Compensation and Benefits Test 1

Incentive Pay Categories

Individual: these plans reward employees whose work is performed independently Group: these plans promote supportive, collaborative behavior among employees Company-wide: these plans tie employee compensation to a company's performance over a short time frame

Referral plans:

employees receive bonuses for recruitment of highly qualified employees

Job-point accrual:

encourages employees to develop skills and learn to perform jobs from different job families Cross-departmental: promote staffing flexibility by training employees in one department with critical skills they would need to perform effectively in other departments

Skill-based pay

is used mostly for employees who perform physical work and increases these workers'pay as they master new skills. - is used mostly for employees who perform physical work and increases as workers master new

Leniency errors

managers rate employees' performances more highly than they would rate them using objective criteria

Merit pay

merit pay programs assume that employees' compensation over time should be determined, at least in part, by differences in job performance.

Individual Incentive Performance Measures

Quantity of work output Quality of work output Monthly sales Work safety record Work attendance - For incentive pay to be effective, the employee must have control over his or her performance and the goals must be realistic (though they can be realistically difficult).

Performance Appraisal Plans

Effective performance appraisals drive effective merit pay programs. Merit pay systems require specific performance appraisal approaches, as noted previously. Administering successful merit pay programs depends as much on supervisors' appraisal approaches as it does on the professionals' skills in designing and implementing such plans.

Behavior encouragement plans

employees receive payments for specific behavioral accomplishments

Incentive pay

incentive pay (or variable pay) rewards employees for partially or completely attaining a predetermined work objective. - . Incentive pay rewards employees for achieving predetermined work objectives

Paid time-off

provides employees with pay for time when they are not working.

Work (process) teams:

refer to organizational units that perform the work of the organization on an ongoing basis Ex: customer service teams, assembly teams on production lines

Compensation

represents the rewards employees receive for performing their job.

Pay-for-Knowledge plans

reward managerial, service, or professional workers, for successfully learning specific curricula. -reward managerial, service, or professional workers for successfully learning specific curricula

Piecework plans

reward workers for every item produced over a designated production standard -Awards based on individual production vs. objective standards -Awards based on individual performance standards using objective and subjective criteria -Quantity and/or quality goals

Seniority pay:

seniority pay systems reward employees with periodic additions to base pay according to employees' length of service in performing their jobs.

Horizontal skills:

skills at the same level of responsibility or difficulty Ex: clerical employees of a retail store trained to perform record-keeping tasks Employee attendance records Schedule salesperson's work shifts Master the use of office supplies for reordering

Stair step:

the steps represent jobs from a particular job family that differ in terms of complexity -Jobs from same job family -Jobs differ in complexity -Higher the step, greater the skills -Companies use separate models -Models designed to match jobs

Skills-based:

used mostly for employees who do physical work, increases these workers' pay as they master new skills - Skills-based pay is used mostly for employees who do physical work, increases these workers' pay as they master new skills.

Advantages of Group Incentives

- Companies can more easily develop performance measures for group plans than individual plans - Greater group cohesion

Base pay

- Hourly pay - Annual salary

Trait System Characteristics

- Quality of work - Judgment - Quantity of work - Leadership responsibility - Dependability - Decision-making ability - Cooperation - Creativity - Initiative

Disadvantages of Group Incentives

--May lead to higher employee turnover because of the free-rider effect --Members may feel uncomfortable with the fact that other members' performance influences their compensation level There are also disadvantages of group incentives. They may lead to higher employee turnover because of the free-rider effect. In group award arrangements, every team member receives the same award regardless of performance. It is said that individuals who may choose not to perform at high levels are taking a free ride at the expense of group members who work hard. Over time, high performers may leave out of resentment. Also, members may feel uncomfortable with the fact that other members' performance influences their compensation level.

Effective incentive pay systems are based on three assumptions:

1. Individual employees and work teams differ in how much they contribute to the company, both in what they do as well as in how well they do it. 2. The company's overall performance depends to a large degree on the performance of individuals and groups within the company. 3. To attract, retain, and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance.

The U.S. government requires compensation professionals to:

1. Keep updated and comply with all employment legislation 2. Demonstrate that alleged discriminatory pay practices are a business necessity 3. Demonstrate that alleged discriminatory pay practices are not discriminatory

Child Labor

Age 14 and younger can't work Age 14 and 15 can work 3 hours on school nights 18 hours a week during school 40 hours a week when school is out Age 16 and 17 No hourly restrictions Can't work in hazardous conditions *Child labor provisions intend to protect children from being overworked, working in hazardous settings, and having their education jeopardized due to excessive work hours.

Job-Point Accrual Model

Applies to jobs from different job families Creates organizational flexibility Points are assigned to various skills The higher the number of points, the higher the core compensation level --- Job-point accrual model encourages employees to develop skills and learn to perform jobs from different job families. Creates organizational flexibility and promotes company goals by assigning a relatively greater number of points to skills that address key company concerns. The higher the number of points, the higher the core compensation level.

Current profit-sharing plans

Award cash to employees typically on a quarterly or annual basis

Base pay adjustments

COLAs - Seniority pay Merit pay - Skill-based pay Incentive pay - Person-focused pay

COLAs

COLAs represent periodic base pay increases that are founded on changes in prices as indexed by the consumer price index (CPI).

Disadvantages

Can increase hourly labor costs Can increase training costs Can increase overhead costs May not mesh well with existing incentive pay systems

Advantages to Employees

Can provide job enrichment Can provide job security Can make jobs more intrinsically motivating Can make jobs more interesting Increases employees' flexibility - These programs can provide job enrichment and job security to employees. Through job enrichment, it creates more intrinsically motivating and interesting work environments. They increase employees' flexibility. - At Volvo's Uddevalla manufacturing facility in Sweden, teams of 7-10 hourly workers produce entire vehicles rather than focusing solely on certain aspects such as installing a drivetrain assembly or attaching upholstery to a car's interior.16 Contributing to all aspects of manufacturing automobiles expands the horizontal dimensions (skill variety) of workers' jobs. In some cases, an employer empowers teams to manage themselves and the work they do. These managing duties, including controlling schedules, dividing up tasks, learning multiple jobs, and training one another, represent the vertical dimensions (autonomy) of work.

Disadvantages of Profit-Sharing Plans

Can undermine the economic security of employees May fail to motivate employees if they do not see a direct link between their efforts and corporate profits

Employee Stock Option Plans

Companies grant employees right to purchase share of company Company stock Company stock shares Stock options

Why do companies use incentive pay?

Companies use incentive pay to reward individual employees, teams of employees, or whole companies based on their performance - Much like seniority and merit pay approaches, incentive pay augments employees' base pay, but incentive pay appears as one-time payments. Employees usually receive a combination of recurring base pay and incentive pay, with base pay representing the greater portion of core compensation. More employees are presently eligible for incentive pay than ever before, as companies seek to control costs and motivate personnel continually to strive for exemplary performance.

Performance Appraisal Practices

Conduct a job analysis Incorporate results into ratings Trains supervisors on use Implement formal appeals process - Here we examine the four activities to promote nondiscriminatory performance appraisal practices. The first activity is to conduct job analyses to ascertain characteristics necessary for a content valid performance appraisal system. The second activity is to incorporate these characteristics into a rating instrument. The third activity is to train supervisors to use the rating instrument properly. And the fourth activity is to set up formal appeal mechanisms.

Behavioral Systems

Critical-incident technique (CIT) Behaviorally anchored rating scales (BARS) Behavioral observation scales (BOS)

General Schedule (GS)

Divided into 15 classifications Based on skills, education, and experience levels Employees eligible for 10 within-grade pay increases Step waiting periods of 1-3 years

Sources of Performance Appraisal Information

Employee Supervisor Coworkers Subordinates Customers/clients

Advantages of Profit-Sharing Plans

Enable employees to share in companies' profits Allow companies greater financial flexibility

Rewards Allocation Methods

Equal incentive payments Differential payments based on contribution to goals Differential payments according to base pay

FLSA Exempt Positions

Executive Administrative Learned professional Creative professional Computer positions Outside sales Most other jobs are nonexempt. Nonexempt jobs are subject to the FLSA overtime pay provision.

Executives rely on compensation professionals to:

Executives rely on compensation professionals to: Develop and manage sound compensation systems Insure the company's practices are: Legal Sufficiently attractive to recruit and retain Cost effective

Limitations of Merit Pay Programs

Failure to differentiate among performers Poor measures Supervisor biases Poor communication Undesirable social structures Using nonmerit factors Undesirable competition Little motivational value

Individual Incentive Plan Advantages

Helps relate pay to performance Promotes equitable distribution of compensation Helps retain best performers Compatible with America's individualistic culture

Main IRC Regulations

Federal Insurance Contributions Act (FICA) Federal Unemployment Tax Act (FUTA) FICA taxes employees and employers to finance the Social Security Old-Age, Survivor, and Disability Insurance Program (OASDI) Federal taxes are levied on employers under FUTA *The Internal Revenue Code (IRC) is the set of regulations pertaining to taxation in the United States (e.g., sales tax, company [employer] income tax, individual [employee] income tax, and property tax). Taxes represent the main source of revenue to fund federal, state, and local government programs. The Internal Revenue Service (IRS) is the government agency that develops and implements the IRC and levies penalties against companies and individuals who violate the IRC. Since 1916, the federal government has encouraged employers to provide retirement benefits to employees with tax breaks or deductions. In other words, the government allowed employers to exclude retirement plan payments from their income subject to taxation.

Bias Errors

First-impression effect Positive halo effect Negative halo effect- because you hang out with him and hes bad you are bad Similar-to-me effect- remind me a lot of myself so you must be a good guy Illegal discriminatory biases - Bias errors happen when rater evaluates employees based on a negative or positive opinion of the employee rather than on the employee's actual performance. Bias errors include first-impression effect, positive halo effect, negative halo effect, similar-to-me effect, and illegal discriminatory biases.

Historical Perspective on Compensation

In the early 20th century, business owners often viewed employees as machines. Business owners wanted employees to work as efficiently as possible to increase output per period of time. Doing so reduced labor costs and contributed to higher profits.

Internal consistency

Internal consistency refers to compensation systems that define the relative value of each job among all the jobs. It represents job structure or hierarchy. According to internal consistency, employees working at jobs that require greater qualifications, more responsibilities, and more complex job duties should be paid more. In order to achieve internal consistency, compensation professionals use job analysis and job evaluation.

Pay for Performance Link

Link appraisals to business goals Analyze jobs Communicate Establish effective appraisals Empower employees Differentiate among performers - Employee performance should be linked to the company's competitive strategy. Job analysis is important for establishing internally consistent compensation systems. Employees must clearly understand the link between performance and merit increases through communication. Effective appraisals should be established. Supervisors need to allow employees to interpret and respond to work problems as they occur. Merit increases should consist of meaningful increments. Merit increases should clearly reflect differences in actual job performance. These ideas also apply to individual- and group-level incentive pay.

Longevity pay

Longevity pay rewards employees who have reached pay grade maximums and who are not likely to move into higher grades. Longevity pay is used by state and local governments as an incentive reduce employee turnover. Federal employees are subject to longevity pay via the General Schedule (GS) system, which will be discussed in the next slide.

Gain Sharing Programs

Most gain sharing programs have three components 1. Leadership philosophy 2. Employee involvement systems 3. Bonuses ---- The three components of gain sharing programs are leadership philosophy, employee involvement systems, and bonuses. Leadership philosophy refers to a cooperative organizational climate that promotes high levels of trust, open communication, and participation. Employee involvement drives organizational productivity and includes improvement suggestions and problem-solving ideas. Bonuses are awarded when actual productivity exceeds targeted productivity levels.

Typical Settings

One study found that a skilled-based pay plan in a manufacturing setting increased plant productivity by 58% More than half of the companies that use skilled-based pay plans employ between 150-2,000 employees Mostly found in continuous process settings, like manufacturing in which: Assembly lines are used One employee's job depends on the work of at least one other worker

Pay-for-knowledge:

Pay-for-knowledge: reward managerial, service, or professional workers for successfully learning specific curricula - Pay-for-knowledge reward managerial, service, or professional workers for successfully learning specific curricula.

Deferred profit-sharing plans

Place cash awards in trust accounts for employees

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Provide employees opportunity to continue receiving employer-sponsored medical care insurance temporarily if their coverage otherwise ceases due to: Termination Layoff Other change in employment status

Human Resources Practices

Recruitment Selection Performance appraisal Training Career development Labor-management relations Employment termination Insuring legal compliance

Competency-Based Pay Programs

Reward employees for improving or acquiring new skills/knowledge - Person focused pay systems reward employees for acquiring horizontal skills, vertical skills, and greater depth of knowledge or skills. Horizontal skills represent similar skills. Clerical employees of a retail store trained to perform record-keeping tasks can be given as an example of horizontal skills.

Group Incentive Plans

Reward employees for their collective performance Use has increased in industry Two types: -Team based or small group -Gain sharing

Person-Focused Plans

Rewards employees for acquiring job-related Competencies Knowledge Skills Two main types Pay-for-knowledge Skill-based pay

Company-Wide Incentive Plans

Rewards employees when company meets performance standards Two types -Profit sharing plans -Employee stock options

Contrast errors

Supervisor compares employees' performances to other employees not to explicit performance standards - Contrast errors take place when rater compares the employee to other employees rather than to specific performance standards. This is an error because the employee is required to perform only at minimally acceptable standards.

Goal-Oriented System

Supervisors and employees set objectives Highly effective technique Rated on how well objectives are met Mainly for professionals and managers - Management by Objectives (MBO) could be the most effective performance appraisal technique because supervisors and employees set objectives for employees to meet. Employee's performance is rated based on accomplishment of the objectives. MBO is used mainly for professionals and managers.

Errors of Central Tendency

Supervisors rate all employees as average Usually occurs when only extreme behaviors require documentation - Errors of central tendency occur when a supervisor rates all employees as average or close to average. It usually occurs when only extreme behaviors require documentation.

The planned use of company resources

The planned use of company resources Technology Capital Human resources

FLSA of 1938

Three broad issues Minimum wage ($7.25/hr as of 2009) Overtime pay Child labor provisions

Three common forms

Three common forms Scanlon plan Rucker plan Improshare

Types of Teams for Team Incentive Plans

Types of teams for team incentive plans are work teams, project teams, and parallel teams. Work teams refer to organizational units that perform the work of the organization on an ongoing basis. Customer service teams, assembly teams on production lines can be given as examples of this type. Project teams consist of a group of people assigned to complete a one-time project. A team of engineers working on the construction of a bridge can be given as an example of project teams. In parallel teams, employees assigned to work on a specific task in addition to normal work duties.

Unions rely on compensation professionals to:

Unions rely on compensation professionals to: 1. Abide by their collective bargaining agreements 2. Ensure they get their COLA adjustments and seniority pay

Vertical skills:

Vertical skills: skills that are traditionally considered supervisory Scheduling, coordinating, training, leading others

Strictness error

supervisors rate employees' performance lower than they would rate them using objective criteria

Internal Consistency

Achieved when the value of each job is clearly defined Represents Job structure Hierarchy Achieved using Job analysis Job evaluation Ex- Think about a series of jobs that progress in terms of duties and responsibilities, for example, a store associate, department manager, assistant store manager, and store manager.

Group Incentive Performance Measures

Customer satisfaction Labor cost savings Materials cost savings Reduction in accidents Services cost savings

Goal-oriented systems

Goal-oriented systems: used mainly for managerial and professional employees and typically evaluate employees' progress toward strategic planning objectives. - Goal-oriented systems are used mainly for managerial and professional employees and typically evaluate employees' progress toward strategic planning objectives.

Competitive strategy choices

Lowest cost strategy Differentiation strategy

ADA Amendments Act of 2008

Makes important changes to the definition of the term disability Changes the way that these statutory terms should be interpreted: 1. Expands the definition of major life activities by including two nonexhaustive lists: Reading, bending, and communicating Functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions 2. Mitigating measures other than "ordinary eyeglasses or contact lenses" shall not be considered in assessing whether an individual has a disability 3. Clarifies that an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active

scientific management practices

Many employers instituted so-called scientific management practices to control labor costs, as well as welfare practices to maintain control over labor.

Individual Incentive Plan Disadvantages

May promote inflexibility Unrealistic standards may hamper employee motivation Setting performance standards is time consuming Factors beyond employee's control may affect outcomes May promote undesirable behaviors

Improshare

Measure productivity physically rather than in terms of dollar savings Incentive to finish products Bonuses paid on a weekly basis based on a ratio of standard labor hours to actual labor hours Includes a buy-back provision --- Improshare measures productivity physically rather than in terms of dollar savings. The emphasis is on providing employees with an incentive to finish products. Bonuses paid on a weekly basis based on a ratio of standard labor hours to actual labor hours. Improshare includes a buy-back provision, which is a maximum productivity improvement pay out level that is placed on productivity gains.

Project teams:

consist of a group of people assigned to complete a one-time project Ex: a team of engineers working on the construction of a bridge

Traditional pay

Traditional pay generally includes an annual salary or hourly wage Increased periodically on a seniority or merit basis

Competencies

Uniquely combined characteristics of the person that enables employees to fulfill job requirements well Core competencies are derived from company's strategic statements Competencies are uniquely combined characteristics that enable an employee to fulfill job requirements, including, personality, attitudes, knowledge, skills, and behaviors. Core competencies are often derived from companies' strategic statements. Core competencies are often derived from the overall strategic statements of companies. For example, General Electric (GE) emphasizes three strategic goals for corporate growth: Globalization, Product Services, and Six Sigma (quality improvement). GE's top management relies on four core competencies to drive business success, which they call the four "Es": High Energy, the ability to Energize others, Edge (i.e., the ability to make tough calls), and Execute (i.e., the ability to turn vision into results).

Pay grades

based on compensable factors and value

Comparison systems

evaluate a given employee's performance against the performance of other employees.

Cross-departmental

promote staffing flexibility by training employees in one department with critical skills they would need to perform effectively in other departments

Services

provides such enhancements as tuition reimbursement and day care assistance to employees and their families.

Parallel teams (task forces

: include employees assigned to work on a specific task in addition to normal work duties

Skill-Block Model

Applies to jobs in same job family Employees expected to progress to increasingly complex jobs Skills may not build on one another Emphasizes horizontal and vertical skills --- Skill-block model applies to jobs within one job family per model and employees progress to increasingly complex jobs. Skills do not necessarily build on each other and emphasizes the development of both horizontal and vertical skills.

Behaviorally Anchored Rating Scales (BARS)

Based on 8-10 expected job behaviors Employees rated on ability to perform each behavior Ratings highly defensible Encourages all raters to make evaluations in similar ways

Incentive Pay Considerations

Based on individual or group performance? Acceptable level of risk? Replace traditional pay? Performance criteria evaluated? Appropriate time horizon?

Elements of Merit Pay

Based on objective and subjective indicators of job performance Periodic performance reviews Realistic and attainable standards Pay increases reflect performance

Behavioral systems

Behavioral systems: rate employees on the extent to which they display successful job performance behaviors. - Behavioral systems rate employees on the extent to which they display successful job performance behaviors.

Major Types of Rater Errors

Bias errors Contrast errors Errors of central tendency Errors of leniency or strictness - Almost all raters make rating errors. Rating errors reflect differences between human judgment processes versus objective, accurate assessments uncolored by bias, prejudice, or other subjective, extraneous influences. Rating errors occur because raters must always make subjective judgments. Human resource departments can help raters to minimize errors by carefully choosing rating systems and to recognize and avoid common errors.

Collective Bargaining

Collective bargaining led to job control unionism in which collective bargaining units negotiate labor contracts with employees and provide grievance procedures. Union shops establish workers' rights and obligations and participate in describing and delineating jobs. Collective bargaining led to job control unionism, in which collective bargaining units negotiate formal contracts with employees and provide quasi-judicial grievance procedures to adjudicate disputes between union members and employers. Union shops establish workers' rights and obligations and participate in describing and delineating jobs. In unionized workplaces, terms of collective bargaining agreements may determine the specific type of seniority system used, and seniority tends to be the deciding factor in nearly all job scheduling, transfer, layoff, compensation, and promotion decisions.

incentive pay programs

Companies generally institute incentive pay programs to control payroll costs or to motivate employee productivity. Companies can control costs by replacing annual merit or seniority increases or fixed salaries with incentive plans that award pay raises only when the company enjoys an offsetting rise in productivity, profits, or some other measure of business success. Well-developed incentive programs base pay on performance, so employees control their own compensation levels. Companies can choose incentives to further business objectives. For example, Princess Cruise Lines is another company that relies heavily on incentive pay to remain competitive. One goal of Princess Cruise Lines is to provide passengers with excellent service (e.g., food, entertainment, and shore excursions) in the hope that they will select Princess Cruise Lines for their next vacation instead of a competing cruise line (e.g., Carnival Cruises). Princess Cruise Lines offers regular incentives to the crews of each ship based on the overall level of customer satisfaction.

Company-Wide Performance Measures

Company profits Cost attainment Market share Sales revenue

Comparison systems

Comparison systems rate and rank performance of employees and pay increases are based on ranking. Forced distribution performance appraisal systems assign employees to groups that represent the entire range of performance such as best, moderate, and poor performers. In paired comparisons technique each employee is compared to all others. Each employee is ranked according to the number of times they are identified as being the better performer.

Job-Based Pay

Compensates employees for current jobs Pay limits set for each job Evaluations based on job descriptions and objectives Two main types -Merit pay -Incentive pay ------ Job-based pay compensates employees for jobs they currently perform. Pay levels are set for each job and evaluations are based on job descriptions and objectives. Job-based pay has two main types such as merit pay and incentive pay. Job-based pay approaches are consistent with the common basis for HR decisions. That basis is judging the status of employees (pay raises, whether to recommend training, promotion) according to how well they perform job duties and tasks.

Person-Focused Pay

Compensates employees for flexibility Compensated for potential contributions - Based on skills and knowledge Used for jobs not easily assessed -For skills and knowledge Person-focused pay compensates employees for developing the flexibility and skills to perform a number of jobs effectively. These programs reward employees for potential contributions based on skills and knowledge. Person-focused pay plans apply in limited contexts and are used for jobs not easily assessed.

Incentive Pay

Compensation fluctuates according to: -A preestablished formula -Individual or group goals -Company earnings Adds to base pay Controls costs Motivates employees

Defined benefit plans:

Defined benefit plans: guarantee monthly income for the duration of a retiree's life

Defined contribution plans:

Defined contribution plans: savings plans that employees may contribute to for use during their retirement

Depth of skills:

Depth of skills: level of expertise or specialization an employee possesses HR professionals specialize in compensation: Job evaluation Salary survey analysis Market pay system designs Incentive (merit) pay system design

Designed to: Longevity Pay

Designed to: Pay grade maximum for length of service To reduce employee turnover Used for most government employees General Schedule system for federal employees

Behavioral Observation Scales (BOS)

Documents positive performance behaviors on job dimensions Employees rated on exhibited behaviors Ratings averaged for overall rating - Behavioral observation scales (BOS) documents positive performance behaviors on various job dimensions. Evaluators rate employees on exhibited behaviors. Scores are then averaged to provide an overall rating number. BOS is developed similar to BARS, except that only positive behaviors are recorded.

Scanlon Plan

Emphasis on teamwork Two-tiered cost savings suggestion system Production-level committees Screening committees Rewards = Labor costs/SVOP Smaller Scanlon ratios show that labor costs are lower relative to SVOP

Rucker Plan

Emphasizes employee involvement Uses a value-added formula (value added/total employment costs) -Value of sales price -Value of materials used -Total labor costs Larger ratios show that the value added is greater than the total employment costs

Critical Incident Technique (CIT)

Employees and supervisors identify and label job behaviors and results Supervisors observe and record Requires extensive documentation - Employees and supervisors identify and label job behaviors and results. Supervisors then observe employees and record their performance on these critical job aspects. CIT requires extensive observations and documentation that identifies successful and unsuccessful job performance behaviors.

Job Characteristics Theory

Employees are more motivated to perform jobs that contain Skill variety: requires using different abilities Task identity: enables employees to do entire job Autonomy: allows employees to choose Feedback: provides clear communications

Cross-Departmental Model

Employees develop skills usable in other departments Helps manage sporadic, short-term staffing shortages Helps meet seasonal fluctuations Ex: Holiday shopping rush -- In cross-departmental model, employees develop skills usable in other departments. This model can help production companies manage sporadic, short-term staffing shortages. Also, this type of model can help companies meet seasonal fluctuations in demands for their products or services such as holiday shopping rush.

Distribution Methods

Equal payments Proportional payments based on annual salary Proportional payments based on contribution to profits --. The choice depends in large part about the message the company intends to convey to employees. The equal payments approach endorses an egalitarian perspective and the proportional approaches suggest an equity perspective.

Gain Sharing

Incentives based on company performance in -Increased productivity -Increased customer satisfaction -Lower costs -Better safety records Based on open leadership Involves employee participation Includes bonuses _____ Gain sharing plans are defined as group incentive systems that provide employees an incentive based on improved company performance in areas such as increased productivity, increased customer satisfaction, lower costs, and better safety records. These plans reflect management philosophy that emphasizes employee involvement and suggestions.

Advantages to Employers

Leads to enhanced job performance Leads to reduced staffing Leads to greater flexibility Improves quality Increases productivity levels

Led to: Collective Bargaining

Led to: Job control unionism Collective bargaining units Union shops

Government Makeup

Levels Federal oversees the entire United States and its territories State enact and enforce laws that pertain exclusively to their respective regions Local enact and enforce laws that are most pertinent to smaller geographic regions Branches Executive enforces laws Legislative—makes laws Judicial—interprets laws

Merit Pay Plans

Pay increases based on performance Reward excellent effort or results Motivate future performance Help retain valued employees In 2013, average merit increase ranged between 2.5 and 2.8% The lowest performance earned 0.2%, average, 2.6%, and highest 4.6% - Merit pay is one of the most commonly used compensation methods in the United States. Various small-scale surveys of no more than a few thousand companies, conducted by compensation consulting firms and professional associations, demonstrate that merit pay plans are firmly entrenched within U.S. business. Its popularity may result from the fact that merit pay fits well with U.S. cultural ideals that reward individual achievement. Merit pay programs occur most often in the private "for-profit" sector of the economy rather than in such public sect or organizations as local and state governments

Work well in manufacturing companies that organize work flow around high-performance work teams where employees are expected to:

Perform managerial tasks like: -Work scheduling -Budgeting -Quality control

Profit-Sharing Plans

Profit sharing plans pay a portion of company profits to employees. There are two types of profit sharing plans such as current profit sharing plans and deferred profit sharing plans. Current profit sharing plans award cash to employees typically on a quarterly or annual basis as part of their core compensation. Deferred profit sharing plans place cash awards in trust accounts for employees for retirement.

Federal legislation designed to:

Promote worker safety and health Maintain family income Assist families in crisis Provide assistance in case of Disability Unemployment

Reasons for adoption

Removes entitlement label Connects pay to job-related abilities Increases employee autonomy Jobs require new and different worker skills Technological innovations Increased global competition --- It removes the view of pay as an entitlement and connects pay to job-related abilities. These programs increase employee autonomy. Employees must learn to manage themselves and their time. Jobs require new and different worker skills and person-focused pay programs foster acquiring these type of skills. To sustain competitive advantage, companies must provide employees with leading-edge skills, and encourage employees to apply their skills proficiently.

Decline in Union Representation

Since 1954 (highest union representation), the percentage of civilian workers in both the public and private sectors represented by unions has steadily declined In 2012, union representation was at 11.3% Approximately 15 million workers 35.9% government workers 6.6% private sector workers

360 Degree Performance Appraisal

Uses more than one appraisal source Reduces recruiting and hiring costs Appropriate for work team evaluations Ability to see everything - 360-degree performance appraisals use more than one appraisal source. It helps companies to reduce the costs of recruiting and hiring. It is more appropriate for work team evaluations since employees can rate each other.

Errors of Leniency or Strictness

With a leniency error, managers rate employees' performances more highly than they would rate them using objective criteria, and this causes employees to believe they are going to receive larger pay raises than deserved. With strictness error, supervisors rate employees' performance lower than they would rate them using objective criteria.

Vertical Skills

Works well for work teams Service industry Manufacturing industry Employees Learn functional skills Perform managerial tasks --- ertical skills works well for self-managed work teams because team members need to learn how to manage one another. These type of teams bring employees together from various functional areas to plan, design, and complete one product or service. Person-focused pay programs that emphasize vertical skills work well at manufacturing companies that organize work flow around high-performance work teams in which employees are expected to learn both functional and managerial tasks (e.g., work scheduling, budgeting, and quality control). This means that groups of employees work together to assemble entire products such as cellular telephones (Motorola) and furniture (Steelcase, a manufacturer of office furniture), and each team member learns how to perform the jobs of other team members.

Skill block

applies to jobs within the same job family, but skills do not necessarily build on one another

Trait systems

ask raters to evaluate each employee's traits or characteristics. Class grading

Management incentive plans

award bonuses to managers when they meet or exceed objectives based on sales, profit, production, or other measures for their division

Pay ranges

builds on grades, uses midpoints, minimums, and maximums

Paycheck Fairness Act

-Strengthens the remedies available to put sex-based pay discrimination on par with race-based pay discrimination -Prohibits employers from retaliating against employees who share salary information with their coworkers - The Paycheck Fairness Act is a second key initiative in closing the pay gap between men and women. This bill strengthens the Equal Pay Act of 1963 by strengthening the remedies available to put sex-based pay discrimination on par with race-based pay discrimination.

Patient Protection and Affordable Core Act of 2006 (PPACA)

-Was signed into law by President Barack Obama on March 23, 2010 -Was amended by the passage of the Health Care and Education Reconciliation Act of 2010 -Patient Protection and Affordable Care Act of 2010 (PPACA) was signed into law by President Barack Obama on March 23, 2010 and it was amended by the passage of the Health Care and Education Reconciliation Act of 2010. These laws provide the basis for health care reform in the U.S. The goal of the health care reform is to reduce the number of uninsured U.S. residents by 32 million in 2016. Moreover, the health care reform aims to help more children get health coverage, end lifetime and most annual limits on care, allow young adults under 26 to stay on their parent's health insurance, and give patients access to recommended preventive services without cost.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

1. Guarantees ready access to coverage under a subsequent employer's health plan, regardless of their health or claims experience 2. Sets limits on the length of time that health plans and health insurance issuers may impose preexisting conditions 3. Counts periods of continuous coverage under another form of comprehensive health coverage toward a preexisting condition limit 4. Protects the transfer, disclosure, and use of health care information

Unions rely on compensation professionals to:

Abide by their collective bargaining agreements Ensure they get their COLA adjustments and seniority pay

Bennett Amendment (to Title VII)

Allows female employees to charge employers with Title VII violations regarding pay only when the employer has violated the Equal Pay Act of 1963 -The Bennett Amendment to Title VII allows female employees to charge employers with Title VII violations regarding pay only when the employer has violated the Equal Pay Act of 1963. The Bennett Amendment is necessary because lawmakers could not agree on the answers to the following questions: • Does Title VII incorporate both the Equal Pay Act of 1963's equal pay standard and the four defenses for unequal work [(i) a seniority system; (ii) merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex]? • Does Title VII include only the four exceptions to the Equal Pay Act of 1963 standard?

Strategic versus Tactical Decisions

Although strategic decisions guide the activities of a company in the market, tactical decisions support the fulfillment of strategic decisions. Strategic compensation consists of two categories: strategic management and strategic planning. Strategic management involves making a series of judgments under uncertainty for reaching specific goals. Strategic planning supports business objectives and executives communicate business objectives through competitive strategy statements.

ADEA of 1967

Amended 1978, 1986, and 1990 Enforced by EEOC Protection for workers age 40+ in all employment decisions Eliminated minimum retirement age, except for jobs where public safety is at issue - Age discrimination in Employment Act of 1967 (ADEA) was designed to protect workers age 40 and older ("baby boomers") from age discrimination. Baby boomers are those born between 1942 and 1964. They represent the largest generation of U.S. population and will probably work past age 67. ADEA amended in 1978, 1986, and 1990 and enforced by EEOC.

Pregnancy Discrimination Act of 1978 (PDA)

Amendment to Title VII Prohibits disparate impact of pregnancy Pregnancy treated like disability The protected rights include Credit for previous service Accrued retirement benefits Accumulated seniority - Congress enacted the Pregnancy Discrimination Act of 1978, the Americans with Disabilities Act of 1990, and the Family and Medical Leave Act of 1993 to accommodate employees with disabilities and pressing family needs. These laws protect a significant number of employees: In 2000, approximately 68 percent of employed women were responsible for children under the age of 18. The preamble to the Americans with Disabilities Act states that it covers 43 million Americans. Many employees will benefit from the Family and Medical Leave Act if they need substantial time away from work to care for newborns or elderly family members. Two trends explain this need. First, many elderly and seriously ill parents of the employed baby boom generation depend on their children. Second, both husbands and wives work full-time jobs now more than ever before, necessitating extended leave to care for newborns or for children who become ill.

Four Constitutional Amendments

Basis for laws Article 1, Section 8 Congressional powers First Amendment What Congress can't do Fifth Amendment Individual's rights Fourteenth Amendment, Section 1 State governments' limitations

Equal Pay Act of 1963

Broadened FLSA Enforced by EEOC Prohibited sex discrimination Defined compensable factors Established legal pay differentials - Equal Pay Act of 1963 is enforced by the Equal Employment Opportunity Commission (EEOC). According to this act, men and women should receive equal pay for performing equal work. It applies to jobs of equal worth according to Department of Labor's definition of compensable factors, such as level of skill, effort, responsibility, and working conditions.

Discretionary Benefits

Companies choose to offer different benefits based on various historical factors that we will consider throughout the book. In addition, a company will do so because other companies offer benefits. Not following suit will make it more difficult to recruit and retain the best qualified individuals. Tax incentives offered by the government encourage employers to offer benefits. Where tax incentives are relevant, companies reduce their taxable profits by deducting the costs they spend on employee benefits.

Employers Exempt from COBRA

Companies with fewer than 20 workers Church plans U.S. government plans *Employers exempt from COBRA includes companies with fewer than 20 workers, church plans, and U.S. government plans.

Base Pay

Compensable factors An employee's skill level An employee's effort An employee's level of responsibility The severity of the working conditions

Market Competitiveness

Compensation policies that fit with business objectives Vital in attracting and retaining employees Are based on: Strategic analyses Compensation surveys -----Setting pay rates and benefits offerings is essential to recruiting and retaining the best employees. Companies make judgments about what is best based on the norms in companies with whom they compete for labor. They use strategic analysis (understanding who the competitors are) and compensation surveys (understanding what competitors pay).

Compensation Department's Main Goals

Compensation professionals promote effective compensation systems by meeting three important goals: Internal consistency Market competitiveness Recognition of individual contributions

Competitive Strategy

Competitive advantage describes a company's success. Competitive advantage refers specifically to a company's ability to maintain market share and profitability over a sustained period of several years. Employers began to recognize that employees are key resources necessary for a company's success, particularly in changing business environments characterized by rapid technological change and intense business competition from foreign countries. Employers' recognition that employees represent an important resource led to the view of employees as human resources. In line with this view, companies design human resource management practices to promote competitive advantage.

Competitive advantage

Competitive advantage refers specifically to a company's ability to maintain market share and profitability over a sustained period of several years. - During the 1980s, personnel administration was transformed from mainly an administrative function to designing and implementing compensation programs that contribute to a company's competitive advantage. Competitive advantage refers to a company's ability to maintain market share and profitability over a sustained period of several years.

Causes for Decline in Union Representation

Consistently lower profits than nonunion companies Major employment cuts in highly unionized companies (e.g., automobile and steel industry) High-quality vehicles produced by foreign automobile manufacturers

Walsh-Healey Public Contracts Act

Covers contractors and manufacturers who sell supplies, materials, and equipment to the federal government Coverage is more extensive than Davis-Bacon Act Applies to both construction and nonconstruction activities *Walsh-Healey Public Contracts Act of 1936 covers contractors and manufacturers who sell supplies, material, and equipment to the federal government with contracts worth at least $10,000. Its coverage is more extensive than Davis-Bacon Act. The act covers both construction and non construction activities.

Seniority Pay

Designed to award job tenure Set base pay with time-designated increases Employees perceive that they are treated fairly Facilitates administration of pay Avoids perception of favoritism Poor fit with most competitive strategies

Designed to:Collective Bargaining

Designed to: Negotiate labor contracts Provide grievance procedures

Employee Benefits

Discretionary benefits Legally required benefits

Disparate treatment

Disparate treatment Intentional punishable by law Workers treated unfairly because of race, color, religion, gender, national origin Ex: Different standards to determine pay increases for blacks and whites - Disparate treatment represents intentional discrimination. It occurs when employers intentionally treat some workers less favorably than others due to race, color, religion, sex, or national origin. Applying different standards to determine pay increases for blacks and whites is an example of disparate treatment. Disparate impact represents unintentional discrimination. It occurs when an employer applies employment practice to all employees. It leads to unequal treatment of protected employee groups. Awarding pay increases to male and female workers based on seniority when females had less seniority is an example of disparate impact.

Effective when jobs: Differentiation Strategy

Effective when jobs: Require highly creative behaviors Have a long-term focus Demand cooperation and independence Involve risk-taking Ex: P&G differentiates Eukanuba from Iams (Brand image and price premiums) - In differentiation strategy the main emphasis is generally not on increasing employee productivity. Employees usually have jobs that require highly creative behaviors, a relatively long-term focus, cooperation and independence, and greater degree of risk taking. For example, P&G differentiates Eukanuba from Iams by brand image and price premiums. Iams is considered a super-premium product line. Eukanuba is considered an ultra-premium line that contains more chicken and vital nutrients that promote shiny and healthy coats. P&G charges premium prices for this line, which allows it to invest more in research and product development.

Basis for Seniority Pay

Employees become more valuable over time Good employees may leave if not compensated fairly Rationale based on the human capital theory -Seniority pay and longevity pay systems reward employees with periodic additions to base pay according to employees' length of service in performing their jobs. These pay plans assume that employees become more valuable to companies with time and that valued employees will leave if they do not have a clear idea that their salaries will progress over time. This rationale comes from human capital theory, which states that employees' knowledge and skills generate productive capital known as human capital.

ERISA Topics

Employers' reporting and disclosure duties Funding of benefits Fiduciary responsibilities of programs Vesting rights *ERISA addresses employers' reporting and disclosure duties, funding of benefits, fiduciary responsibilities of programs, and vesting rights. For reporting and disclosure duties, companies must provide their employees with descriptions of benefit plans, updates and changes to the plan, annual synopses of financing and operations of the plans, and advance notification if there is any plan to terminate benefits plan. Companies have to meet strict guidelines to make sure there are sufficient funds when employees reach retirement. Fiduciary responsibilities require that companies not engage in transactions with parties having interests adverse to those of the recipients of the plan and not deal with the income or assets of the employee benefits plan in the company's own interests. Vesting refers to an employee's acquisition of non forfeitable rights to an employer's contributions to fund pension benefits.

Compensation Law Themes

Employment laws are essential to maintain a balance of power between employers and employees; in the case of compensation practice, helping to ensure that pursuit of goals by any one group does not undermine others' goals, particularly those with the least amount of power—employees. Three factors led to the passage of income continuity, safety, and work hours legislation. The first factor was the Great Depression, the move from family businesses to large factories, and divisions of labor within factories. During the Great Depression, which took place in the 1930s, scores of businesses failed, and many workers became chronically unemployed. Government enacted key legislation designed to stabilize the income of an individual who became unemployed because of poor business conditions or workplace injuries. Second, the main U.S. economic activities prior to the twentieth century were agriculture and small family businesses that were organized along craft lines. Workers began to move from their farms and small family businesses to capitalists' factories for employment. The character of work changed dramatically with the move of workers to factories. An individual's status changed from owner to employee. This status change meant that individuals lost control over their earnings and working conditions. Third, the factory system also created divisions of labor characterized by differences in skills and responsibilities. Some workers received training, whereas others did not. This contributed greatly to differences in skills and responsibilities. Workers with higher skills and responsibilities did not necessarily earn higher wages than workers with fewer skills and responsibilities. Paying some workers more than others only increased costs, which is something factory owners avoided whenever possible.

Relevant Employment Laws

Equal Pay Act Title VII Civil Rights Act of 1964 Bennett Amendment to Title VII Executive Orders 11246 and 11141 Age discrimination in employment Older Workers' Benefit Protection Act Civil Rights Act of 1991 - Some of the relevant employment laws that influence compensations tactics are included in this slide. We can list them as Equal Pay Act, Title VII Civil Rights Act of 1964, Bennett Amendment to Title VII, Executive Orders 11246 and 11141, age discrimination, Older Workers Benefit Protection Act, and Civil Rights Act of 1991. They will be discussed in the following slides. -In addition to power imbalances in the employment relationship, social forces influenced the creation of the laws that we will discuss. The Civil Rights movement in the 1960s and women's inequality (unfair treatment in the hiring process and pay) are examples. Also, desperate economic times such as during the era of the Great Depression (1930s) gave rise many of these laws, such as the Fair Labor Standards Act.

Federal Employee Protections

Executive Orders 11478 and 11935 Rehabilitation Act Vietnam Era veterans readjustment Assistance Act Government Employee Rights Act of 1991 Family and Medical Leave Act of 1993 - Federal government employees do not receive protection under Title VII, ADEA, and the Equal Pay Act of 1963. Shortly after the passage of these acts during the 1960s, the president of the United States and Congress enacted executive orders and laws. Executive orders and laws that cover federal employees include Executive Orders 11478 and 11935, Rehabilitation Act, Vietnam Era Veterans Readjustment Assistance Act, Government Employee Rights Act of 1991, and Family and Medical Leave Act of 1993. Executive Order 11478 prohibits employment discrimination on the basis of race, color, religion, sex, national origin, handicap, and age. Executive Order 11935 prohibits employment of nonresidents in U.S. civil service jobs. Rehabilitation Act is for individuals with disabilities and Vietnam Era Veterans Readjustment Assistance Act applies the principles of Rehabilitation Act to veterans with disabilities. Government Employee Rights Act of 1991 protects U.S. Senate employees from employment discrimination on the basis of race, color, age, and disability. And Family and Medical Leave Act of 1993 provides 12-week unpaid leave in any 12-month period to care for a newborn or a seriously ill family member.

HR's Role

Human resource professionals are staff employees because they offer a wide variety of support services for line employees. In a nutshell, HR professionals promote the effective use of all employees in companies. Effective use means attaining work objectives that fit with the overall mission of the company.

Human Resources Practices

In addition to compensation, HR professionals design and implement various HR practices such as recruitment, selection, performance appraisals, training, career development, labor-management relations, employment termination, and insuring legal compliance. With recruitment, and selection, HR departments try to attract job candidates. Companies attract candidates by providing career opportunities, training opportunities, reputation, and so forth. Performance appraisal is key to effective merit pay programs. Compensation rewards must be tied to attainment of performance goals and quality standards. Employees must perceive a strong relationship between performance standards and pay increases. Training is another important HR practice. Successful pay-for-knowledge plans depend upon a company's ability to develop and implement systematic training programs. Employees' careers develop in two ways, namely, as a lateral movement or upward movement. In lateral movement, employee moves across a company's hierarchy, and in upward movement, an employee focuses on one functional area and takes a greater responsibility in that area. Compensation is a key topic in labor-management relations. Unions bargain for COLAs and base pay on seniority pay. Employment termination is either involuntary or voluntary. In involuntary termination, companies may offer severance pay. Voluntary terminations are initiated by employees and usually occur when employees want to work elsewhere or retire. Laws were enacted to determine acceptable employment practices and protect employees' rights.

Compensable Factors

In this table, definition of each compensable factor is provided. Skill refers to experience, training, education, and ability as measured by the performance requirements of a job. Effort refers to the amount of mental or physical effort expended in the performance of a job. Responsibility refers to the degree of accountability required in the performance of a job. Lastly, working conditions refers to the physical surrounding and hazards of a job, including dimensions such as inside versus outside work, heat, cold, and poor ventilation. Can not make a hiring decision based on gender or color (biological factors)

Lowest-Cost Strategy: Effective when jobs:

Include predictable behaviors -Have a short-term focus -Require autonomous activity -Focus on quantity of output Ex: Ryanair (reduced operations costs) Lowest-cost strategy is generally used for jobs that include repetitive and predictable behaviors, have a short-term focus, require autonomous or individual activity, and focus on quantity of output. Ryanair can be given as an example of this type of strategy. Ryanair pursues lowest cost by reducing operating costs. By using only one type of aircraft, they minimize aircraft training and maintenance costs. Seating cost and labor costs are minimized because seats do not recline and seat-back pockets are stowed under the seat. Their aircraft includes only one toilet to make room for additional seats. Moreover, baggage handling costs are reduced because passengers are required to carry their luggage.

Four themes: Compensation Law Themes

Income continuity, safety, and work hours Pay discrimination Meeting disabilities and family needs Prevailing wage laws

Stakeholders

Individuals or entities directly affected by compensation practices Employees Line managers Executives Unions U.S. government - Various stakeholders include employees, line mangers, executives, unions, and the U.S. government. Compensation professionals should educate employees about available training programs, changes in compensation practices, and advancement opportunities. Compensation professionals help line managers to make sound compensation judgments, establish pay differentials, and evaluate jobs. Executives rely on compensation professionals to develop and manage sound compensation system. Unions rely on compensation professionals to abide by their collective bargaining agreements. The U.S. government requires companies to comply with all employment legislation.

Family and Medical Leave Act of 1993 (FMLA)

Job protection during family and medical emergencies Guarantees unpaid leave Employee returns with same or similar Position Pay Conditions Benefits *Congress enacted the Pregnancy Discrimination Act of 1978, the Americans with Disabilities Act of 1990, and the Family and Medical Leave Act of 1993 to accommodate employees with disabilities and pressing family needs. These laws protect a significant number of employees: In 2000, approximately 68 percent of employed women were responsible for children under the age of 18. The preamble to the Americans with Disabilities Act states that it covers 43 million Americans. Many employees will benefit from the Family and Medical Leave Act if they need substantial time away from work to care for newborns or elderly family members. Two trends explain this need. First, many elderly and seriously ill parents of the employed baby boom generation depend on their children. Second, both husbands and wives work full-time jobs now more than ever before, necessitating extended leave to care for newborns or for children who become ill.

Line managers

Line managers rely on compensation professionals to: -Ensure knowledge of relevant laws to help them make sound compensation judgments -Advise for establishing pay differentials -Train them how to properly evaluate jobs

Federal Employees

Not protected by: Title VII of 1964 Civil Rights Act ADEA Equal Pay Act of 1963

Individual Contributions

Over time, it is important to recognize the contributions of employees for the purposes of retaining them. There are three main methods such as pay structures, pay grades, and pay ranges. Pay structures are pay rate differences for jobs of unequal worth. Pay is determined by employees' credentials, job knowledge, and job performance. Pay grades group jobs for pay policy application, and they are based on similar compensable factors and value. The last method is pay ranges and it builds on pay grades.

Lilly Ledbetter Fair Pay Act

Overturned the 2007 Ledbetter Supreme Court ruling Helps close the pay gap between men and women Pay discrimination charge must simply be filed within 180 days of a discriminatory paycheck - It had become more difficult to sue employers for pay discrimination under Title VII. Title VII imposes a statute of limitation period, typically 180 days, after which employees may file claims of illegal discrimination against employers. In 2007, the U.S. Supreme Court rendered a very strict interpretation as to when the statute of limitations period begins for women to sue their employers for discrimination in pay. In 2009, the Ledbetter court decision was overturned with the passage of the Lilly Ledbetter Fair Pay Act,

Legal Pay Differentials

Payments made pursuant to a: Seniority system Merit system Earnings measured by quantity or quality of production Differentials not based on gender Pay differentials are not always illegal. They are legal when payment made due to seniority system, merit system, system which measures earnings by the quantity or quality of production, and factors other than gender. Seniority system- get paid more, additional responsibilities, Merit system- incentivize you to make you want to make more money, Earnings measured by quantity or quality of production Differentials not based on gender

Pension Protection Act of 2006

Pension Protection Act of 2006 is designed to strengthen protections for employees' company-sponsored retirement plans through defined benefits plans and defined contribution plans. Defined benefit plans guarantee monthly income for the duration of a retiree's life. Defined contribution plans refers to savings plans that employees may contribute to for use during their retirement. Pension Protection Act enables companies to enroll their employees automatically in defined contribution plans and provides greater access to professional advice about investing for retirement.

OWBPA

Places additional age-related restrictions on employer benefit practices Ex: Company A has 3,000 employees 750/25% of employees 40 or older 2,250/75% younger than 39 Total annual contributions of $120,000 40+ paid $84,000/70% 39- paid $36,000/30% Older workers pay much more -Older Workers Benefit Protection Act is the 1990 amendment to the ADEA. It places additional restrictions on employers' benefits practices. The Older Workers Benefit Protection Act (OWBPA)—the 1990 amendment to the ADEA—placed additional restrictions on employer benefits practices. When employers require employee contributions toward their benefits, under particular circumstances, employers can require older employees to pay more for health care, disability, or life insurance than younger employees because these benefits generally become more costly with age (e.g., older workers may be more likely to incur serious illnesses, thus, insurance companies may charge employers higher rates to provide coverage to older workers than younger ones).

Americans with Disability Act of 1990 (ADA)

Prohibits discrimination of employees with disabilities Reasonable accommodations such as: -Making existing facilities readily accessible -Job restructuring -Modifying work schedules Defines "qualified individuals with disabilities" Enforced by EEOC

Nondiscrimination Rules

Prohibits employers from giving preferential treatment to key employees and highly compensated employees Key employees 5% owner of the employer 1% owner of the employer with compensation more than $160,000 An officer of the employer with compensation greater than $165,000 in 2013 No preferienantial treatment just because *Nondiscrimination rules prohibit employers from giving preferential treatment to key employees and highly compensated employees. Key employee is a 5% owner of the employer, or a 1% owner of the employer with compensation more than $160,000, or an officer of the employer with compensation greater than $165,000 in 2013.

Civil Rights Act of 1964 Title VII

Promotes equal employment opportunities for minorities Defined two types of discrimination Disparate treatment intentional discrimination (all women get As, all boys get Ds for no reason) Disparate impact unintentional discrimination ( frame a test questions that unintentionally discriminate against a gender some way) - Title VII of the Civil Rights Act of 1964 promotes equal employment opportunities for underrepresented minorities. Title VII distinguishes two types of discrimination such as disparate treatment and disparate impact. Basically, disparate treatment refers to intentional discrimination and disparate impact refers to unintentional discrimination. Treat everyone the way they should be treated

Employee Retirement Income Security Act of 1974 (ERISA)

Regulates the implementation of various employee benefits programs, including: Medical Life Disability Pension - ERISA was established to regulate the implementation of various employee benefits programs, including medical, life, and disability programs, as well as pension programs. The essence of ERISA is protection of employee benefits rights. For example, companies with pension plans are required to maintain a minimum level of funding in order to meet its future obligations (payments to retirees). Prior to ERISA, scores of employees who were participants in their companies' retirement plans did not receive the benefits they were promised.

Base Pay Adjustments

Seniority pay, merit pay, and incentive pay enable companies to recognize the changing impact of employees over time, presumably, as they become more valuable.

Civil Rights Act of 1991

Shifts burden of proof of disparate impact to employers Filing of discrimination claims changed U.S. citizens working overseas may file suit against U.S. businesses for discriminatory employment practices Extends coverage to U.S. Senate employees and executive branch political appointees - Civil Rights Act of 1991 overturned several Supreme Court rulings. It shifted burden of proof of disparate impact to employers. It allows employees to file a discrimination claim when the system is implemented or whenever the system negatively affects them. Also, it allows U.S. citizens working oversees to file discrimination lawsuits against U.S. businesses. Moreover, it extends coverage to U.S. Senate employees and executive branch political appointees.

Davis-Bacon Act

Standards for contractors with federal contracts Applies to on-site laborers and mechanics Must pay prevailing wages Must offer comparable benefits - Some believe that the need for prevailing wages is to prevent the public sector's large expenditures and strict competitive bidding requirements from destabilizing local and regional construction markets. By taking wages out of the equation, prevailing wages organize competition around quality, productivity, and efficiency.

Strategic decisions

Strategic decisions: guide the activities of companies in the market Tactical decisions: support the fulfillment of strategic decisions

Tactical decisions

Tactical decisions: support the fulfillment of strategic decisions

FLSA

The purpose of the minimum wage provision is to ensure a minimally acceptable standard of living for workers. The original minimum wage was 25 cents per hour. Since the act's passage in 1938, the federal government has raised the minimum wage several times. The previous minimum wage increase, to $5.15 per hour, was signed into law in August of 1996. In 2007, Congress passed an increase in the federal minimum wage from $5.15 in increments to $7.25 in 2009. Twenty-one states have minimum wage laws that currently specify higher minimum wage rates than the federal level specified in the FLSA. The overtime pay provision, in general, requires employers to pay employees at rate 1.5 times the normal hourly rate for each hour above 40 hours in a seven-day period. The overtime provision does not apply to all jobs. Executive, administrative, learned professional, creative professional, computer workers, and outside sales employees are generally exempt from the FLSA overtime and minimum wage provisions. Nonexempt jobs are subject to the FLSA overtime pay provision. The FLSA child labor provisions protect children from being overworked, working in potentially hazardous settings, and having their education jeopardized due to excessive work hours. The restrictions vary by age: Children under age 14 usually cannot be employed. Children ages 14 and 15 may work in safe occupations outside school hours if their work does not exceed 3 hours on a school day (18 hours per week while school is in session). When school is not in session, as in the summer, children cannot work more than 40 hours per week. Children ages 16 and 17 do not have hourly restrictions; however, they cannot work in hazardous jobs (e.g., the use of heavy industrial equipment or exposure to harmful substances).

Legally Required Benefits

The second component of employee benefits is legally required benefits. They are protection programs that are designed to promote worker safety and health and maintain family income. They assist families in crisis and provide assistance when an employee is disabled or unemployed. As we will learn in this chapter, social problems in the early part of the 20th century prompted the government to create many benefits. For example, many employers did not spend the money to ensure that workers operated in safe and healthful environments. Doing so would have reduced profits. And, in the event that employees became seriously injured or disabled, they would not have a source of income, making it difficult for them to provide basic necessities for themselves and family (food shelter).

Time-and-motion studies

Time-and-motion studies analyzed the time it took employees to complete their jobs. These studies literally focused on employees' movements and the identification of the most efficient steps to complete jobs in the least amount of time.

Disparate impact

Unintentional (does not justify it—training) Unequal treatment of protected employee groups Ex: Awarding pay increases to male and female workers based on seniority when females had less seniority - Disparate treatment represents intentional discrimination. It occurs when employers intentionally treat some workers less favorably than others due to race, color, religion, sex, or national origin. Applying different standards to determine pay increases for blacks and whites is an example of disparate treatment. Disparate impact represents unintentional discrimination. It occurs when an employer applies employment practice to all employees. It leads to unequal treatment of protected employee groups. Awarding pay increases to male and female workers based on seniority when females had less seniority is an example of disparate impact.

COBRA Coverage

Up to 18 months for individuals and their spouses and dependents May extend for up to 36 months for spouses and dependents facing a loss of employer-provided coverage because of an employee's: Death Divorce Legal separation Other (termination, retirement, layoff)

Compensable Work Activities

Waiting time On-call time Rest and meal periods Sleeping time and certain other activities Lectures, meetings, and training programs Travel time -Home to work travel -Home to work on special one day assignment -Travel that is all in a day's work -Travel away from home community

Welfare practices

Welfare practices were generous endeavors undertaken by some employers, motivated in part to minimize employees' desire for union representation, to promote good management and to enhance worker productivity. - Welfare practices were originated to provide comfort and improvement, intellectual or social, to employees over and above wages paid to discourage unionization, promote effective management, and enhance productivity. Some of the examples of benefits under welfare practices include use of libraries and recreational facilities, educational assistance, and medical insurance.

Lowest cost strategy

focus on being lowest cost producer/seller of goods or services

Differentiation strategy:

focus on offering unique goods or services to the public

Extrinsic:

includes both monetary and nonmonetary rewards.

Pay structures

pay is determined by employees' credentials, job knowledge, and job performance

Protection programs

provide family benefits, promote health, and guard against income loss caused by such catastrophic factors as unemployment, disability, or serious illness.

Intrinsic

represents employees' critical psychological states that result from performing their jobs. Individuals may derive satisfaction and a sense of accomplishment from the work they do. Such satisfaction and sense of accomplishment are considered a form of intrinsic compensation. For example, a nurse may feel very well compensated intrinsically because he values helping others.