esteem people tend to perform better than those with low self-esteem which prefer to behave in a manner consistent with their low self-image).

3. Two-Factor Theory (Herzberg) - proposed a theory of job satisfaction. Motivator factors that are associated with high job attitudes and Hygiene factors that are associated with low job attitudes.

4. Behavior Modification (Skinner) - behavior is controlled by its consequences. The consequences of interest are reinforcers (anything that follows a behavior and influences the probability that behavior will be repeated in the future).

5. Expectancy Theory (Vroom) - based upon a rational-economic view of people. It is assumed that people are decision makers who choose among alternative courses of actions by selecting the action that appears most advantageous.

6. Intrinsic Motivation (Deci)

·                     White's Notion of Competence Motivation - assumes that in performance settings, people are motivated to do well in order to experience a sense of competence.

·                     Notion of Personal Causation - assumes that people need to feel responsible for their own actions. Responsibility for action is the freedom to choose among alternative courses of action.

LEVELS OF CONSIDERATION FOR WORK BEHAVIOR

1.                  Motivational Theories of Work Behavior

2.                 General Practices for Influencing Behavior in Organization

·                     Goal Setting - goals provide as a basis for motivation and they guide behaviors

·                     Participatory Decision Making - employees who participate in making decisions will be more committed to their decisions and will work harder to accomplish them

·                     Incentive Systems - items given to individuals that are designed to influence future behavior

·                     Job Design

            3. Specific Practices (MBO, Pay Schedules, Leadership Styles)