Answer Happy

Summary We have now completed the discussion of the pay management process Management includes control: control of the way managers decide individual employees' pay as well as control of overall costs of labor. As we noted, some controls are designed into the fabric of the pay system (embedded controls). The salary budgeting and forecast- ing processes impose additional controls. The formal budgeting process focuses on controlling labor costs and generating the financial plan for the pay system. The bud- get sets the limits within which the rest of the system operates. We also noted that with the continuous change in organizations, compensation managers must understand how to manage change and be knowledgeable business partners. They are responsible for communicating information about pay in a way that treats employees fairly and honestly. The basic point is that pay systems are tools, and like any tools they need to be evaluated in terms of usefulness in achieving an organization's objectives. Review Questions 1. How can employers control labor costs? 2. How does the management of the pay system affect pay objectives? 3. Why is the structure of the compensation function important? 4. Give some examples of how employers use inherent controls. 5. What activities in managing the pay system are likely candidates to be outsourced? Why? 6. Use Exhibit 18.13 to explain how the research on individual decision making can be used in pay communication.