C236 Compensation & Benefits

Competencies

are configurations of knowledge, skills, and traits that enable employee performance.

Deductible

organizations routinely require employees to pay the full amount of medical expenses up to a set amount.

Valence Perception

"Do I value the reward"? Employees use their personal value systems and circumstances to evaluate the extent to which the rewards being offered are rewarding to them.

Instrumentality Perception

"If I perform, will I receive the reward"? This perception focuses on the contingency between employee actions and the reward, and can be thought of as the odds of reward.

Intrinsic Motivation Theory

(also referred to as Self-determination Theory) stipulates that employees attribute their behavior to internal and external causes.

Flexible Benefit Plans

(or Cafeteria Style Plans) to their employees. Flexible benefit plans provide employees options in which benefits they receive.

Indemnity Plans

(or fee for service) allow employees to go to any physician and create costs for the organization only when health services are utilized.

Scatterplot

A graphic tool used to display the relationship between two quantiative variables using X and Y axis.

Sunset Clause

A law or regulation that ceases to have effect, after a specific date is reached.

Preferred Provider Organization (PPO) plan

A plan in which the organization or health benefits provider establishes a network of health services providers with whom they have negotiated cost-saving terms in exchange for inclusion in the network.

Indemnity Plans

A plan that allows employees to go to any physician and create costs for the organization only when health services are utilized.

Premium Sharing Policies

A policy in which the employer does not pay the full premium for the health insurance.

Co-pay Policy

A policy that requires employees to pay a set amount for each time any service is used.

Employee Benefit Preference Survey

A survey used to ask employees directly about their benefit preferences.

Shadow ranges

A system of smaller ranges within the pay ranges, applied to specific job families to provide guidance on appropriate on compensation levels.

Merit Pay Matrix

Allows organizations to simultaneously reward past performance but also support its Integrated Reward Structure.

Family and Medical Leave Act (FMLA)

An Act which specifies that employees are entitled to up to 12 weeks of time off to recuperate from medical conditions or to handle qualified family needs such as the birth of a child or to care for an elderly relation.

Patient Protection and Affordable Care Act (ACA)

An Act whose objectives are to reduce the cost of health insurance and expand its coverage of all Americans.

Shift differential Pay

Employees working the evening or night shift receive a high pay rate.

External Equity

External equity refers to employee perceptions regarding the worth of their work conditions and rewards compared to the work conditions and rewards of individuals outside the company.

External equity

External equity refers to employee perceptions regarding the worth of their work conditions and rewards compared to the work conditions and rewards of individuals outside the company.

Data

Facts and statistics collected together for reference or analysis

Motivational Preferences

Not all employees are motivated by the same rewards and systems should be designed with enough flexibility to allow for as much customization as possible. For example, one employee may be very interested in earning money to make a purchase. For that employee a cash bonus system may prove very effective. For another employee, however, they might find more value in having more time off. For that employee, the free time may actually prove more motivating.

Reward-level Strategy

Refers to the extent to which a company will pay above, at, or below the market average.

Motivation

Refers to the focus, effort and persistence that employees demonstrate.

Psychological Contract

Refers to the informal expectations and agreements between an employee and an organization.

Benchmark Jobs

Sample of jobs that is representative of the type, content and level of jobs in the organization.

Principle of Overlap

Says that there should be overlap in the pay ranges for successive pay grades or bands.

Principle of Control

States that the size of pay ranges should be kept sufficiently small to enable an organization to control labor costs.

Business strategy support

Supporting a business' approach to adapting to changes in its environment in order to compete and win.

Tasks, Duties and Responsibilities (TDRs)

TDRs are the building blocks of a job, and represent the ways that employees create value for the organization. Generally speaking, Responsibilities and Duties are broader terms than tasks. The challenge here is to have enough detail to create a useful and accurate view of a job while not being so detailed that the document is unwieldy. Statements of TDRs typically begin with an action verb, with 7-15 statements typically being sufficient to describe most jobs at the appropriate level of detail.

Multiple Sources

That is, if an employee's performance is being assessed, competencies rated, or market prices established, it is important that multiple people have input into the process. Ideally, some of this input should come from non-management peers to further enhance procedural justice.

Pay ranges

That range between the highest and lowest pay in a pay grade or band ($15,000 and $4,000 in our examples) is referred to as the Pay Range

Job classification approach

The Classification Approach to creating a job structure uses logical categories and descriptions to organize the jobs.

Health Maintenance Organization (HMO)

The HMO is an organization that creates a more restricted network than the PPO and creates pre-paid services contracts with those health services providers.

Point Factor Approach

The Point Factor Approach to job evaluation allocates points to jobs based upon the job's value to the organization. That is, each job in the organization is given a quantitative rating of its overall value to the organization.

Reward strategy line

The extent to which a company will pay above, at, or below the market average, shown in graphical form.

Internal Reward Alignment

The extent to which an organization's Total Rewards System aligns each employee's rewards with those received by others in the organization.

Face validity

The extent to which the system produces relative job values that appear to be accurate and credible. This concept is applied during Step Four of the Point Factor Approach to job evaluation.

Obtain Feedback and Revise Job Description

The fifth step is to use a survey or interview based process to have the subject matter experts review the job description to ensure that it adequately captures the job. For jobs involving numerous incumbents, a survey can often be used with this step. Finally, a mechanism for resolving conflicts and for keeping the description updated should also be established, this is commonly done during annual performance reviews.

Identify job

The first step is to identify the job being analyzed. This includes obtaining previous job descriptions if analyzing an existing job, descriptions of any jobs being consolidated into the new job, or labels provided to the job by those requesting the job analysis. At this point it is recognized that the exact job title and job identification information is subject to change.

Consolidate Information into Job Description Draft

The fourth step is to review the information gathered from the interviews to create the draft of the job description. This draft should note any points of uncertainty or disagreement among information sources.

Employer Matching

The percentage of an employee's salary that will be matched is typically capped at 3-5%. This is done to encourage employees to enroll in the plan and contribute on a regular basis.

Strategy

The process by which an organization decides on which products or services to market and sell, which industries to enter, and how the organization is going to reach its desired goals in the marketplace. How an organization is going to compete.

Factor Weighting

The process of deciding how important compensable factors are to the organization. It is Step Three in the Point Factor Approach to job evaluation.

Design strategy

The process used to design the rewards system

Value-Reward line

The resulting line when regression is used to estimate the line summarizing the relationship between Job Evaluation Points and a compensation metric.

Value-reward line

The resulting line when regression is used to estimate the line summarizing the relationship between Job Evaluation Points and a compensation metric.

Absolute level

The reward can be defined. Paying an employee $50,000 salary per year is an example.

Observe and Interview Leadership

The second step is to observe the workplace and interview the organizational leadership connected to the new job. Attention should be placed on understanding how the job interfaces with other jobs in the workplace.

Explanation

The systematic process of job evaluation, job analysis, market surveys, and performance measurement are important because they provide managers with the explanation of how a system was designed and a decision was made.

Observe and Interview Incumbents

The third step is to conduct more in-depth interviews with job incumbents to ascertain the tasks, duties, and responsibilities. Care should be taken to interview multiple incumbents of varying experience with a common set of structured questions.

Dynamic Role-based

The work employees do changes on a regular basis

Scale

Uses examples or definitions of typical behaviors to define each point along the scale.

Variable Rewards

Variable rewards are forms of compensation that increase or decrease based upon a criterion such as employee performance, unit performance, market performance, or even stock price.

Pay Form-Specific Reward Strategies

Varying pay-level strategies across reward types.

Capability-based Pay

When a reward system explicitly attempts to vary rewards based upon capabilities of the employees. Types include Skill-based pay, Competency-based pay, and Seniority-based pay.

Control Costs

Without a variable pay component, labor costs remain the same even when revenues, sales, or profits drop. Performance-based pay helps ensure that when performance is low, the company's cost structure is also reduced

Unemployment Insurance

a government program that partially protects workers' incomes when they become unemployed

Strategy Shift

a gradual shift towards being involved in businesses with a more value-driven purpose.

Person-organization Fit

achieved in several ways, including recruiting and selecting employees based upon fit as well as technical skills, having a recruiting image that signals the values of the firm, socializing employees through training and rituals to understand the values of the firm, and aligning all elements of the rewards system to be consistent with the organizational values.

Flexible Spending Accounts

allow employees to set aside pre-tax funds from their wages into an account that then can be drawn upon to receive reimbursement for health related expenses.

Decentralized approach

allows such decisions to be made by the employee's immediate supervisor or manager.

Employee Retirement Income Security Act (ERISA)

an act passed in 1974 that regulates private pension plans in the United States and provides protection against loss of benefits to retired workers

Occupational Information Network (O*NET)

an online job description database developed by the Labor Department that provides an exhaustive listing of jobs and occupations.

Hybrid approach

an organization can choose to lead the market on certain forms of rewards while matching or lagging the market on other forms.

Broad-banding

and entails the use of a few broad bands (or grades) to organize work for pay purposes.

Equity Theory

and is based on comparisons between the ratio of employees' inputs and rewards to the ratio of inputs and rewards of others.

Salary Level Test

any employee paid less than $23,660 per year (or $455 per week) is non-exempt and covered by the FLSA for purposes of paying overtime.

Cost-sharing

approach in which the insurance only pays for a portion of medical expenses.

Hybrid Strategy

approach to business shows that many businesses use a mix of these approaches.

Benchmark competitors

are a selection of primary organizations that exemplify the labor and product/service markets in which the organization competes.

Managed Care Plans

are adopted by organizations trying to slow the increasing cost of healthcare.

Reward surveys

are aggregations of reward information gathered from other market organizations.

Sick Days

are also days that an employee is paid even though they do not attend work, but the expectation is that an employee is actually unwell when the days are used.

Team-based Bonuses

are like Individual-based bonuses in that they provide a lump sum reward that does not get added into future base pay, but the bonus is based on some measure of team performance instead of individual performance. That is, in order for an employee to receive a team-based bonus, it is not sufficient for the employee to perform well; the employee also has to ensure that the team collectively performs well.

Generic Questionnaires

are purchased from a third party and use general questions to which incumbents respond using scaled ratings.

Total Rewards Process Strategies

are the decisions, policies, and practices that define how Total Rewards are designed and implemented.

Critical Success Factors

are those capabilities, activities, customer perceptions, and market positions that allow an organization to outcompete its rivals.

Variable pay

can include performance-based rewards such as bonuses and commissions, as well as longer-term equity rewards such as stock options.

Transparency

clear information on the who, what, when, and why of the reward system is available to all

Custom Questionnaires

contain a series of questions that job incumbents complete on their own.

Transformational Leadership

creates a sense of purpose in the minds of employees, motivating them to transcend self-interest in order to accomplish the goals of the organization. Through their directions, stories, actions, and systems, Transformational Leaders inspire employees in such a way that employees see the connection between their values and the purpose of the organization. Through this leadership approach, therefore, employees can receive greater intangible rewards from their membership in the organization.

Cost Leadership Strategies

emphasizes having a lower cost product or service as the highest priority throughout its processes.

Broadbanding

entails the use of a few broad bands (or grades) to organize work for pay purposes.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

established that employees have a right to continue their employer-sponsored health care plan, at the employees' expense, for up to 18 months.

Job-Specific Reward Level Strategy

establishing different Reward Level Strategies for different job families or hierarchical levels.

Bad data challenge

exists because the data a company obtains about market rates may not be an accurate representation of the market. It is often difficult to fully understand the quality of the data obtained from various sources, or how best to integrate this information, which adds error to any reward system based on that data.

Procedural Justice

focuses on the process by which the reward distribution was determined.

SWOT analysis

forces managers to look internally at the organization's Strengths and Weaknesses as well as externally at Opportunities and Threats that exist in the organization's environment.

Independent contractors

generally have the ability to set their own hours and work processes, and they work and are paid on a project basis with the opportunity for profit or loss.

Correcting Mechanism

in place to fix any mistake made by the system.

Niche-focused strategy

in which an organization chooses a small and segmented market and competes only in that small arena.

Collaborative Environment

in which teams of employees work in concert to be creative, solve problems, and produce results.

Centralized approach

in which the Human Resources department makes all decisions relating to pay strategy, as well as specific reward decisions such as salary offers to prospective employees, pay raises to current employees, and allocations of bonuses.

Base pay

includes salary or hourly wages.

Performance Management System

involves creating performance plans, providing support and resources, appraising performance, and providing feedback and coaching.

Job Performance Model

is a depiction that defines performance and outlines its causes.

Job family

is a grouping of jobs that have similar functions or content.

Negative Location Externality

is a punishment or nuisance that an employee experiences by virtue of living in a particular location.

Positive Location Externality

is a reward or benefit, not paid for by the organization, that the employee experiences by virtue of living at a particular location.

Gain Sharing

is a system of establishing a baseline of unit-level results and sharing improvements above that baseline with employees in that unit.

PayScale

is a web site that hosts a continuous compensation and benefits survey that is based on data gathered from individuals who visit its site.

The Occupational Outlook Handbook (OOH)

is an additional resource provided by the Bureau of Labor Statistics (BLS).

Autonomy

is giving them discretion in choosing what to do and how to do it.

Cash compensation

is monetary pay that employees receive in exchange for their work.

Median

is simply the middle number of a group of numbers when they are arranged from lowest to highest. The median helps address the outlier problem.

Central Tendency

is simply to find one single number that best represents a whole group of numbers.

Business Strategy

is the collection of decisions, approaches, and activities that allow an organization to compete and win.

Total rewards strategy

is the combination of pay forms, plans, policies, and practices that enable long-term organizational performance.

Growth Needs Strength

is the extent to which employees value and desire challenge and responsibility in work.

Organizational culture fit

is the extent to which the Rewards Strategy aligns with and supports the ingrained practices, norms, and values of the organization.

Job Title

is the name by which the job is known within the company.

Role and Control Strategy

is the policies and practices that allocate design, implementation, and discretionary control of the rewards system.

Role and control strategy

is the policies and practices that allocate design, implementation, and discretionary control of the rewards system.

Human Resource Management

is the policies, practices, and systems that manage the interface between the organization and its employees in order to enable long-term organizational performance.

Leading the market

is used to indicate a Rewards Strategy in which the firm is trying to provide more of a given reward than its competitors for those employees.

Feedback

knowledge of the results of their work.

Worker's compensation

laws are administered at the state level and require employers to make provisions for employees who are injured at work.

Outside sales

making outside sales away from the employer's place of business

Reliable Measurement

means that an employee's level of skill, competency, or experience can be assessed consistently across employees and raters.

Transparent Measurement

means that the criteria and system should be easily understood and the processes for implementing the system should also be well documented and followed.

Strategic Measurement

means that the definition of criteria are all conceptually and empirically connected to employee, unit, and organizational outcomes.

Expectancy Theory

motivation is a function not only of the perceived contingency of the rewards, but also of how much the employee values the reward, and whether or not they believe that they can perform at the required level.

Pay Inversion

occurs when new employees are paid more than those employees with substantial experience in the organization.

Reinforcement Theory

of motivation, as derived by behavioral scientist B.F. Skinner and others, is built on the assumption that behavior is a function of its consequences.

Perquisites

or Perks, many of these are not 'standard benefits' that employees necessarily expect.

Weighted Mean

or Weighted Average, is calculated by multiplying each company salary by the number of accountants in that company and adding them up (2 x $35,000 + 5 x $55,000 + 25 x $57,000 = $1,770,000), and then dividing by the total number of accountants ($1,770,000 / 32 = $55,312).

Outliers

or numbers that are far above or below most of the other numbers.

Level

organizations must define what Level of each reward will be offered. The level of reward offered can be understood in two ways. First, the Absolute Level of a reward can be defined. Paying an employee $50,000 salary per year, for example, is a defining absolute level. Alternatively, organizations can define their strategy relative to the market.

Cost of Living Adjustment (COLA)

pay goes up for all employees in order to account for inflation, and these are often thought of as part of the solution to this problem.

Distributive Justice

perceptions are based upon employees' views of the distribution of rewards in the organization.

Differentiation Strategy

places a high priority on providing innovative, exceptional, and high-quality products and/or services to customers.

Defined Benefit

plan an organization uses a time-based formula to calculate how much pension an employee has earned, and upon retirement the organization pays the employee a guaranteed amount per year throughout retirement.

Profit Sharing

plans are designed to distribute a portion of the firm's annual profits back to the firm's employees. The goal of these systems is to align both the incentives for employees and the variable labor costs with the interests of the organization.

Variability Principle

points out that new behaviors are most quickly acquired when employees receive the reward every time a behavior is exhibited (low variability), but they are more likely to persist in an acquired behavior even after rewards have stopped when the behavior was not rewarded every time (high variability, also known as intermittent reinforcement).

Stock Options

provide employees the right to purchase a set amount of shares of stock for a set price.

Life Insurance

provides a payout to survivors of the employee upon his or her death. The amount of coverage paid for by the organization is often limited to a percentage of the employee's salary, but many organizations provide employees the option of purchasing higher amounts of coverage.

Compa-ratio

ratio frequently used to measure the conformity of pay rates to the pay plan.

Matching the market

refers to a rewards strategy of providing an amount of the reward equal to the market average. For example, a firm that attempts to exactly replicate the work culture of competitors is taking a Matching approach.

Total rewards

refers to all forms of pay and compensation, tangible benefits, and other intangible rewards that an organization provides.

External Reward Positioning

refers to how an organization's Rewards compare to the Rewards offered for comparable work in other organizations.

External reward positioning

refers to how an organization's Rewards compare to the Rewards offered for comparable work in other organizations.

Interactional Justice

refers to perceptions of the extent to which the employee was treated with due respect.

Reward-level strategy

refers to the extent to which a company will pay above, at, or below the market average.

Rewards strategy coherence

refers to the extent to which the parts of the strategy (e.g., reward forms, levels, communication, etc.) fit together in a logical and clear way.

Skill Variety

refers to the extent to which work is designed to require a variety of skills and poses a reasonable degree of challenge to the employee.

Benefit Level Strategy

refers to the level of each benefit type provided as well as the overall company expenditure.

Benefit Mix Strategy

refers to the particular combination of benefit types that an organization offers.

Performance Assessment

refers to the process of defining and measuring the performance of individuals, teams, units, and organizations.

Reward Form Combinations Strategy

refers to the reward forms offered (e.g., cash, benefits, etc.) and the way in which they relate to each other.

Paid Leave

refers to various forms of pay for time not worked.

Frequency policies

regulate how many skills or competencies a given employee can certify on during a specific time period.

Fixed Rewards

remain constant independent of changes in the criteria.

Organizational Citizenship Behaviors (OCB)

represent those value-creating activities in which employees engage but which are not part of their job. Employees who go beyond their defined responsibilities to help a colleague at work contribute significantly to an organization's success.

Task Significance

represents the extent to which the employee perceives that completion of their work has important consequences for others.

Job-value structure

represents the structure of jobs internally positioned according to their relative value.

Fair Labor Standards Act (FLSA)

requires that organizations determine the "employee status" of each job.

Job matching challenge

results from difficulties in determining exactly which organizational jobs match up with each benchmark job in the wage surveys. By carefully choosing benchmark jobs and using sources with detailed descriptions, this challenge can be partially addressed.

Commission-based

reward systems are most often used for jobs with a sales component and provide employees a set percentage of the sales that they make. They are used to provide a strong incentive to create sales and also to maximize the size of those sales. In a pure Commission system, the full risk of low performance is borne by the employees. For this reason many organizations pair a commission-based system with some other form of base pay (such as salary) to more evenly distribute that risk.

Variable Pay

rewards will vary as performance varies

Performance-based Pay

rewards with distributions dependent upon performance levels

National culture

should be considered when rewards systems are designed because employees from diverse cultures may have very different definitions of what is rewarding.

Salary Basis Test

signifies that any employee whose pay is reduced based on the hours worked is non-exempt.

Principle of Inclusiveness

simply states that a pay range needs to be large enough to capture the pay range of all jobs in that grade or band.

The Timing Principle

specifies that the smaller the time gap between the behavior and the reward or punishment, the greater impact on behavior.

Pay as Meaning Principle

states that the rewards employees receive from organizations have informational value in addition to their economic value.

Reinforcement Principle

states that when positive consequences (rewards) follow a behavior, that behavior becomes more likely to be seen in the future. Conversely, when negative consequences (punishments) follow a behavior, then that behavior will be less likely to be observed. Thus, designing a reward system requires careful consideration to the consequences that follow performance-related behavior at work.

Relative level

states the rewards strategy as greater than, equal to, or less than some labor market reference point.

Principle of Parity

suggests that, in general, the more grades that are used the smaller the ranges will be.

Differential Piece Rate

system, a lower rate (e.g., $0.75 per unit) is paid for the first 10 units assembled, and then a higher rate (e.g., $1.50) is paid for each unit over 10 assembled.

Unemployment Compensation

systems in place to provide temporary income to employees who have lost employment. I

Piece Rate

systems reward employees with a fixed amount of compensation for each unit of work they produce.

Job descriptions

that detail the work done in the organization.

Rucker Plans

that have a broader base of metrics

Job Characteristics Theory

that specifies those qualities of work that will be inherently motivating and rewarding to employees.

Task Identity

the extent to which the employee completes a whole and identifiable piece of work

Panel interviews

the job analyst asks the job incumbent preset questions about the content, skills needed, and time spent on activities in the job.

Traditional interview

the job analyst asks the job incumbent preset questions about the content, skills needed, and time spent on activities in the job.

Law of Unintended Consequences

this principle states that not all of the consequences of a reward system change are foreseeable.

Group-based Variable Pay

ties rewards to the collective actions and results achieved by teams, groups and units in the organization.

Job-based approach

to internal reward alignment assumes that organizations provide rewards based upon the job that a person holds.

Benefit Benchmark Survey

tool that helps organizations better understand how employee benefits may impact their ability to attract and retain qualified employees

Job Specification

translates the TDRs into the Knowledge, Skills, Abilities, and Other (KSAOs) that an employee needs to perform the job at a satisfactory level.

Exclusive Provider Organization (EPO) plan

under which any expenses an employee incurs outside of the network are not reimbursed.

Social Security

was enacted in 1935 and updated in 1965 to require employers to both pay and collect taxes from employees to fund the United States Social Security, Medicare, and Medicaid systems.

Pay Compression

when new employees and long-tenured employees are paid very similar amounts.

Labor-driven Job Market

when the demand for a particular set of KSAs (knowledge, skills, and abilities) is high and the supply of these KSAs is low.

Linear Careers

where employees can expect to spend the duration of their careers with a single organization

Linear career

where employees can expect to spend the duration of their careers with a single organization.

Networked Careers

where employees change jobs frequently, sometimes changing functions and industries to bring unique perspectives and competencies to their new roles.

Risk and Uncertainty

where unforeseen or uncontrollable circumstances result in changes in profitability.

Individualistic Environment

where work is done independently by single employees reporting to a single supervisor

Health Savings Accounts

wherein organizations or employees put pretax funds into an account upon which employees can draw for medical expense reimbursement.

Reference ID

which is a letter and/or numeric code used to reference the job, often in databases.

Communication strategy

which is a plan for creating, sharing, and receiving information relating to its Total Rewards Systems.

Point-of-Service organization (POS)

which is similar to the PPO with the exception that the plan specifies a medical services point of contact for employees.

Health Insurance Portability and Accountability Act (HIPAA)

which restricts the use of preexisting condition clauses from being used to deny new employees coverage for a particular medical condition that was previously covered under an insurance policy.

Primary Duties Test

which specifies that an employee has significant discretion and exercises independent judgment. These tests of duties are broken into exemption criteria for Executives (direct work, hire and fire others), Learned Professionals (intellectual work requiring advanced degree), Creative Professionals (inventive or artistic work), Administrative (non-manual work requiring discretion and judgment), Computer (programming, network administration), or Outside Sales (making outside sales away from the employer's place of business), or High Compensated (making more than $134,004 per year).

Total Rewards Content Strategy

which specifies the type, level, and combination of rewards offered to employees.

Employer Mandate

which states that organizations with 50 or more employees are required to either offer health insurance to their employees or pay an additional tax for not having done so.

Tournament Theory

which states that people are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small.

Personal Days

which the employee is free to not come into work, even if they are not sick.

Long-term Disability Policy

will replace a portion of that employee's salary. For injuries preventing work for up to 3 months

Vacation time off

would be made available as a break for work, with no constraints on how the employee wants to use the time.

Job analysis

yields a catalogue of job descriptions.

Fringe benefits

Any financial extras beyond the regular pay check, such as health insurance, life insurance, paid vacation and/or retirement

Spot Awards

Cash bonuses given out based on weekly or daily behavior, to recognize extra effort.

Expectancy Perception

"Can I perform at the level required for the reward?". This is the 'Can I?' question and grows out of employees' perceptions of the clarity of performance expectations and of their own abilities.

Job structure

A Job Structure is an organized listing of the business's jobs that functionally groups and hierarchically arranges the jobs for rewards purposes.

Paid Time Off Bank

A bank of hours in various forms of paid leave, form which the employee can draw time from for any purpose.

Lagging the market

A compensation-level strategy based on paying below the average compensation level in a given labour market.

On-call Pay

Compensates employees for being available to work based on short notice from the organization.

Geographic Pay

Connects to the total reward philosophy and global compensation by providing employees a high pay rate for taking assignments in less desirable or inconvenient locations.

Child Labor

Defines the type of work appropriate for children and the ages at which children can work.

Static

Didn't change much overtime

Fairness in total rewards

Distributive, Procedural, and Interactional.

Reward Equivalence

Due to differences in tax laws, costs of living, exchange rates, and differential perceived costs and rewards of the overseas assignments, organizations have to consider how to motivate the employees to take the expatriate assignment while simultaneously maintaining a sense of equity for those host country employees with which the expatriate works. Anchoring the definition of equivalence to the employees home country, the host country, or some global metric are common approaches.

Voice

Employees should be given input into the decision

Red Circle Rates

Employees whose pay is above the range for their job.

Green Circle Rates

Employees whose pay is below the range for their job.

Individual Bonus

First, it is a monetary reward given to a single employee based upon that employee's performance. It is an individual-level reward. Second, bonuses do not accumulate into base pay. That is, receiving a year-end bonus one year does not affect the employees' wages or salary for the next year.

eligibility

Generally speaking, the eligibility should be restricted to ensure that the number of employees certifying (and therefore being paid at the higher rate) is in line with current and future needs for that capability.

Outcomes

Goals or the criteria by which a rewards system can be judged

Broad input

Help, advice and thoughts from employees of all levels of organization.

Short-term Disability Policy

If injuries prevent an employee from returning to work for a relatively short period of time (e.g., three weeks)

Job comparison approach

In the Job Comparison Approach (or ranking approach), jobs are placed in a relative hierarchy based upon how their value compares to the other jobs. Using this approach, all jobs in the organization are compared, with points given for each comparison "won" by each job.

motivation

Internal drive that causes an individual to decide to take action. There are several theories regarding motivation: Reinforcement Theory, Expectancy Theory, Tournament Theory, Justice (Equity) Theory, and Intrinsic Motivation Theory.

Compensatory Time

Paid time off instead of overtime pay.

Job description

Job Descriptions are written documents that serve as the primary source of information about jobs for many uses within the organization, and these descriptions play a key role in the design and implementation of total reward systems.

Job evaluation

Job Evaluation is the process by which the value of each job in an organization is established. Methods include the Classification Approach, the Job Comparison Approach and the Point Factor Approach.

Compensable Factor

Job elements or criteria that identify what the organization values for purposes of job evaluation. Identifying compensable factors is step one in the Point factor Approach.

Benchmark jobs

Jobs that are representative of the type, content, and level of jobs in the organization.

labor market

Labor Markets are where individuals are the sellers and organizations are the buyers.

High Compensated

Making more than $100,000 per year

Hierarchy of Needs Theory

Maslow's theory that there is a hierarchy of five human needs: physiological, safety, social, esteem, and self-actualization

Merit pay

Merit Pay refers to an annual increase in future compensation based on past performance.

Performance Appraisal

Obtaining ratings of an employee's past performance.

Organizational Culture

Organizational Culture is the shared beliefs, values, norms, and assumptions of the organization.

Pay grades

Pay grades are useful as they allow organizations to simplify reward systems because similar jobs can all be treated in the same way.

performance-based pay

Pay is contingent upon certain performance-related behaviors or results.

Holiday Pay

Pay provided for many federally-recognized holidays.

Three primary categories of rewards

Pay, Benefits and Intangible Rewards

Learned professionals

People who advanced knowledge in a field of learning, usually acquired by a prolonged course specialized, intellectual instruction.

Creative Professionals

People who are employed for the extraction of their skills concerning creativity

Executives

People who managerial authority in a business organization

Administrative

Pertaining to the activities of running an organization or a business

Computer

Programming, network administration

Hazard Pay

Provides employees a premium increase in pay for jobs that involve a higher degree of risk to the employee.

Pay grades

Put jobs into categories that are treated as a group for reward purposes.

Incentive Stock Options

Specify an exercise price that is above the current market price to take into account that the organization expects the employees to outperform expected market returns.

Purpose Principle

States that employees derive intangible rewards from an organization's value-consistent Purpose. That is, when the core purposes of a business align with the values of an employee, then that employee will perceive value in maintaining his or her relationship with the organization. There are several actions organizations can take to use the Purpose Principles as part of their Total Rewards strategy.

Intensive Communication

There will be many questions initially, and if those questions are not answered clearly and quickly then the answers employees receive through informal channels may not be accurate. This is damaging both if the information is negative (poor participation) or positive (unrealistic expectations).

Intangible rewards

These include such things as meaningful work and rewarding relationships, and they also play a role in the formation of the deals that allow employees and organizations to join forces.

Pilot Program

This allows the organization to better understand the design parameters, how the program is received, and the impact of the program on work outcomes.

Employment-based Reward

This means that they are only contingent on an employee maintaining employment with the organization.

Rating scales

Tools used to measure compensable factors in step two of the Point Factor Approach. Rating scales include Graphic Rating Scales, Anchored Rating Scales, and Variable Distance Scales.

Variable Distance Scale

Uses different point distances between each level in the scale which allows an organization to measure compensable factors in a way that takes into account the "natural breaks" in the factor being measured.

Anchored rating

Uses example or definitions of typical behaviors to define each point along the scale.

Product and service markets

are where organizations compete to create value through the production of goods or the provision of services for customers in exchange for money and loyalty.

Individual-based approach

assumes that rewards should be based upon the characteristics of the person holding a job.

Performance-based approach

assumes that rewards should be based upon the performance or results produced by an employee.

Motivational Judgement

because different views of motivation might be useful at different times. In some ways, these views are compatible. For example, reinforcement and expectancy theory would both recommend that contingencies in pay be made very clear. In other ways, the theories have some points of conflict. For example, Intrinsic Motivation would suggest that the clear contingencies in pay serve to undermine employees' intrinsic reasons for working.

Ethical challenge

bribery is an example of this type of challenge facing businesses

Organizational Performance

can include effectiveness at meeting customer needs, new product creation, and gains in market share, profits, and other measures of financial return on the firm's assets.

Scanlon Plans

that focus on improvements in labor costs