COMP & BENEFITS MIDTERM
Major decisions in pay-level determination
- Specify pay level policy - Define purpose of survey - Specify relevant market - Design/conduct survey - Interpret and apply result - Design grades and ranges or bands
Position
Tasks put together for one person
Pay techniques
Techniques tie the four basic policies to the pay objectives Many variations exist
Financial control
extent of worker's unreimbursed expenses/investment in equipment/availability in market place/having a profit or loss and how business pays wokers
Interpret survey results and construct market line: statistical analysis
frequency distribution central tendency (mean median mode) variation (standard deviation, quartiles)
Job analysis: current issues
globalization/offshoring judging job analysis (reliability/validity/acceptability)
Prevailing wage laws *most likely union wage
government defined prevailing wage = minimum wage that must be paid for work done on covered gov't projects or purchases number of laws contain prevailing wage provisions - davis-beacon act: public construction projects - walsh-healey: public services provided to fed. gov't - service contract act - nat'l foundation for arts/humanities
comparable worth
if jobs require similar skill, effort, and responsibility - pay must be similar, no matter how dissimilar job content may be
Level of analysis
influences whether work is similar or dissimilar - microscopic approach - broad, generic descriptions if too broad.... - reduce number of titles to reduce opportunities to reinforce + EE behavior - b/c promotion to new job title is part of org's network of returns
Behavior control
instructions that the business gives to worker/training that business gives to worker
FLSA: Child Labor
under 18 can't work in hazardous jobs under 16 can't be employed in jobs involving interstate commerce except for nonhazardous work for a parent/guardian
variable pay popularity
used to be just for top management but is now becoming more prevalent for lower level employees too. increasing competition from foreign producers so american firms cut costs. workers adjust what they do and how they do it most = salaried exempt least = union hourly
Job evaluation
Compare jobs within an organization to determine different values of different positions
Hours covered for FLSA
Breaks (10-15) non lunch Time spent on activities before beginning of "principal activity" not included (portal to portal act)
Essential elements for ADA - 2
Can't reassign tasks to other positions/jobs Fundamental to job itself
What does job evaluation balance?
Chaos & Control Chaos of decentralization and uncoordinated wage-setting practices of the 1930s and 1940s
What to do with discrepancies?
Collect more data to ensure consistent, accurate, useful, and acceptable results Hold a meeting of multiple jobholders and supervisors to discuss discrepancies
Interpret survey results and construct market line: update survey data
"aging" - process of updating pay data to forecast the competitive rates for the time in the future when pay decisions will be implemented
Major decisions in job eval: which job eval system to use? --- Classification
+ = Can group a wide range of work together in one system - = Descriptions may leave too much room for manipulation
Not exempt
Blue-collar workers, police firefighters paramedics, etc.
Major decisions in job eval: which job eval system to use? --- Point
+ = Compensable factors call out basis for comparisons, communicate what's valued - = Can become bureaucratic and rule-bound Most common internal method ---- compensable factors, factor degrees numerically scaled, weights reflect importance of each factor
Major decisions in job eval: which job eval system to use? --- Ranking
+ = fast, simple, easy to explain - = cumbersome as number of jobs increases, basis for comparisons is not called out
Policy choices - Internal Alignment
- Compares jobs or skill levels inside a single organization - Pertains to the pay rates both for employees doing equal work and for those doing dissimilar work - SHRM calls this "internal equity issues" - Pay relationships within an organization effect employee decisions to stay w/ org, become more flexible by investing in add'l training, seek greater responsibility
Benchmark jobs
- Contents well-known and stable - Not unique to one employer - Representative sample will include entire domain of work being evaluated
What are managers concerned about regarding compensation?
- Develop policies/procedures to pay people fairly - How to offer competitive pay and control labor costs - Performance and other job related behaviors use pay increases as motivation and reward influencing EE behavior
Major decisions in job eval: Should the company have one or multiple job eval plans?
- Different eval plans are used when work content is too diverse to be evaluated by one plan - Look at benchmark jobs to be sure all relevant aspects of company's work are included
Policy choices - External Competitiveness
- Focus (pay comparisons w/ competitors) - Pay is market driven - Objective: to ensure that pay is sufficient enough to attract and retain employees and to control labor costs to ensure competitive pricing of products/services
Relevant labor markets (4) dimensions
- Geographical (Local Regional National Int'l) - Org size (Small 1-49, 50-99; Medium 100-499, 500-999; Large 1000 or more) - Occupation (Prof/Mgr, Sales, Service, Natural resources, production) - Industry/Product (public sector, private sector either goods producing or service producing)
Compensation objectives
- Guide design of pay system - Serve as standards for judging the success of the pay system - Business outcomes: SHRM's metrics
Disagreements can be an opportunity to...
- HR has opp. to clarify expectations w/ supervisor - Can learn better ways to do job - Make sure you have good documentation
What are employees concerned about regarding compensation?
- Know what to expect in return for work you do - Entitlement - EE's paid fairly w/ people they supervise & those who supervise them
Collect employee data (3)
- Knowledge, skills, abilities (characteristics) - Relationships job has with other jobs w/in organization (internal) - How EE relates to other EE's outside of org (external)
What is society concerned about regarding compensation?
- Pay as a measure of justice (not fair - why should business executives make that much money ---- men vs. women) - Benefits as a reflection of justice (should everyone have access to healthcare benefits? social security, workers comp, etc., everyone should be eligible) - Jobs (need for fair comp practices so we don't have to send so many jobs overseas)
3. Scale factors
- Scales reflecting different degrees within each factor are constructed - 4-8 degrees (pay project had 4) - Criteria: number necessary to distinguish among jobs, understandable terminology, anchor degree definitions w/ benchmark job titles, apparent how degree applies to job
Major decisions in job evaluation: What's the purpose of the job eval?
- Supports organization strategy - Supports work flow - Is fair to employees - Motivates behavior toward organization objectives
Top management/union support is critical b/c...
- They know what is strategically relevant - Must be alerted to (cost of doing this, time, changes WILL occur)
FLSA: Minimum Wage - Factors to be considered in evaluating effectiveness of min. wage law
- Whether gains through higher wages are greater than losses of jobs/hours - Whether wage gains go primarily to workers from low income families rather than going to workers from families w/ higher incomes
Designing survey
- Who involved (comp mgr, mgr, EE, outside consulting firms) - How many EE's (no firm rules, publicly available data, many surveys) - Which jobs to include ** benchmark job approach (enough jobs to price whole structure) ** skill based approach (wages of lowest/highest paid BM jobs for relevant skills in relevant mkt are used as anchors for skill-based structures) ** benchmark conversion (leveling - adjust for less than perfect matches btwn survey's job descriptions and your company's - What info to collect (org. data like financial/turnover, total compensation data like base pay, total cash, total comp.)
Professional HR associations (2)
- World at Work (compensation, benefits, work/life, performance recognition, development and career opportunities) - SHRM (compensation, benefits)
individual plans: spot awards
- awarded for exceptional performance - survey says that 74% of companies view these as highly/moderately effective
FLSA: overtime and hours of work - Types exempt
- computer employees - outside sales - executives - professional employees - administrative
4: weight factors according to importance
- different weights for diff. importance
7: apply to non-benchmark jobs
- get job descriptions/specifications for non-benchmark jobs - evaluate them using compensable factors - take note on total points for non-BM job - evaluate new jobs or revaluate old jobs
Factors considered in developing number and width of pay grades
- jobs of similar value (similar points) go into same grade and jobs w/ different value go to diff pay grade
6: communicate plan/train users
- manual developed (job eval, compensable factors, distinguish degree) - training on information - communication needed
8: develop online software support
- online job eval widely used - part of total compensation service center - drastically reduces time to process new job eval and old job's re-eval
5: criterion pay structure
- pay structure the compensation task force wishes to duplication w/ the point plan (via statistical modeling)
organizational profit-sharing plans
- predetermined index of profitability - plan must be self-funding - along with having financial incentive, EE's should feel they have a measure of control - Pay out methods vary (short term-cash or stock) want to make EE feel like owners
Why bother with grades and ranges?
- pressures in external markets - diff. among firms' rewards levels/mix - diff. in quality of applicants - diff. in performance of EE's - EE's expect pay increases over time - Encourage retention - Move EE's among jobs w/ no change in pay
individual plans: incentives
- promise of pay for some objective level of performance accomplished - many diff. plans (EE perf. compared to determine amount of incentive pay but DIFFER in relationship between production/pay)
Job descriptions summarize data
- summary of the job (job specifications are KSA) - using generic job descriptions (onet) to avoid starting from scratch - describing managerial/prof jobs (more detail) - verify description
individual plans: lump sum bonus
- target bonus (non-exec, exec) - can be used as substitute for merit pay viewed as less of an entitlement than merit pay - not built into base pay, so it's less expensive
2: Determine compensable factors
- work characteristics that org. values (values of firm, work itself, acceptable to stakeholders)
sources of earnings gap
- work/occupation differences (responsibilities, effort requires) - qualification differences (edu, experience) - work-related behavior differences (career performance hours) - union differences (power interests) - discrimination - labor market differences - firm/industry differences (size technology)
Who provides the information?
-- Principal sources (jobholders, supervisors) -- Secondary sources (key managerial/professional jobs: Supervisors two levels above, subordinates/EE's in other jobs that interface with the job under study) -- Number of incumbents from which to collect data varies w/ stability of job and ease of collecting the info
2 ways to develop ranges for grades
1) % above or below midpoint clerical = 10 (5-15) prof/mgr = 30 (15-30) exec = 30-60 2) market percentiles min grade = 25 midpoint = 50 max = 75
2 methods to find merit pay percentages
1) percent increase to performance rating average EE rated above average average now around 3.0 2) percent increase to performance appraisal rating AND compa-ratio (where they are in salary range) midpoint and those above salary range don't get increases and those below get more depending on performance eval
EEO & performance eval
1) provide written instructions on how to complete appraisal 2) incorporate clear criteria for evaluating performance 3) provide a rational foundation for personnel decisions via job descriptions 4) require supervisors to provide feedback about appraisal results to EEs 5) incorporate a review of performance ratings by higher level supervisors 6) consistent treatment across raters regardless of race color religion sex, nat'l origin, etc.
7 Steps of Point process (or 8?)
1. Conduct job analysis 2. Determine compensable factors 3. Scale factors 4. Weight factors according to importance 5. Select criterion pay structure 6. Communicate plan, train users, prepare manual 7. Apply to non-benchmark jobs 8. Develop online software support
Steps of a job analysis (6)
1. Develop preliminary job information 2. Conduct initial tour of work site 3. Conduct interviews 4. Conduct second tour of work site 5. Consolidate job information 6. Verify job description
Four policy choices
1. Internal alignment 2. External competitiveness 3. Employee contributions 4. Management
Fair labor standards act: 3 major provisions
1. Minimum wage 2. Overtime 3. Child labor
steps to establishing comparable worth plan
1. adopt single gender neutral point job evaluation plan for all jobs within unit 2. jobs with equal evaluation results should be paid same 3. identify percentages of male and female employees in each group 4. wage to job evaluation point ration should be based on wages paid for male-dominated jobs
designing merit guidelines (7)
1. determine market average percentage 2. determine company's ability to pay 3. determine company's avg % 4. determine which PA rating is really avg 5. give comp. avg % to real avg PA 6. determine % increase for top perf. 7. determine & increase for bottom perf.
Pay model - 3 basic building blocks
1. policies that form the foundation of the compensation system 2. techniques that make up the compensation system 3. compensation objectives
Interpret survey results and construct market line: verify data
Accuracy of match (BM conversion/survey leveling) Anomalies (does any one company dominate? Do all employers show similar patterns?)
What is the purpose for doing a pay survey?
Adjust pay level Adjust pay mix Adjust pay structure Study special situations Estimate competitor's labor costs
What is compensation?
All forms of financial returns and tangible services/benefits employees receive as part of an employment relationship
SHRM: Total Rewards
Compensation: compensation philosophy, role of job analysis/design, internal equity issues, market-based strategies, calculating pay increases, comply with regulations Benefits: regulatory issues, retirement plans, health and wellness, statutory vs. voluntary, paid time off, family friendly
Why perform a job analysis?
Compensation: content of jobs, compares content for similarities/differences Supports every HR function (recruitment/selection, training/development, EE & labor relations)
Job description
Describing tasks
Policy choices - Employee contributions
Directly affects employees' attitudes and work behaviors
Disparate treatment vs disparate impact
Disparate treatment: intentional - asking women if they plan to have children disparate impact: non intentional - screening out higher portion of black students
Long-term incentive plans
ESOPs (EE stock ownership plan) - often aren't much of an incentive - companies use them b/c EE's willingness to participate in decision making and they function as retirement plan BBOP (broad-based option plan) - stock grants - foster performance or commitment
Job data: content
Elemental tasks or units of work Essential elements for ADA
Exemptions under FLSA: Computer
Employed as computer systems analyst, programmer, software engineer or similar Computer skills design documentation analysis, etc.
FLSA: overtime and hours work - time spent in those duties determines status. Federal = ? Illinois = ?
Federal 50% of job time Illinois 80% of job time
Policy choices - Management
Focus - right people get the right pay for achieving the right objectives in the right way
Job analysis definition
Formal process - determining qualifications and tasks for a specific position. Produces job description/specification
Who should be involved in job eval?
Get mgt. and EE input in design process - appeal process for issues
Determining internal job structure
Internal work/relationships within organization, job analysis, job description, job evaluation, job structure
Job-based structures: Job evaluation definition and what it's based on
Job evaluation is the process of systematically determining the relative worth of jobs to create a job structure for the firm based on: skill, value to organization, organizational culture, external market (how much other companies pay for similar jobs)
What's the final result?
Job structure - org's commonly have multiple structures designed
FLSA: Minimum Wage - what will it be in Chicago and when?
July 1, 2015 - $10
Job specification
Knowledge, skills, and abilities necessary for position
Specify competitive pay policy
Lead market Meet market Follow (lag) market
What are stockholders concerned about regarding compensation?
Make sure we pay people appropriately so company performs well and stock goes up
Exemptions under FLSA: Executive
Managing enterprise At least 2 or more full-time EE's Can hire or fire
Job based job structure
Most used, Job analysis/description
Who collects the information?
People thoroughly familiar with the organization and its jobs - trained HR specialist - supervisors (make sure they know what they're doing)
Exemptions under FLSA: Professional
Performance of work requiring advanced knowledge, intellectual Primary duty requiring invention, imagination, originality
Job structure
Putting jobs together in terms of their value make sure it allows for internal promotions
How can information be collected? Quantitative methods
Quantitative job analysis facilitates statistical analysis of results and allows more data to be collected faster + = cheap in large company - = too broad sometimes
How can information be collected? Conventional methods
Questionnaires/interviews + = getting EE's involved - = EE's can make their jobs more fancy than they actually are (sanitation engineer for garbage man)
EE or independent contractor?
Relevant laws: tax law enforced by IRS, ERISA enforced by the department of labor General classification criteria: Type of relationship, behavior control, financial control
Job
Several people who have the same position
Person based job structure
Skill, Competencies
Task
Specific things you'll be doing
What are Total Returns
Total Compensation: Cash (bonus, base pay, commission, stock options) Benefits (paid time off, health insurance, vision/dental, retirement plan) Relational: Work-life balance, networking, recognition/status
Exemptions under FLSA: Admin
Work related to mgmt or general gusiness operations
FLSA what income is/isn't included in calculation?
YES: base pay (regular pay) bonuses and incentives, if expected NO: stock options bonuses and incentives, if not always expected
Job family
a bunch of similar jobs
Discrimination (2 types)
access discrimination - the denial of a particular job, promotion, or training to qualified women or minorities valuation discrimination - pay women and minorities receive for the jobs they perform
Making merit pay work
accurate performance allocate to high performance pay of high difference
balanced scorecard
awards that combine financial and operating measures for org, business unit, and/or individual performance award pool based on achieving performance targets -- communicates org. priorities
Market line links....
company's benchmark jobs on the horizontal axis to market rates paid by competitors on vertical axis summarizes distribution of going rates paid by competitors in the market horizontal = internally aligned structure vertical = external competitive data represented by pay policy line
Relationship between worker and company
consent of written contracts, business provides employees benefits, permanent of relationship
Equal pay act
differences in pay between men and women are legal when doing equal work in same org. legal if based on: seniority, merit (performance eval), quality/quantity of work, factors other than sex
court cases on what is unequal work
effort/skill/responsibility substantially greater tasks requiring greater effort must be significant amount of time for all ee's in job extra effort must have value commensurate with pay differential
Balancing internal/external pressures: adjustments
job structure orders jobs on basis of internal factors (job eval) pay structure anchored by firm's external competitive position (pay-policy line) reconcile differences by reviewing accuracy of job description, job eval, market prices
Job data: identification
job titles, departments, number of people who hold the job
motivation theories: equity theory
money
motivation theories: need theories
money, base of needs, need of power/achievement
motivation theories: learning theories
money, more education, more pay
motivation theories: goal-setting theory
money, obtain goal, bonus
motivation theories: expectancy theory
money, performance, outcome
relationship between production level and pay
pay constant function of production level OR pay varies as function of production level
two aspects of pay structure that help us balance internal alignment/external competitiveness
pay policy line: r^2 represents how close external is predicted by JE points pay ranges: allow a company to pay different individuals in same equity job different amounts of money
Pay model (in book on page 40)
policies/techniques: internal alignment/internal structure, competitiveness/pay structure, contributions/pay for performance, management ----------------------evaluation objectives (efficiency, fairness, compliance, ethics)
Adjusting market line to reflect lead, match, or lag
policy line as percent of market line -- ex: we wanted to be 3% above so we multiplied the weighed mean by 1.03
What behaviors does compensation need to motivate?
produce more effort retention promote - learn more skills attract people to compensation
executive order 11246
prohibits discrimination on basis of race, color, religion, sex, national origin requires covered gov't contractors to file affirmative action plans
Compensatory time off public vs private
public 45 one week then less next week (7.5 hr less so 1.5*5) private no, must give money and not less time
Title VII of civil right's act prohibits discrimination on basis of...
race gender religion nat'l origin color
1: Conduct job analysis
representative sample of jobs (benchmark jobs) is drawn for analysis content of these jobs basis for defining/scaling/weighting compensable factors
gain-sharing incentive plans
scanion plans: try to get group to lower labor costs without lowering firm's activities rucker plans: production - required for each dollar of wages improshare (improvided productivity through sharing) - HOURS
market pricing
sets pay structures almost exclusively on external market rates
what are factors other than sex?
shift differentials temporary assignments bona fide training programs differences based on ability/training
labor's definition to determine if jobs are substantially equal based on...
skill effort responsibility working conditions
define compensable factors
skill (edu, technical skills) responsibility (scope of control, impact of job) effort (degree of prob. solving, task complexity)
under title VII, do jobs have to be substantially similar in order to file a pay discrimination lawsuit?
supreme court: NO THEY DONT HAVE TO BE SAME yes: congress wrote in equal pay act so they probably meant to no: law doesn't say so
under title VII, can employers use market data to justify the difference in pay between men and women? (tree trimmers and nurses)
supreme court: YES yes: we don't control market, we pay what market pays no: market data is sexist (women said this)
pay for performance
take-home pay varies based on some measure of individual, team, or organizational performance these plans signal a movement away from entitlements
variable pay vs merit pay
variable pay = depends on some measure of individual/team/org. performance merit pay = increases in base pay based on subjective performance evaluation. issues: expensive, not improve company performance, perceive performance. it's expensive and under attack currently
internally aligned structure = ___ axis externally competitive data = ____ axis
x y