Objective 4.5People· 1 min read
Total Rewards
Total Rewards
What you will learn
- List the financial and non-financial components of total rewards.
- Calculate and interpret compa-ratio.
- Distinguish red-circling, green-circling, pay compression, and broadbanding.
- Choose the pay policy that fits the organization's goal.
Total rewards are everything an employee receives for their work: base and variable pay and benefits, plus development, recognition, work environment, and balance. The goal isn't to pay more but to pay smartly: internal equity, external competitiveness, and links to performance.
Calculating compa-ratio
An employee earns SAR 9,000 and their grade midpoint is 10,000. Compa-ratio = 9,000 ÷ 10,000 = 0.90, meaning they are paid 10% below midpoint. A value of 1.00 means exactly at midpoint.
Pay structure terms
| Red-circled | Pay above the range maximum; often frozen or given lump-sum increases. |
|---|---|
| Green-circled | Pay below the range minimum; needs adjustment. |
| Pay Compression | New and tenured pay converging because hiring rates rose faster. |
| Broadbanding | Consolidating many grades into fewer, wider bands for flexibility. |
Job evaluation methods
| Point-factor | Ranking and classification | |
|---|---|---|
| Mechanism | Points per factor: skill, effort, responsibility, working conditions | Ordering whole jobs or placing them in descriptive grades |
| Precision | Higher and more defensible | Simpler but less detailed |
What matters on the exam
- A lead policy pays above market to attract scarce talent; a lag policy pays below.
- Job evaluation rates the job, not the person in it.
- Total rewards include non-financial elements: development, recognition, flexibility.
Quick check
Answer in your head first, then reveal.
Pay 12,000, midpoint 10,000. Compa-ratio?Reveal the answer
1.20.
What is pay above the range maximum called?Reveal the answer
Red-circled.
What is pay compression?Reveal the answer
New and tenured employees' pay in the same job converging.
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Your next step
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Sources
Used to verify the facts. The writing is original to Passuit.