PHR/SPHR Ch. 7

Job Ranking Job Evaluation Method

- Comparison of the whole job compared to another whole job rather than a comparison based on each job's measurable factors

Managed-Care Health Plan

- Concept behind is that it is structured to provide managed care to its subscribers - Core objective is that the medical care a subscriber receives is medically necessary and provided in a cost-effective manner - All typically offer basic medical coverage

Long-Term Care Insurance (LTC)

- Covers the cost of long-term care in a number of settings including care at home, in an assisted living facility, in a nursing home, or as an inpatient in a hospice - If offered, must provide care for ppl who are chronically ill for at least 90 days - Premium payments are not counted as employee income, and employers can deduct their part of the insurance premiums from their annual income tax liability

Single/Flat-Rate Pay System

- Each worker in the same job has the same rate of pay regardless of seniority or job performance - Usually directly linked to an applicable market survey

Straight Piece Rate Pay System

- Employee receives a base rate of pay and is awarded additional compensation for the amount of output produced

Differential Piece Rate System

- Employee receives one rate of pay up to the production standard and a higher rate of pay when the standard is exceeded

Group Life Insurance

- When plans exceed $50k, the amount over $50k is referred to as excess group-term life insurance and treated by the IRS as imputed income subject to tax

Who created the FASB?

The Securities and Exchange Commission (SEC)

The IRS regulations influence what with payroll?

The types of benefits plans that employers can provide to their employees and the manner in which they fund and operate these plans.

What is the age limit for Social Security?

There is no limit

When can workers begin to receive Social Security benefits and what are the stipulations?

- 62 at reduced benefits - Retirement age is determined on a graduated scale

Stipulations of Medicare

- 65+ - If employer provides health insurance, the employer's health plan is primary and Medicare is secondary - If the individual is retired, Medicare is the primary carrier and the employer's insurance is secondary - If the employer has fewer than 20 employees, Medicare can be primary for employees 65+

Health Maintenance Organization (HMO)

- A capitated healthcare plan in which the healthcare provider is paid on a capitated basis (per-person) rather than on the basis of services provided - 2 Types: a) Individual Practice Association (IPA) - Groups of healthcare providers in private practice also provide services through the HMO b) Staff Model HMOs - The healthcare providers are directly employed by the HMO

Cost-of-Living Adjustments

- A pay increase given to all employees on the basis of market pressure, usually measured against the consumer price index (CPI), which is the measure of the price of goods and services in a given area over a period of time.

Knowledge-Based Pay System

- A person's pay is based on the level of knowledge they have in a particular field. - Often used with learned professional, i.e. doctors, lawyers

Pay Grade

- AKA Job Groups - the way an organization organizes jobs of similar values - Things to consider: 1. Size and structure of the organization 2. "Distance" between the lowest and the highest job in the organization 3. Organization's pay increase and promotion policy 4. Grouping of nonexempt and exempt jobs as well as job families 5. Creating sufficient grades to permit distinguishing difficulty levels but not so many that the difference between adjoining grades is insignificant

Pay Differential

- Additional compensation paid to an employee as an incentive to accept what would normally be considered adverse working conditions, usually based on time, location, or situational conditions. - Incentivizes employees

Uniform Coverage of Section 125

- Allows an employee to be reimbursed for qualified medical expenses that exceed their contributions to date - Poses a potential risk to the employer because if an employee terminates when there is a negative balance in their FSA, the employer is responsible - Rule states that for the medical expense account, a participant may claim the full amount of their annual election even if they have contributed only a portion of the total - Applies to medical FSA only

Full Cafeteria Plans

- Allows employees to choose from a menu of eligible qualified benefits prior to the start of the plan year or coverage period - Employees typically are given credits that they can spend on a variety of qualified benefit items choosing not only between different benefits but also between items within a given benefit

What was the EEOC ruling on Medicare?

- Allows employers to reduce health benefits for Medicare eligible retirees to avoid paying premiums that are higher than those paid for retirees not covered by Medicare - If an employer provides retiree health benefits, the health insurance benefits received by Medicare-eligible retirees can be the same or cost the same as health insurance benefits received by younger retirees

Section 125 Cafeteria (Flexible Benefit) Plans

- An employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code A - Allows employees to pay certain qualified expenses (such as health insurance premiums) on a pretax basis, thereby reducing their total taxable income and increasing their spendable/take-home income

Direct Compensation

- Applies to a variety of pay programs that are, in one way or another, cash-based - Examples: Base pay, commissions, bonuses, merit pay, piece rate, differential pay, cash award, profit sharing, gainsharing

Indirect Compensation

- Applies to programs primarily designed to provide recognition and benefits - Examples: Social Security, unemployment insurance, disability insurance, 401k, healthcare, vacation, sick leave, PTO

Short-term Disability (STD)

- Begins where sick leave ends - Typically covers only a portion of lost income and may require a waiting period - Typically 50-70% coverage of employee's base salary up to 6 months

Lump-Sum Increases

- Can be either a stand-alone performance bonus or part of an annual pay increase

Broadbanding

- Combines several pay grades or job classifications with narrow range spreads with a single band with a wider spread - Usually used as a way to simplify an organization's pay levels and reduce management oversight requirements

What are the qualifications for Social Security?

- Person must earn a number of quarters, usually 40, which takes at least 10 years

Flexible Spending Account (FSA)

- Employees may set aside a pre-established amount of money on a pretax basis per plan year - Employees can use the funds to pay for eligible medical, dependent care, or transportation expenses - Pretax - Does not rollover

Skill-Based Pay System

- Employees paid in the skill-based system are paid for the number and depth of skills that they have that are applicable to their job. - Heavy operators are an example

Fully Funded Health Plan

- Employer pays the insurance carrier premiums that cover all of the costs associated with the level and type of coverage - On an annual basis, the carrier adjusts their premiums to coordinate with the employer's claims experience - The carrier bears all the risk; the carrier experiences either profits or losses based on its underwriting acumen

Partially Self-Funded Plans

- Employer purchases one or two types of stop-loss insurance coverage - either specific and/or aggregate stop-loss coverage a) Specific stop-loss coverage: Plan is protected against the risk of a major illness for one participant or one family unit covered by the plan b) Aggregate stop-loss coverage: Plan is protected against the risk of large total claims from all participants during the plan year

Employee Assistance Programs (EAP)

- Employer-sponsored benefits that provide a number of services that help promote the physical, mental, and emotional wellness of individual employees who otherwise would be negatively impacted by health-related crises

Premium-Only Plan

- Employers may deduct the employee's portion of the company-sponsored insurance premium directly from said employee's paycheck before taxes are deducted

Primary objective of a nonquantitative job evaluation method

- Establish a relative hierarchy of jobs based on the jobs' relative worth - Often referred to as a whole-job method because they rank jobs as a whole based on their perceived worth without placing a numerical value on each job

Mission of the US DOL

- Foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the US - Improve working conditions - Advance opportunities for profitable employment - Assure work-related benefits and rights - Enforces the FLSA

General Pay Increases

- Given to all employees regardless of their job performance and is not linked to market pressures.

When are disability benefits paid to a worker?

- If they have a medically determined physical or mental impairment that keeps them from working for at least 5 months and is expected to continue to at least 1 year or result in death - There is a 5-month waiting period before monthly benefits begin

Preferred Provider Organization (PPO)

- Includes in- and out-of-network options - Allows you to visit whatever in-network physician or healthcare provider you want without first requiring a referral from a PCP - In-network services receive discounted co-payments or deductibles

Compa-ratios

- Indicators of how wages match, lead, or lag the midpoint, normally an indicator of market value - Compa-ratio = Pay Rate/Midpoint - If less than 100% means the worker is paid less than the midpoint of the range; above 100% means the wages exceed the midpoint

Job Classification

- Job evaluation method in which descriptions are written for each class of jobs; individual jobs are then put into the grade that best matches their class description. - Nonquantitative job evaluation method - Good for evaluating a large number of jobs, but not effective when jobs overlap because they compare the whole job.

Point-Factor Job Evaluation Method

- Most commonly used - Uses specific compensable factors as its reference points to measure relative job worth

High Deductible Health Plan (HDHP)

- Objective of consumer-directed healthcare accounts is to allow employees to make more decisions about their healthcare while helping employers better control their costs.

Green Circle Rates

- Occurs when a new employee is hired at a pay rate lower than the minimum rate for the applicable grade. - Situations should be avoided whenever possible and should be allowed only as a last resort because they create serious morale issues or could even be pay discrimination.

Hazard Pay

- Occurs when employees are called to work under adverse conditions either caused by the environment or because of the circumstances - Work generally considered putting an employee at risk for safety or health purposes would be hazard pay

Section 125 Plan Plan Year and Grace Period

- One full year and generally begins on the first of a month - Grace period is a time frame up to 75 days after the end of the official plan year during which employees may use up any funds remaining at the end of the plan year

Red Circle Rates

- Organizations use as a method to increase an employee's pay to a new rate higher than the maximum for the assigned pay range - Most often occurs in smaller organizations where promotional opportunities may be limited

Employer Sick Leave

- Paid leave for a specified number of hours or days absent from work because of medical conditions. - No federal law that requires it but some state laws do

What does Medicare cover?

- Part A: Hospital Insurance - Part B: Voluntary supplemental medical insurance

Premium Pay

- Pay at a higher rate than required by law for working paid holidays or vacation days, for the 6th or 7th day of work in a single workweek, or after 8 hours in a day.

Travel Pay

- Pay for time traveling between one location and another under other than routine conditions.

Competency-Based Pay Systems

- Pay is linked to the level at which an employee can perform in a recognized competency - Like HR competency in benefits

Factor Comparison Job Evaluation Method

- Rarely used because more complex - Involves ranking each job by each compensable factor and then identifying dollar values for each level of each factor to develop an actual pay rate for the evaluated job.

Time-Based Differential Pay/Shift Pay

- Rewards the employee who works hours normally considered undesirable - i.e. night shift, weekends

What are the current federally mandated benefits?

- Social Security/Medicare - Healthcare under the Patient Protection and Affordability Care Act (PPACA) - Unemployment Insurance - Worker's comp - COBRA - FMLA

Point-of-Service (POS)

- Some of the qualities of HMO and PPO plans with benefit levels varying depending on whether your care is received in or out of the health insurance company's network of providers - Sometimes required to designate a PCP to make referrals - Can receive out-of-network providers but with greater out-of-pocket costs

Location-Based Differentials

- Sometimes locations are undesirable for different factors and this is to help attract more workers

Fee-for-Service Health Plan

- Subscribers can go to any qualified physician, healthcare, provider, hospital, or medical clinic and submit claims to the insurance company - Fees are generated on the basis of the service provided, thereby creating an incentive for the medical provider to provide more services

Who is eligible for Social Security Survivor Benefits?

- Surviving spouse age 60+ (50 if disabled) - Surviving spouse at any age caring for a child under the age of 16 or disabled - Unmarried children under age 18 - Disabled children of any age if disabled before age 22 - Dependent parents age 62+

Health Reimbursement Account (HRA)

- Tax-advantaged benefit that allows both employees and employers to save on the cost of healthcare - Employer-funded medical reimbursement plans - Employer sets aside a specific amount of pretax dollars for employees to pay for healthcare expenses on an annual basis. - Primary requirements is that the plan must be funded solely by the employer and cannot be funded by salary reduction - The plan may provide benefits for substantiated medical expenses only.

Health Savings Account (HSA)

- Tax-advantaged medical savings account available to taxpayers in the US who are enrolled in a high-deductible health plan - Funds contributed to an account are not subject to federal income tax at the time of deposit - Funds roll over and accumulate year to year if not spent - They are owned by the individual - May be used to pay for qualified medical expenses at any time without federal tax liability or penalty.

Self-Funded Plans

- The employer takes on the role of the insurance carrier and assumes all or most of the risk - Subject to annual nondiscrimination testing requirements - 2 different approaches: a) Administrative services-only (ASO) plan: All of the risk is assumed by the employer. Employer hires only the claims dept of the insurance company for its claims services. b) Third-party administrator (TPA) plan: Employer assumes all the risk; employer hires an independent claims dept. - State insurance laws cannot dictate the content and coverage of such plans because ERISA preempts state rights to regulate employee benefit plans except for the regulation of insurance

Quantitative Job Evaluation Methods

- This job evaluation method evaluates specific factors on a scale and provides a score that indicates how valuable one job is compared to another. - Include point-factor and factor comparison

What is the primary purpose of the Financial Accounting Standards Board (FASB)?

- To develop generally accepted accounting principles (GAAP) in the public's interest within the US - Impact the accounting practices of public companies and how they report their financial information to their shareholders

What is the purpose of the Pension Benefit Guaranty Corporation (PBGC)?

- To encourage the continuation and maintenance of voluntary defined benefit pension plans - To ensure the timely and uninterrupted payment of pension benefits to retirees - To keep pension insurance premiums at the lowest level necessary to carry out its operations

What was the goal of the Affordable Care Act (ACA)?

- To increase the quality and affordability of health coverage by expanding public and private insurance coverage - Reduce the costs of healthcare for individuals and the government

What was the intent of Social Security?

- To provide retirement income for older workers - Also includes disability, death, and survivors' benefits

Geographic-Based Differential Pay

- Type of differential pay that responds to geographic issues associated with where the employee works.

Supplemental unemployment benefits (SUB)

- Unemployment benefits in addition to government benefits offered by some employers - Common in union environments

Long-term disability (LTD)

- Usually begins after short-term disability coverage ends - Always underwritten by a commercial insurance company because of the risk associated with the coverage - When employees go on LTD, their employment ends with their organization even though they are collecting LTD benefits - During 1st two years of LTD coverage, individuals must be unable to perform their own occupation - After 2 years, a person must be unable to engage in any occupation or do any work to continue on LTD.

Minimum Premium Plan (MPP)

- Variation of a fully insured plan - Shifts some of the risk to the employer - When there are fewer claims and therefore lower costs, the minimum premium plan passes a percentage of the savings to the employer - More costs, more costs to the employer

Market-Based Increases

- When employee retention is threatened because employee pay is not competitive with the market, employers can create market-based increases to adjust an employee's pay by better matching market levels. - Sometimes called "Equity Increases"

Performance-Based Merit Pay System

- Workers are typically hired at or near the minimum for their applicable pay range - Pay increases are normally awarded on an annual basis and influenced by the individual's overall job performance.

What is Unemployment Insurance (UI)?

- a federally mandated program administered by the states that provides unemployment benefits to eligible workers who are unemployed through no faults of their own and who meet other eligibility requirements of applicable state law

Job Evaluation

- systemic determination of the relative worth of jobs in an organization - conducting a job evaluation is an essential first step in creating an appropriate wage structure that accommodates different jobs within an organization while it preserves internal pay equity

What is the common length of UI benefits?

- up to 26 weeks

Person-Based Pay System

-Employee capabilities, rather than how the job is performed, determine the employee's pay.

Terms used to refine the accuracy of survey data:

1. Aging: technique used to make outdated data current 2. Leveling: adjusting the survey number by an appropriate percentage needed to achieve a match 3. Geography: determine the percent difference in job value for a given location and factor that into the comparison

3 Variations of the Time-Based Step Rate System

1. Automatic Step Rate: Pay range is divided into several steps, each a pre-determined range apart. At the prescribed time interval, each employee with the required seniority receives a one-step pay increase 2. Step Rate with Performance Consideration: Similar to the automatic system except that performance can influence the size or timing of the pay increase 3. Combination Step and performance: Employees receive step rate increases up to the established job rate; above this level, increases are granted only for superior job perofrmance.

What are some ways to contain healthcare costs?

1. Change the delivery system 2. Let employees choose 3. Redesign the program 4. Promote prevention and wellness

Benchmark Jobs have these characteristics:

1. Essential functions and knowledge, skills, and abilities (KSAs) are established and stable 2. Represent the entire range of jobs in each class 3. Significant percentage of workers are employed in these jobs 4. External market rates for these jobs are an acceptable basis for setting wages

Techniques used to organize data

1. Frequency distribution: listing of grouped pay data from lowest to highest 2. Frequency tables: number of workers in a particular job classification and their pay data

Five Steps Involved in the Point-Factor Method of Job Evaluation

1. Identify key jobs - not necessarily the most important jobs in the organization 2. Identify the compensable factors - what is used to distinguish one job from another 3. Weight the factors according to their overall worth 4. Divide each job factor into degrees that range from high to low 5. The final results will be a table that vies a complete range of points from 50 to 200.

Four Standard Measures of Central Tendency

1. Mean/Average 2. Weighted Average: average result considering the number of participants and each participant's pay 3. Median 4. Mode

Worker's comp benefits include:

1. Paid medical expenses and wage replacement benefits under certain circumstances 2. 4 Types of workers' wage replacement benefits: a) Income Benefits: Replace income that might be lost because of a work-related injury or illness; can include temporary income benefits, impairment income benefits, supplemental income benefits, and lifetime income benefits b) Medical Benefits: Pay for necessary medical care to treat a work-related injury or illness c) Death Benefits: Replace a portion of lost family income for eligible family members of employees who are killed on the job d) Burial Benefits: Pay for some of the deceased employee's funeral expenses to the person who paid the expenses 3. Vocational Rehabilitation or in some cases supplemental job displacement benefits 4. Permanent and temporary partial or total disability benefits 5. Survivors' benefits in cases of fatal work injuries or illnesses

Legally Required Communications for Benefits

1. Summary Plan Description (SPD): Contains information on what the plan provides in lay terms. Distribution is required within 120 days after the plan's establishment or 90 days after eligibility. Must be updated no less frequently than every 5 years. 2. Summary Annual Report (SAR): Contains financial information about the plan. Distribution is required within 7 months after the end of the plan year. 3. Summary of Material Modifications (SMM): Required whenever any of the plan's features have been significantly changed or within 201 days after the end of the plan year. 4. FMLA Policy (50+ employees) 5. General notification of federal COBRA Rights (20+ employees) 6. Notice of special HIPAA enrollment rights and privacy rights

2 Systems Used to Identify Compensable Factors

1. The Hay Plan: Uses a standard criteria comprising three compensable factors - know-how, problem-solving, and accountability 2. The Factor Evaluation System (FES): Determines levels of duties and responsibilities using a point rating system to evaluate selected positions. Uses weighted factors to address the major position characteristics of responsibility, education/experience, job conditions, physical requirements, supervision, training, etc.

Seniority Pay Increases

A pay increase given based solely on length of service.

Health Insurance Purchasing Cooperatives (HIPCs)

Acts as purchasing agents for large groups of employers in a region. They shop for the highest quality health plans at the lowest prices. In addition they may negotiate directly with health care providers. The goal of such health alliances is to provide small organizations with the needed economic clout to negotiate more advantageous rates than they can get acting independently.

Total Rewards

Compensation that is both direct and indirect

What does the OFFCP enforce?

Executive Order 11246, - including the ban on compensation discrimination

Where do PBGC funds come from?

Insurance premiums paid by sponsors of defined benefit plans

What are the sole criteria for determining the applicability of the FLSA's minimum wage and OT requirements?

Job content/job duties

Which employers are covered by EEOC laws?

Most employers with at least 15 employees.

Productivity-Based Pay System

Pay is determined by the employee's output Useful if: - output can be measured - relationship between EE effort and output exists - job is standardized & workflow is regular - Quality < quantity - costs are known

What is the purpose of the Office of Federal Contract Compliance Programs (OFCCP)

To enforce, for the benefit of job seekers and wage earners, the contractual promise of affirmative action and equal employment opportunity required of those who do business with the federal government

What is the base period?

With UI - the requirements for wages earned or time worked during an established period of time = base period

How long must an employer retain payroll records and what laws dictate that time?

a) 3 years b) FLSA and Age Discrimination in Employment Act (ADEA)