Compensation and Benefits

Special Minimum Wage for Youth

$4.25/hour

Child Labor Permissable jobs

18+ - Any job, 16-17 - any non-hazardous job; limited driving, 14-15 May work outside of school in non-manufacturing, non-mining, non-hazardous jobs.

Federal Minimum Wage

7.25/Hour. Tipped employees may be paid $2.13/hour as long as wages plus tips equals at lease minimum wage.

Benefit

A collection of non-cash compensation elements, including but not limited to income protection, health coverage, retirement savings, vacation and income supplements for employees, provided in whole or in part by employer payments

Benefits needs analysis

A comprehensive review of all employee benefits

Garnishment

A court order to take part of a person's wages, before he/she gets them, and apply the amount take to pay a debt owed to a creditor

Cash Balance Plan

A defined benefit plan in which the employer contributes a percentage of current pay to an employee's pension plan each year; the employee earned interest on this amount and may receive a lump sum payment if leaves the organization

Roth 401 (k)

A defined contribution plan allowing employees to defer income by making after-tax contributions to a retirement account

401(k) Plan

A defined contribution plan allowing employees to defer income by making pretax contributions to a retirement account. The plan my also allow for employer matching contributions.

Pay grade

A group of jobs of the same or similar value used for compensation purposes

Preferred Provider Organization (PPO)

A health care delivery system in which the employer of insurer enters into contracts with health care providers (physicians, hospitals, etc.), to provide heath care services t a discount

Serious health condition

A health condition that requires either impatient care or continuing treatment by a health care provider

Point of Service Plan (POS)

A health plan that allows the member to pay little or nothing if they stay within the established delivery system, but permits members to receive services from health providers outside the plan if they are willing to pay higher co-payments, deductibles and possibly monthly premiums

Benchmark Job

A job that is commonly defined, used to make pay comparisons, either within the organization or to comparable jobs outside the organization. Pay data for these jobs is readily available in published surveys

Salary (Pay) Survey

A method of collecting compensation data for workers performing similar jobs in other organizations

Bonus

A onetime amount received or paid in addition to the regular wage or salary

Draw

A payroll advance repaid by future commissions earned by the sales employee

Maturity Curve

A process of determining employees' salaries as a function of experience. It assumes that years in a profession equate with more highly valued competencies.

Keogh Plan

A qualified retirement plan for self-employed individuals

Individual retirement account (IRA)

A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund

Non-contributory plan

A retirement or benefit plan in which the employer makes all contributions

Pension Plans

A retirement plan established by a corporation or organization to provide income for its employees when they retire

Defined-contribution plan

A retirement plan in which the employee and/or the employer contributes. Employees are usually responsible for choosing investments in these accounts, and income taxes are deferred until the proceeds are withdrawn after age 59 1/2.

Long Term Disability (LTD)

A significant period of disability generally ranging from six months to life

Salary Compression

A situation that occurs when longer-term employees in a job earn less than new hires for the same job. A salary inequity problem usually caused by inflation.

Managed Care

A system that delivers cost effective health care through monitoring and recommending utilization of services

Job Evaluation

A systematic process for establishing the relative value/worth of jobs within an organization (internal equity)

Money Purchase Plan

A type of defined contribution plan in which the employer makes fixed, regular contributions for participants, usually a percentage of total pay; employees may also make voluntary contributions. At retirement, the accumulated funds are used to provide annuities or lump sum distributions

Health Savings Account (HSA)

A type of flexible spending account that reimburses the employee for out-of-pocket medical expenses; part of a flexible benefit plan

Green-circled employee

A worker paid below the range set for the job

Seniority

A workers length of service with an employer relative to the length of service of other workers.

Hardship Allowance

Additional compensation for expatriates assigned to locations with difficult living and working conditions

Age

Adjusting all salary survey data to the same date

Leveling

Adjusting salary survey data to better fit your job requirements (subjective)

Red Circle Employee

An employee paid above the range set for the job

Defined-benefit plan

An employer's promise to pay a fixed amount each year at retirement. Regardless of the rate of inflation, employees will receive a pre-determined amount.

Compensable factor

An essential, compensate element of a job such as skills, effort, responsibility, and working conditions

Gainsharing

An incentive plan in which groups of employees receive awards based on increased profits, productivity or efficiency

Differential piece-rate system

An individual pay plan in which employees are paid one piece-rate wage for units produced up to a standard output and higher piece-rate wage for units produced over the standard

Workers Compensation

An insurance program, paid for by the employer, designed to protect employees from expenses incurred for a work-related injury or illness

Health Care Reimbursement Account (HRA)

An option under a flexible benefits plan. Expense paid for uninsured medical or heal care services such as vision, hearing, and dental care (deductibles, co-payments/coinsurance, exams for example) are reimbursed by the employer o a non taxable basis provided IRS rules are met.

Health Maintenance Organization (HMO)

An prepaid health plan delivering comprehensive care to members through designated providers, having a fixed monthly payment for health care services, and requiring members to be in a plan for a specified period of time (usually 1 year)

Overtime

Any hours worked over 40 in a workweek. Non-exempt employees are eligible. For overtime pay

Lump Sum Increase (LSI)

Any increase in pay that is made in the form of a single cash payment

Compa-ratio

Base pay divided by the midpoint of the salary range

Competencies

Basic employee characteristics/behaviors that may enhance individual or teach performance

Cost of Living Allowance (COLA)

Basing annual salary increases on the Consumer Price Index (CPI)

Independent Contractor Requirements

Behavioral - Does the company control or have the right to control what the worker does and how the worker does his or her job? Financial - Are the business aspects of the worker's job controlled by the payer (these include things like how worker I️ paid, whether expenses are reimbursed, who provides tools/supplies)? Type of Relationship - Are there written contracts or employee benefits? Will the relationship continue and is the work performed a key aspect of the business.

Paid time-off (PTO) Plan

Benefit plan combining paid sick leave, vacation time and holidays

Vesting

Benefit plan provision that guarantees that participants will, after meeting certain requirements, retain a right to the benefits they have accrued

Flexible Benefit Plans (Examples)

Cafeteria plans, Flexible Spending Accounts, Health Reimbursement Accounts, Health Savings Accounts

Broadbanding

Combining salary grades and ranges into a few wide levels, each containing a relatively wide range of jobs and salary levels

Total Rewards

Compensation (direct pay), benefits, and the work experience (intangible rewards)

Merit (or Pay for Performance) Pay

Compensation increase based on individual employee's past effort and performance

Balance-sheet approach

Compensation package for international assignments that equalizes the cost differences between the host country and the home country

Walsh-Healy Public Contracts Act

Contractors with government contracts over $10,000 for supplies, equipment, and material must pay workers prevailing wage rates

Service Contract Act

Contractors with government service contracts over $2,500 must pay workers prevailing wage rates

Pension Benefit Guaranty Corporation (PBGC)

Created by ERISA. Insurance program that guarantees payment of basic retirement benefits to participants if a plan is terminated; may also terminate seriously underfunded pension plans.

Prevailing Wage Laws

Davis-Bacon Act - Construction projects over $2,000, Walsh-Healy Public Contract Act - Supplies, equipment materials, over $10,000, McNamara-O'Hara Service Contract Act - Services over $2,500., Defense Authorization Bill (1986) - Federal contractors may pay overtime after 40 hour week instead of 8 hour day

Retirement Benefits

Defined Benefit plans, Defined contribution plans, Vesting, ERISA and IRS

Family and Medical Leave Act (FMLA)

Eligible employees receive up to 12 weeks of unpaid leave for: 1) suffering or recovering from a "serious health condition"; 2) the birth of a child; 3) adoption of a child; 4) to care for an immediate family member

Cafeteria Plan (Section 125)

Employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs

Non-Qualified Plan

Employee benefit plans that do not adhere to strict IRS standards, cover only select groups of employees, and don' receive favorable tax treatment

Mandated Benefits

Employee benefits that employers must provide by law

Competency Based Pay

Employee pay based on characteristics/behaviors or increased job knowledge

403(b) plan

Employee retirement account, similar to a 401(k), for public employees

Co-Payment

Employee's portion of the cost of insurance premiums and/or medical care

Exempt employees

Employees not entitled to overtime pay under the Fair Labor Standards Act; positions classified as executive, administrative, professional or outside sales

Non-Exempt Employees

Employees who are covered by the Fair Labor Standards Act minimum wage and overtime provisions. These employees are typically paid hourly

Split-Dollar Plan

Employer and executive share the cost of the executive's enhanced life insurance premium

Voluntary Benefits

Employer provided benefits that are not mandated by law

Employee Assistance Programs (EAP)

Employer provided counseling or other services to help employees cope with work or personal problems that may interfere with job performance

Davis-Bacon Act

Employers with federal construction contracts must ay laborers and mechanics the prevailing wages of the majority of the workers in the same area

Golden Parachute

Enhanced severance pay if executive loses position through merger or acquisition

Fair Labor Standards Act (FLSA) 1938

Establishes a minimum wage, overtime provisions, and child labor; applies to most non-managerial employees in private industry

Utilization review

Evaluation of the necessity, appropriateness and efficiency of the use of medical services and facilities

Benefit Laws

FMLA, ERISA, COBRA, HIPAA

Improshare

Gainsharing based on increases in productivity of the standard hour output of work teams.

Nursing Mothers FSLA

Guarantees "reasonable" unpaid breaks to nursing mothers who need time to express milk. Also requires employers to provide a private place for mothers, othe than a bathroom, for up to one year after a nursing child's birth.

Managed Care Plans

HMO, PPO, POS

Women's Health and Cancer Rights Act (1998)

If a group health plan or health insurance issuer covers mastectomies, then the plan is required to cover breast reconstruction surgery in connection with a mastectomy

Rucker Plan

Incentive bonus plan based on the relationship between the total earnings of hourly employees and the increased production by the employees

Scanlon Plan

Incentive bonus plan using employee committees to achieve cos-reduction improvements. A formula determines the employee's share of cost savings.

Earnings-at-Risk Incentive Plan

Incentive pay plan that puts a portion of the worker's base pay at risk, while also allowing the opportunity to earn more above base pay if goals are met or exceeded

Straight Piece-Rate System

Individual incentive plan in which pay is determined by multiplying the number of units produced by the rate for one unit

Piece-Rate System

Individual incentive plan where workers re paid for each unit produced based on a predetermined standard

Independent Contractors

Individuals who contract with employers to perform specific projects or tasks; they are not employees of the organization

Key-Person Insurance

Insurance intended to cover an organization's cost if a top executive should die

Hay Profile Method

Job evaluation method using knowledge, mental activity, and accountability to evaluate executive and managerial positions

Factor Comparison System

Job evaluation system in which the evaluation process is accomplished on a factor-by-factor basis by developing a factor comparison scale

Job Classification System

Job evaluation system where jobs are classified according to a series of predetermined salary grades

Employee Retirement Income Security Act (ERISA)

Law providing government protection of pensions for all employees with company pension plans

Goals of Compensation Plan

Linked to strategic goals, Internally equitable, externally competitive, efficient to administer

Consumer Price Index (CPI)

Measurement of the average change in a fixed "market basket" of goods and services over time

Tax Equalization Allowance

Method used to ensure that expatriates pay no more than the amount of assumed home country taxes

Exempt Status

Minimum salary test $455/week, Super salary test - over $100,000/year

Employees with more than one pay rate

Must average pay rates during pay period to determine base for overtime pay

Ranking

Non-Qualitative (whole job) job evaluation method of placing each jo in order of relative worth to the organization

Lag Policy

Organization intentionally sets pay structures and targets pay levels below the market rate

Match Policy

Organization pay policy is to set pay structures and targets pay levels to match the market rate

Lead Policy

Organizational intentionally sets pay structures and targets pay levels above the market rate

Differential Pay

Pay in addition to base pay for special work circumstances

Variable Pay

Pay tied to productivity or some measure that can vary with the firm's profitability

Shift Differential

Paying a premium to employees working less desirable shifts

Wages

Payments to employees based on hours or days worked.

Salary Reduction Simplified Employee Pension Plan (SARSEP)

Pension plan that allows employees of companies with 25 employees or less to deter taxation on a portion of their income be making voluntary contributions. Permitted under the Tax Reform Act of 1986

Blackout Period

Period of time when plan participants cannot make investment changes, obtain loans, or take distributions from their plan account. Typical blackouts last 4-6 weeks.

Fiduciary

Person placed in a position of trust confidence expected to exercise a standard of care in administering or managing the assets of others

Flexible spending account

Plan that allows employees to contribute pretax dollars to purchase additional benefits

Flexible benefits plan

Plan that permits employees to choose the benefits they prefer from several benefits offered by the employer

Employee stock ownership plan (ESOP)

Profit sharing plan that gives employees shares of stock in the company; designed to increase employee's effort, commitment ad loyalty since they have a stake in the organization's success

Consolidated Omnibus. Budget Reconciliation Act (COBRA)

Provides for temporary continuation of group health coverage, at group rates, that otherwise might be terminated

Social Security Act (1935)

Provides retirement, disability, and health insurance for retired persons and those unable to work

Qualified Plan

Qualified under the IRS Code to receive favorable tax treatment; employee contributions to the plan are tax deferred until retireemt, and employer contributions are tax deductible

Point Methond

Quantitative job evaluation system that assigns points to each job to determine its relative worth

Organizational Incentives

Rewards employees for the performance to the entire organization

Skill Based Pay

Rewards employees for the range, depth, and types of skills they are capable of using. Also called Pay-For Knowledge or Multiskilled pay.

Individual Incentieves

Rewards for individual effort and performance; piece-rate systems, individual bonuses, sales commissions

Straight Commission Plan

Sales compensation based only on a percentage of each sale

Combined Salary and Commission Plan

Sales compensation plan that includes straight salary and a commission

Silver Parachute

Severance benefit for mid-level managers in the event they lose their job through a merger or acquisition. Not as "rich" a benefit as olden parachutes.

Perquisites (Perks)

Special benefits—usually noncash items—for executives.

Team Incentive Plan

Team members share on incentive bonus when production standards are met or exceeded; commonly used in gain sharing plans

Market Differential

Temporarily paying above the pay range for a certain hard to fill jobs

Sarbanes-Oxley Act of 2002 (SOX)

The Act that encourages the disclosure by an employee of confidential employer information, to a government agency, in a publicly traded organization, that may violate federal securities law or an law meant to prevent fraud against shareholders or employees

Portability

The ability to transfer pension rights and credits when.a worker changes jobs

Base Pay

The basic compensation for a specified position of employment excluding any other payments or allowances

Qualifying Event

The conditions that require offering continued medical coverage under the COBRA

Job Specifications

The knowledge, skills, and abilities (KSAs) an individual needs to perform a job satisfactorily

Prevailing Wage

The minimum wage to be paid to employees working on federal contracts or subcontracts. The wage is determined by the wage paid to other workers in the area.

Profit Sharing

The payment of a portion of company profits to employees as a performance incentive in addition to their regular compensation

Equity

The perceived fairness regarding what an individual does and what is received.

Commission

The percentage of the selling price that is paid to a. Sales employee as all or part of compensation

Job Analisis

The process of determining the skills and duties required of a job

Pay Range

The range of pay rates (from minimum to maximum set for a pay grade. Used to set individual pay rates

Market Line

The relationship between job value, as determined by job evaluation joints and pay survey rates shown on a graph

Stock Option

The right of employees to buy company stock, usually at a discounted price

Pay Equity

The similarity of pay for job requiring comparable levels of knowledge, skills and abilities

Regression Analsis

The statistical technique of finding a straight line that approximates the information in a group of data points

Wage and Salary Survey

The survey of wages paid by other employers in the relevant labor market

Adverse selection

The tendency of persons with poorer than average health expectations (higher risk) to apply for a continue insurance coverage to a greater extent than persons with average or better-than-average health expectations (lesser risk). Also known as anti-selection.

Salary

The total amount regularly paid to an individual regardless of number of hours worked

Compensable Time

Time spent by employees performing work-related tasks

Compensatory time off

Time spent by employees performing work-related tasks

Entitlement Philosophy

Traditional compensation philosophy that gives automatic salary increases based on seniority

Indemnity Plans

Traditional fee-for service group health plans, the patient chooses whichever doctor and hospital he/she wants to use

Contributory Plan

Type of pension plan in which both employees and the employer contribute

Market Price

Typical wage paid for a job in the immediate labor market

Managing Health Care Costs

Utilization Review, Pre-Authorization, Reasonable and customary, Second opinions, Wellness programs, Adverse selection

Waivers

Voluntary agreement between an employee and employer waiving the employer of certain obligations

Portal to Portal Act 1947 Guidelines

Waiting and on-call time - not paid unless it restricts the employee's activities, Rest and meal periods - 10 minutes or less counted as time worked, 30 minutes or more usually unpaid, Training time - paid if employer requires the training, unpaid if voluntary on employee's own time, Travel time - Paid if on the job travel between work sites, unpaid if commuting to and from work, Paid if one day assignment to another city - may deduct time employee would normally commute to the regular work site. Travel away from home (overnight) Work day paid including travel time during work day, Travel outside of work day is unpaid, However, work performed while traveling is paid.

Job Description

Written duties and responsibilities of a job