Compensation Exam 2
Job analyses describe:
*Job content:* actual activities that employees must perform on the job. EX: Greeting clients - Saying "Hello" - Asking the client's name - Offering beverages, etc. *Worker requirements:* minimum qualifications and KSAs *Working Conditions:* social context or physical environment Effective job analysis identifies and defines job content. --> Job content describes job duties and tasks as well as such pertinent factors as the skill and effort (i.e., compensable factors) needed to perform the job adequately.
The Merit Pay Grid
Amounts are determined by two factors: 1. Performance ratings 2. Position of employees' present base pay rates within pay ranges
Examples of consulting firms:
Aon Frederic W. Cook & Company Hay Group Pearl Meyer & Partners Towers Watson William M. Mercer Xerox-Buck Consultants
HSAs
Employers establish HSAs to help employees pay for medical expenses associated with high-deductible health insurance plans High-deductible health insurance amounts (2015) - Individual plan: Minimum annual deductible of $1,300 with a maximum out of pocket limit not more than $6,450 - Family plan: $2,600 and $12,900, respectively
Coverage
Employers may not exclude employees after participation criteria have been met Employers may not disproportionately favor highly compensated employees, who we define in Chapter 11 on executive compensation
Legal Considerations
Equal Pay Act ---- Must justify pay differences ---- Job analysis helps HR professionals discern whether substantive differences between job functions exist. FLSA ---- Determine exemption status ----Job analysis is also useful for determining whether a job is exempt or nonexempt ADA ---- Determine essential job functions ---- Human resource professionals use job analysis to define essential job functions systematically.
Origins of Legally Required Benefits
Established to protect individuals from catastrophic events Disability Unemployment Protection programs to: Promote worker safety and health Maintain family income streams Assist families in crisis Enable retirees to maintain subsistence income levels Provided a form of social insurance Reasons for implementation Rapid growth of industrialization in early 1900s Hardships caused by the Great Depression in the 1930s
FMLA Revision in 2015
Expanded definition of spouse to include individuals in legal same-sex marriages
Salary-Only Plans
Fixed base compensation From the employees' perspective --> risk-free From a company's perspective --> burdensome From the employees' perspective, salary-only plans are relatively risk-free because they can expect a certain amount of income. From a company's perspective, salary-only plans are burdensome because the company must compensate its sales employees regardless of their achievement levels. Thus, salary-only plans do not fit well with the directive to link pay with performance through at-risk pay.
Medicare
Health insurance coverage for citizens age 65 and older Provided insurance coverage for: - Hospitalization - Convalescent care - Major doctor bills - Prescription drug costs
Internally Consistent Compensation Systems and Competitive Strategy
Internally consistent pay systems may reduce a company's flexibility to respond to changes in competitors' pay practices Narrowly defined jobs
Tools for Building Job Structures
Job analysis Job evaluation Compensation professionals use job evaluation to establish pay differentials among employees within a company. The descriptive job analysis results directly aid compensation professionals in their pay-setting decisions by quantifying the key similarities and differences between jobs based on job content identified in the job analysis process.
Benefits and Costs
Legally required benefits are costly
O*NET
O*NET is a database. The U.S. Department of Labor's employment and training administration spearheaded its creation for two reasons: 1. it is designed to describe jobs in the relatively new service sector of the economy (e.g., wireless telecommunications). 2. O*NET more accurately describes jobs that evolved as the result of technological advances (e.g., software and hardware engineering).
Relevant Labor Market: Qualified candidates based on:
Occupational classification (don't compare an accounting firm to a manufacturing firm) Geography Market competitors
OASDI
Old Age, Survivor, and Disability Insurance (OASDI) - Enacted in 1935 for retirement insurance - Survivors' insurance added in 1939 - Disability insurance added in 1965
Point level factor
Participants will rate a job based on a standard set of compensable factors that have point values associated with each level of the factor Both job incumbents and supervisors should complete a rating form separately to achieve job leveling based on all of the relevant factors. - Independent ratings should help to minimize rater biases. - Differences in ratings generally can be reconciled through discussion.
Sales Objectives
Pay-for-Performance incentives Objectives: - Improve sales productivity - Improve sales coverage of current customers - Grow sales overall
Red Circle Rates
Paying above maximum pay rates Results from - Failure to raise pay range maximums - Attempt to retain exemplary employees not ready for promotion to jobs in successive pay grade - Demotion of employee from a higher pay grade to a lower pay grade
Green Circle Rates
Paying below minimum pay rates Result from - Paying employees who do not meet the minimum requirements less than the minimum rate - Failure to raise pay range minimum and maximum rates
Life Insurance
Pays employees' beneficiaries upon employees' death May also include - Accidental death - Dismemberment benefits
FSAs
Permit employees to pay for specified health care costs that are not covered by an employer's insurance plan Prior to each plan year, employees elect the amount of pay they wish to allocate *Advantage* --> ability to make contributions on a pretax basis *Disadvantage* --> "use it or lose it" provision of FSAs
Fee-for-Service Plans
Provide protection against health care expenses in the form of a cash benefit Three types of eligible health expenses - Hospital expenses - Surgical expenses - Physician charges Types: - Indemnity plans - Self-funded plans
Employee Assistance Programs
Provided for: - Alcohol or drug abuse - Domestic violence - Emotional impact of AIDS and other diseases - Clinical depression - Eating disorders *key to success*: the employee must want the assisstance
HMOs
Provides prepaid medical services Copayments represent nominal payments Common copayment amounts - Between $15 and $50 for each doctor's visit - Between $10 and $50 per prescription drug - Between $50 and $500 for hospital or emergency room admission Primary care physicians determine when patients need the care of specialists
Standard Occupational Classification System (SOC)
Published by the Office of Management and Budget Lists 23 major occupational groups
Job Analysis Data Gathering Methods
Questionnaires Interviews Observation Participation
Pension Protection Act of 2006
Designed to strengthen protections for employees' company-sponsored retirement plans in two ways: *- Defined benefit plans:* the Pension Benefit Guarantee Corporation makes it more difficult for employers to skip making required payments to insure these plans *- Defined contribution plans:* enable companies to enroll their employees automatically in these plans
Quartile
Dispersion by % below a set value - Quartile 4 = 100% - Quartile 3 = 75% - Quartile 2 = 50% (also, the median) - Quartile 1 = 25%
Six-year graduated schedule
employers grant vesting rights gradually, 20% after two years, then 20% each year until 100% vested
Job evaluation
Reflects *value judgments* Compensation systems set pay levels
Outplacement Assistance Programs
Required due to: - Layoffs due to economic hardship - Mergers and acquisitions - Company reorganizations - Changes in management - Plant closings or relocation - Elimination of specific positions, often the result of changes in technology
Person-Focus Pay Programs
Reward employees based on learning new skills and knowledge Compensates on potential - the promise of future performance
Life Insurance Types
Term life insurance Whole life insurance Universal life insurance
Whole life insurance
does not terminate until payment is made to beneficiaries substantially more expensive than are term life policies, making the whole life insurance approach an uncommon feature of employer-sponsored insurance programs.
Companies recognize these differences by
paying individuals according to their: - *Credentials* (i.e. CPA, presumes some degree of knowledge) - *Knowledge* - *Job performance* (You may get paid a certain amount to start with but anything beyond that is up to you)
Transportation services
programs that help bring employees to the workplace and back home again by using more energy-efficient forms of transportation. transportation services enable companies to offset deficits in parking space availability, particularly in congested metropolitan areas.
Services
provide enhancements such as tuition reimbursement and day care assistance to employees and their families
Retirement programs
provides income to employees and their beneficiaries during some or all of their retirement
options for receiving medicare
slide 15
Sources of Data
- Job incumbents - Supervisors - Job analysts Note: A review of O*Net, which falls within the scope of job analysis, follows as an appendix.
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
Guarantees ready access to coverage under a subsequent employers health plan, regardless of health or claims experience Limits the length of preexisting condition clauses (preexisting condition clauses now unlawful under PPACA) Protects the transfer, disclosure, and use of health care information
Short-Term Disability
Less than six months duration Unable to perform job Benefit: 50% to 100% of pretax income Conditions - Recovery from injuries - Recovery from surgery - Treatment of an illness requiring any hospitalization - Pregnancy
O*NET Categories
Experience requirements Occupational requirements Occupation specific requirements Worker requirements Worker characteristics Labor market characteristics
R^2
Explains variation in market pay rates via job structure Ranges from 0.0 to 1.0 0.0 = 0% variation in pay rates due to job structure 0.0-.30 = small variation .31-.70 = average variation .71-.99 = large variation 1.0 = 100% variation
PPACA: Penalties and Taxes
Failure to provide health insurance to employees results in a penalty equal to about $2,000 per employee (less the first 30 employee) each year The penalty rate is subject to increase *Cadillac Tax:* Starting in 2018, expensive employer-sponsored plans will be taxed to equal 40% of the amount that exceeds the following limits (2015): - $14,000 for single coverage plans (employee only) - $27,500 for family coverage plans (employee and eligible family members)
How can HR managers, other business professionals minimize the cost of benefits
Integrate workers' compensation benefits into the rest of the benefits program Contain costs for unemployment insurance
Life insurance
protects employees' families by paying a specified amount to an employee's beneficiaries upon the employee's death
Protection programs
provide family benefits, promote health, and guard against income loss caused by such catastrophic factors as unemployment, disability, or serious illnesses
Paid time-off
provides employees time off with pay for such events as vacation
Universal life insurance
provides protection to employees' beneficiaries based on the insurance feature of term life insurance and a separate savings feature combines features of term life insurance and whole life insurance. The insured may shift money between the insurance and savings components of the policy, making this a more flexible alternative to whole life insurance.
Term life insurance
provides protection to employees' beneficiaries only during a limited period based on a specified number of years the most common type offered by companies, provides protection to employees' beneficiaries only during a limited period based on a specified number of years (e.g., 5 years) subject to a maximum age (e.g., 65 or 70). After that, insurance protection automatically expires. Neither the employee nor his or her beneficiaries receives any benefit upon expiration.
Disability insurance
replaces income for employees who become unable to work because of sicknesses or accidents. includes both short- and long-term disability care Short-term plans usually consider disability as an inability to perform any and every duty of the disabled person's occupation. Long-term plans use a more stringent definition, specifying disability as an inability to engage in any occupation for which the individual is qualified by reason of training, education, or experience.
Employee contributions
expressed as a percentage of wage or salary
Worker Specifications
- Education - Skills - Abilities - Knowledge - Other qualifications to perform job
Pay Structure Variations
Broadbanding Two-tier wage structures
Job Analysis Process
*1. Determine job analysis program* ---- A company must decide between using an established system or developing its own system tailored to specific requirements. ----The most typical methods for collecting job analysis information are questionnaires, interviews, observation, and participation. *2. Select and train analysts* ----conductors of job analysis need to be taught about the basic assumptions of the model and the procedures they must follow ----job analysts also should be trained to minimize the chance that they will conduct ineffective job analyses. ----job analysts must be familiar with the structure of pertinent job data. *3. Direct job analyst orientation* ----Before analysts start specific job analysis techniques, they must analyze the context in which employees perform their work to better understand influencing factors. ----analysts should obtain and review such internal information as organizational charts, listings of job titles, classifications of each position to be analyzed, job incumbent names and pay rates, and any instructional booklets or handbooks for operating equipment. *4. Conduct the study* ----Analysts should carefully choose the method of data collection and the sources of data (most common methods = questionnaires and observation) *5. Summarize results: write job descriptions* ---- Job descriptions summarize a job's purpose and list its tasks, duties, and responsibilities, as well as the KSAs necessary to perform the job at a minimum level.
Point Method Steps
*1. Select benchmark jobs* ---- Benchmark jobs, found outside the company, provide reference points against which jobs within the company are judged. *2. Choose compensable factors* ---- Each benchmark job should be described by those factors that help distinguish it from the value of all other jobs. ---- Compensable factor categories may be broken down further into specific related factors or subfactors. ---- Compensation professionals should select as many compensable factors as are needed to describe the range of benchmark jobs adequately. *3. Define factor degrees* ---- Evaluators must divide each factor into a sufficient number of degrees to identify the level of a factor present in each job. ---- EX: the compensable factor writing ability can be described in degrees ranging from the ability to write simple sentences to the ability to write paragraphs of complex information. *4. Determine weight of factors* ---- represents the importance of the factor to the overall value of the job *5. Determine point value* ---- (1) establish the maximum possible point values for the complete set of compensable factors. ---- (2) the maximum possible point value for each compensable factor is based on total weight ---- (3) distribute these points across degree statements within each compensable factor. *6. Verify factor degrees and point values* ---- Committee members should independently calculate the point values for a random sample of jobs *7. Evaluate all jobs* ---- Each job then is evaluated by determining which degree definition best fits the job and by assigning the corresponding point factors. ---- All points are totaled for each job, and all jobs are ranked according to their point values.
Two descriptive properties of numerical survey data sets
*1.) Central tendency* Represents the fact that a set of data center around a central point - arithmetic mean (AKA mean or average) - median *2.) Variation* Represents the amount of spread or dispersion in a data set
Two essential strategic considerations are:
*1.) Defining the relevant labor market* With many professional, technical, and management positions, all three factors (i.e., *job family, geographic scope, and companies that compete on the basis of product or service*) can be applicable to determining relevant labor markets *2.) Choosing benchmark jobs* (HR professionals rely on benchmark jobs as reference points for setting pay levels)
Arithmetic mean (mean, average)
- Sum of salaries/number of salaries - Represents typical market salaries Outliers can distort values Understated means occur with extremely small outliers - May set salaries too low Overstated means occur with extremely large outliers - May set salaries too high
Transition Matters From job-based pay to person-focused pay:
*Assessment of skills and knowledge* *Who assesses* *On what basis* *How often* (During transition phases, managers should assess employees' performance more frequently to keep employees informed of how well they are doing under the new system.) *Align pay with skills and knowledge structure* (If employees' actual earnings are more than what the person-focused system indicates, managers must develop a reasonable course of action so that employees can acquire skills that are commensurate with their current pay. If employees are underpaid, the company must provide pay adjustments as quickly as possible. The length of time required to make these necessary adjustments will depend on two factors: the number of such employees and the extent to which they are underpaid. With limited budgets, companies will obviously require more extended periods as either the number of underpaid employees or the pay deficit increases.) *Access to training* *Equal access to all*
Equal Employment Opportunity Commission (EEOC)
*Distinguishes among the terms knowledge, skill, and ability* *Skill* refers to an observable competence to perform a learned psychomotor act Ex: Typing 50 words per minute. *Knowledge* refers to a body of information applied directly to the performance of a function Ex: Compensation professionals should know FLSA's overtime provisions. *Ability* refers to a present competence to perform an observable behavior or a behavior that results in an observable product - Ex: To mediate a dispute between labor and management successfully.
Job Analysis Units
*Element:* the smallest step Ex: Connecting a flash drive into a USB port. *Task:* one or more elements Ex: Keyboarding text into memo format. *Position:* a collection of tasks Ex: Clerk typist. *Job:* a group of positions with similar tasks Ex: Bob, John, and Jason are clerk typists *Job family:* a group of two or more jobs with similar characteristics Ex: Clerical job family: file clerk, clerk typist, administrative clerk *Occupation:* a group of jobs Ex: Office support occupation
Step 1: Decide on Pay Structures (3 ways)
*Exempt and nonexempt:* companies establish these pay structures for administrative ease *Based on job families:* executive, managerial, professional, technical, clerical, and craft represent distinct job families *Based on geography:* companies with multiple, geographically dispersed locations such as sales offices, manufacturing plants, service centers, and corporate offices (the cost of living is an important consideration)
Exempt and Nonexempt Pay Structures
*Exempt* Not subject to overtime provisions Salaried supervisors, managers, professionals, and executives *Nonexempt* Subject to overtime provisions Hourly, nonsupervisory Exempt jobs, by the definition of the Fair Labor Standards Act, are generally supervisory, professional, managerial, or executive jobs that contain a wide variety of duties. Nonexempt jobs are generally nonsupervisory in nature, and the duties tend to be narrowly defined.
Experience Requirements (O*NET)
*Experience and training* - Related work experience - On-site training - On-the-job training *Licensing* - Licenses and certificates - Formal education *Additional education and training* *Organization and agency requirements* - Legal - Employer - Union, guild, professional association
PPACA: Grandfathered and Non-Grandfathered Plans
*Grandfathered Plans:* Health plans in existence prior to the enactment of PPACA on March 23, 2010 *Non-Grandfathered Plans:* Health plans established after the enactment of PPACA Grandfathered plans can lose status if there are substantial modifications, for example, elimination of all or substantially all benefits to diagnose or treat particular medical conditions
Two Mandates of the Patient Protection and Affordable Care Act of 2010 (PPACA)
*Individual Mandate:* requires that persons who do not receive health care through employment must purchase their own health insurance *Employer Mandate:* The employer mandate requires that most employers provide health insurance to full-time employees
Two Examples of Job Evaluation Techniques
*Market-based evaluation:* uses market data to determine differences in job worth ---- Many companies choose market-based evaluation methods because they wish to assign job pay rates that are neither too low nor too high relative to the market. ---- Setting pay rates too low will make it difficult to recruit talented candidates, whereas setting pay rates too high will result in an excessive cost burden for the employer. *Job-content evaluation:* emphasizes company's internal value system by establishing a hierarchy of internal job worth; the point method is a job-content evaluation system Neither market-based nor job-content evaluation approaches alone enable compensation professionals to balance internal and external considerations. Most companies therefore rely on both approaches.
Nonqualified and Qualified Plans
*Nonqualified plans:* refer to pension plans that do not meet at least one of the minimum standard provisions of the Employee Retirement Income Security Act (presented shortly). Neither employee nor employer contributions are permitted on a pretax basis. *Qualified plans:* meet all of the minimum standard provisions, which permits employer and employee contributions to be made on a pretax basis.
Pay Range Overlap
*Overlapping ranges:* adjacent pay ranges overlap where the highest rate paid in one range is above the minimum pay rate, but less than the maximum rate, in the successive pay grade *Non overlapping pay ranges:* adjacent pay ranges do not overlap where highest rate in one range is equal to or greater than the minimum pay rate in the successive pay grade If the ranges overlap, you can give someone a promotion without a raise (don't assume they always have to go hand in hand)
Reliable and Valid Job Analysis Methods
*Reliable Job Analysis Method:* Yields consistent results under similar conditions. - For example, two independent analysts reach similar conclusions about the duties that constitutes a job *Valid Job Analysis Method:* Accurately assesses each job's duties or content At present, the best approach to producing valid job descriptions requires that results among multiple sources of job data (e.g., job incumbents, analysts, supervisors, and customers) and multiple methods (e.g., interview, questionnaire, and observation) converge.
Four Categories of Legally Required Benefits
1. Social Security Programs Unemployment insurance Old Age, Survivor, and Disability Insurance (OASDI) Medicare 2. Workers' Compensation 3. Family and Medical Leave 4. Health insurance
Commission Only
*Straight* - Based on fixed percentage of sales price - Ex: 10% commission, service sold $100 $10 *Graduated* - Increased percentage rates for higher sales volume - Ex: 5% commission, per unit for 100 units 8% commission per unit from 101 to 500, 12% commission per unit in excess of 500 *Multi-tiered* - Increased percentage rates for meeting and exceeding sales goal - Ex: 8% if total sales volume < 1,000 units, 12% if total sales volume >1000 units. In contrast to salespeople on salary-only plans, commission-only salespeople shoulder all the risk: Employees earn nothing until they sell. Despite this risk, potential rewards are substantial, particularly with graduated and multiple-tiered commission plans.
2 kinds of data in these practices
*primary data:* you gather for yourself *secondary data:* someone else gathered it general rule: exhaust your sources of secondary data before you start to gather primary data because developing one on your own takes a fair amount of time and effort
recurring vs. nonrecurring increases
*recurring* Companies have traditionally awarded merit pay increases permanently, and permanent increases are sometimes associated with some undesirable side effects (e.g., placing excessive cost burdens on the employer). In terms of costs, U.S. companies are increasingly concerned with containing costs as just one initiative in their quest to establish and sustain competitive advantage in the marketplace. *nonrecurring* Lump sum bonuses strengthen the pay-for-performance link and minimize costs because these increases are not permanent, and subsequent percentage increases are not based on higher base-pay levels.
Unemployment Insurance Eligibility
- Able and available for work - Actively seeking work - Has not refused suitable work - Must be employed for the last four or five quarters prior to becoming unemployed, known as the base period
*CH 9* Discretionary benefits:
- Are offered at the will of each company - Employees view them as entitlements - Employers reinforce the entitlement mentality by awarding them regardless of performance no company is required to give these benefits. some companies have a *cafeteria benefits plan* - you are allowed to take the benefits that you want and not the ones that you don't want
Worker requirements(O*NET)
- Basic skills - Cross-functional skills - Knowledge - Education
Worker characteristics (O*NET)
- Characteristics - Abilities - Interests - Work styles
Broadbanding
- Consolidates pay grades and ranges - Flattens corporate hierarchies - Emphasizes teamwork - Broadens job duties and responsibilities - Promotes quicker decision making - More latitude in pay rate decisions consolidate existing pay grades and ranges into fewer, wider pay grades and broader pay ranges Broadbanding represents the organizational trend toward flatter, less hierarchical corporate structures that emphasize teamwork over individual contributions alone Broadbanding shifts greater responsibility to supervisors and managers for administering each employee's compensation within the confines of the broadbands. Because broadbands include a wider range of jobs than narrowly defined pay grades, supervisors have greater latitude in setting employees' pay according to the tasks and duties they perform. Under traditional pay grades, employees receive pay and pay increases based on a limited set of duties stated in their job descriptions.
Increases within Budget
- Determine performance categories and percentage of employees in each - Place percent in quartiles - Put percent and quartiles into cells - Estimate performance distribution - Distribute increase to each cell - Ensure total is within budget
Services
- Employee assistance programs - Family assistance programs - Flexible scheduling and leave - Day care - Tuition reimbursement - Transportation services - Outplacement assistance - Wellness programs - Smoking cessation - Stress management - Weight control and nutrition programs - Financial education
Occupational requirements (O*NET)
- Generalized work activities (describes general types of job behaviors occurring on multiple jobs.) - Organizational context (indicates the characteristics of the organization that influence how people do their work.) - Work context (describes physical and social factors that influence the nature of work. )
Worker Requirements
- Knowledge, Skills, and Abilities (KSAs) - Education - Experience - Licenses - Permits - Special abilities (Ex: HR managers must have knowledge of recruitment, selection, training, compensation and benefits, labor relations and negotiations, human resource information systems, oral/written comprehension, active listening, critical thinking.) - the minimum qualifications and the knowledge, skills, and abilities (KSAs) that people must have to perform a particular job. - Active listening and critical thinking are two examples of many necessary skills for effective HR managers. Human resource managers must possess abilities such as oral comprehension and written comprehension.
Median (midpoint)
- Middle value of sequential numerical data
The Point Method
- Most popular job-content method - Uses quantitative methodology - Evaluates jobs by comparing compensable factors
Two-tier wage structures
- New employees paid less - Temporary or permanent rewards - Mainly in unionized companies - May hinder recruiting - Can lower employees' morale
Occupation specific requirements (O*NET)
- Occupational skills - Occupational knowledge - Tasks - Duties - Machines - Tools - Equipment
Outplacement Assistance Services
- Personal counseling - Career assessments and evaluations - Training in job search techniques - Resume and cover letter preparation - Interviewing techniques - Training in the use of basic workplace technology Outplacement assistance provides such services as personal counseling, career assessments and evaluations, training in job search techniques, resume and cover letter preparation, interviewing techniques, and training in the use of such basic workplace technology as computers. Although beneficial to employees, outplacement assistance programs hold possible benefits for companies as well. They can promote a positive image of the company among those being terminated, as well as their families and friends, by helping these employees prepare for employment opportunities.
Disadvantages of commission plans
- can cause competitive behaviors among employees - can undermine employees' intrinsic motivation to sell (i.e., their genuine interest for the challenge and enjoyment that selling brings). --> Once salespeople have lost that intrinsic motivation, commissions act essentially as controls to maintain sales professionals' performance levels. Said another way, such professionals may simply go through the motions in order to earn money without regard to quality and customer satisfaction. - the younger generation appears to be more risk averse than older generations, which is making it difficult for companies to fill sales positions because members of the younger generation prefer higher certainty associated with earning base pay.
In-House vs. Outsourced Training
-Expertise ---Needed and Available ~Employers generally turn to in-house resources if they can draw on existing expertise. ~If in-house expertise is lacking, employers often seek an outside provider either to fill the need directly or to train individuals who become instructors. -Timeliness ---How soon and how often ~Employers often seek outside services if the in-house staff does not have adequate time to develop and deliver the program within the time frame requested. -Number of trainees ~Employers typically rely on in-house resources for larger groups of employees. -Proprietary nature of topic ---Too sensitive to share ~If the area of the training is sensitive or proprietary, the training is likely to be done in-house regardless of the other factors just discussed.
PPACA: Ten Essential Benefits
1. Ambulatory patient services 2. Emergency services 3. Hospitalization 4. Maternity and newborn care 5. Mental health and substance use disorder services 6. Prescription drugs 7. Rehabilitative services and devices 8. Laboratory services 9. Preventive and wellness services and chronic disease management 10. Pediatric services, including oral and vision care
5 steps of constructing a pay structure
1. Decide how many pay structures to construct 2. Determine a market pay line 3. Define pay grades 4. Calculate pay ranges 5. Evaluate results Don't assume that there is one pay structure in an organization
Three advantages of HSAs
1. HSAs are portable 2. HSAs are subject to inflation-adjusted funding limits 3. Do not limit employee choice
Job Evaluation Process Steps
1. Select technique 2. Choose committee 3. Train members to evaluate 4. Document plan 5. Communicate with employees 6. Set up appeals process
Four Activities of Market Competitive Pay Systems
1.) *Strategic analysis* entails an examination of a company's external market context and internal factors - External market context: industry profile, information on competition, long-term prospects (opportunities and threats happening outside the company) - Internal factors: financial condition, functional capabilities 2.) *Compensation surveys* involve the collection and subsequent analysis of competitors' compensation data (remember compensation isn't just pay --> compensation surveys these days are looking more and more at benefits) 3.) Compensation professionals *integrate the internal job structure with the external market pay rates* identified through compensation surveys 4.) Compensation professionals *recommend pay policies that fit with their companies' standing and competitive strategies*
Two preliminary considerations before investing time and money into compensation surveys:
1.) What companies hope to gain from compensation surveys 2.) Custom development versus use of an existing compensation survey
Variation
3 measures of dispersion in a set of data: 1. *Standard deviation* - Refer to the mean distance of each figure from the mean 2. *Quartile* - Percentile of figures below a point based on four groupings 3. *Percentile* - Percentage of figures below a point based on 100 groupings Compensation professionals' reviews of percentiles and quartiles can enhance their insights into the dispersion of salary data.
Job analysis
A *descriptive* procedure Identifies and defines job content a systematic process for gathering, documenting, and analyzing information in order to describe jobs. Job analyses describe: - content or job duties, - worker requirements or job specifications, - and, sometimes, the job context or working conditions.
*CH 7* Market-competitive pay systems refer to:
A company's compensation policy The imperatives of competitive advantage The key role in promoting recruitment and retention of talented employees
Competitors' Pay Practices
Base pay Incentive awards structure Mix and level of discretionary benefits (benefits account for ~31% of total payroll costs. don't forget to look at this when assessing)
OASDI Survivor's Benefits
Based on Eligibility Status and Relationship - Deceased was fully insured - Dependent, unmarried children - Widows age 60 and older - Dependent parent age 62 and older Average monthly benefit was $1,253 in 2015
Step 4: Calculate Pay Ranges
Build upon pay grades Pay grades represent horizontal dimension Pay ranges represent vertical dimension Pay ranges include midpoint, minimum, and maximum pay rates. The minimum and maximum values denote the acceptable lower and upper bounds of pay for the jobs within particular pay grades.
Custom Developed Surveys
Can be custom tailored Quality can be monitored by employer Usually not done in-house External data not readily accessible Can be expensive In practice, companies choose not to develop and implement their own surveys for three reasons: 1. most companies lack employees qualified to undertake this task. Developing and implementing valid surveys require specialized knowledge and expertise in sound questionnaire design, sampling methods, and statistical methods. 2. rival companies are understandably reluctant to surrender information about their compensation packages to competitors because compensation systems are instrumental to competitive advantage issues. If companies are willing to cooperate, the information may be incomplete or inaccurate. 3. custom survey development can be costly.
Discretionary Benefits Costs and Benefits (Tax advantages:)
Can translate into cost savings Companies pursuing differentiation strategies might invest more in research and development or other valuable pursuits Companies pursuing lowest cost strategies might be able to lower prices
This program publishes quarterly statistics that measure:
Changes in labor costs over time - Employment Cost Index Levels of costs per hour - Employer Costs for Employee Compensation
Point-of-Service Plans
Combine features of health maintenance organizations and fee-for-service arrangements Employees pay a nominal copayment for each visit to a designated network of physicians Employees possess the option to receive care from health care providers outside the designated network of physicians, but they pay somewhat more for this choice
Hybrid Plans
Combine features of traditional defined benefit and defined contribution plans Cash balance plans are defined benefit plans that define benefits for each employee by reference to the amount of the employee's hypothetical account balance Many companies have chosen to convert their defined benefit plans to cash balance plans for two key reasons. First, cash balance plans are less costly to employers than defined benefit plans. Second, these plans pay benefits in a lump sum instead of a series of payments. Companies are presumably in a better position to recruit more mobile workers. Under a traditional defined benefit plan, an employee who leaves employment prior to qualifying for a retirement annuity (a series of monthly payments for the rest of one's life) will forfeit the annuity.
Salary-Plus-Commission Plans
Commissions based on percentage of price Spreads risks Designed to attract quality sellers Allows employees to do other tasks spread the risk of selling between the company and the sales professional. The salary component presumably enhances a company's ability to attract good employees and allows a company to direct its employees' efforts to deter employees from undertaking tasks that do not lead directly to commissions (e.g., participating in further training or servicing accounts). The commission component serves as the employees' share in the gains they generated for the company.
Pay-Level Policies (3)
Companies can choose from three pay level policies: *Market lead* (75th percentile) - Levels above market pay lines - Best for differentiation strategies *Market match* (50th percentile) - Pay according to market pay line - Appropriate with differentiation strategy *Market lag* (25th percentile) - Levels below market pay lines - Best for lowest-cost strategies ~~~ The market lead policy is clearly most appropriate for companies that pursue differentiation strategies. The market lag policy appears to fit well with lowest-cost strategies because companies realize cost savings by paying lower than the market pay line. Companies that use the market lag policy may experience difficulties in recruiting and retaining highly qualified employees. Too much turnover will undercut a company's ability to operate efficiently and to market goods and services on a timely basis. Thus, companies that adopt market lag policies need to balance cost savings with productivity and quality concerns. The market match policy represents a safe approach for companies because they generally are spending no more or less on compensation (per employee) than competitors. Some companies that pursue differentiation strategies follow a market match policy to fund expensive operating or capital needs that support differentiation (e.g., research equipment and research laboratories). (but generally it does not follow low cost or differentiation)
Day Care
Companies subsidize child or elder day care: *Elder care:* self-help, meals, and entertainment activities for the participants *Child care:* supervision, preschool preparation, and meals
Timing
Companies typically take one of two approaches in timing of pay raises: - Common review date or common review period - Employee's anniversary date
Sales Compensation Plans
Companies usually use one of five kinds of sales incentive plans. The type of plan appropriate for any given company will depend on the company's competitive strategy. The order of presentation roughly represents the degree of risk (from lowest to highest) to employees. Salary only Salary plus bonus Salary plus commission Commission plus draw Commission only
*CH 6* Internal Consistency
Compares the *value of each job* within the same company against the rest of the jobs found within that company Represents job structure or hierarchy Job descriptions are its cornerstone Internally consistent job structures formally recognize *differences in job characteristics* that enable compensation managers to set pay accordingly.
Compensation Policies and Strategic Mandates
Compensation policies refer to choices that compensation professionals make to promote competitive advantage. Broadly, choices are made about: Pay-level policies Pay mix policies
Designing Sales Incentive Compensation Plans
Compensation programs for salespeople rely on incentives. Sales compensation programs can help businesses meet their objectives by aligning the financial self-interest of sales professionals with the company's marketing objectives. By extension, sales compensation programs can help companies achieve strategic objectives by linking sales professionals' compensation to fulfilling customer needs or other marketing objectives (e.g., increasing market share). Thus, sales compensation plans derive their objectives more or less directly from strategic marketing objectives, which, in turn, are derived from company competitive strategy.
Market Competitive Pay Systems
Conduct strategic analyses Assess competitors' practices Integrate internal job structures with external market pay rates Determine compensation policies Well-designed pay systems should promote companies' attainment of competitive strategies. Paying more than necessary can undermine *lowest-cost strategies:* - Excessive pay levels represent an undue burden and restricts companies' abilities to invest in other important strategic activities (e.g., research and development, training) because money is a limited resource. Companies that pursue *differentiation strategies* must strike a balance between offering sufficiently high salaries to attract and retain talented candidates and providing sufficient resources to enable them to be productively creative.
Fee-for-Service Plan Features
Deductibles Coinsurance Out-of-pocket maximums Preexisting condition clauses (now eliminated by PPACA) Maximum benefit limits (now eliminated by PPACA)
Commission-Plus Draw Plans
Draw - Advance pay for living expenses - Charged against future commissions - Recoverable or non recoverable Provides strong incentive to excel *Recoverable draws* act as company loans to employees that are carried forward indefinitely until employees sell enough to repay their draws. *Nonrecoverable draws* act as salary because employees are not obligated to repay the loans if they do not sell enough. Nonrecoverable draws clearly represent risks to companies because these expenses are not repaid if employee sales performance is lackluster. Companies that adopt nonrecoverable draws may stipulate that employees cannot continue in the employment of the company if they fail to cover their draw for a specified number of months or sales periods during the year. This arrangement is quite common among car salespeople.
Minimum Standards for Qualified Plans
ERISA specifies 13 minimum standards: 1. Participation requirements 2. Coverage requirements 3. Vesting rules 4. Accrual rules 5. Nondiscrimination rules: testing 6. Key employee and top-heavy provisions 7. Minimum funding standards 8. Social Security integration 9. Contribution and benefit limits 10. Plan distribution rules 11. Qualified survivor annuities 12. Qualified domestics relations orders 13. Plan termination rules and procedures
OASDI Retirement Statistics
Earn 40 quarters of credit (each quarter equals three consecutive months during which minimum earnings are obtained -- $1,220 in 2015) Be age 62 to earn partial benefits Retirement age for full benefits is increasing slowly from age 65 to age 67 in 2022 Average monthly benefit was $1,328 in 2015
Contribution Sources
Employee contributions Employer contributions (company match):
Participation requirements
Employees must be allowed to participate in pension plans after they have reached age 21 and completed 1 year of service (based on 1,000 work hours) These hours include all paid time for performing work and paid time off
Defined Contribution Plans
Employees, employers, or both make annual contributions to separate accounts established for each participating employee, based on a formula contained in the plan document Contributions are usually invested in a variety of ways such as in company stock, bonds, or money market accounts
The Bureau of Labor Statistics (BLS) publishes information on the wages, earnings, and benefits of workers:
Employment cost trends National compensation data Wages by area and occupation Earnings by demographics Earnings by industry County wages Employee benefits Compensation costs in other countries (use BLS sources as a resource so you don't need to find these things yourself)
Family and Medical Leave
Family and Medical Leave Act (FMLA) 12 weeks of unpaid leave for: - Birth, adoption, foster care - Serious family medical problems - Worker's serious medical problem Retention of: - Seniority - Health insurance coverage - Credit for previous service - Accrued retirement benefits
Health Insurance Program Design Alternatives
Fee-for-service plans Managed care approaches Plans associated with the consumer-driven health care approach
compensation professionals should choose compensable factors based on two considerations:
First, factors must be *job related.* The factors that describe a particular job should indeed reflect the actual work that is performed. Second, compensation professionals should select compensable factors that *further a company's strategies.* For example, companies that value product differentiation probably consider innovation to be an important compensable factor for research scientist and marketing manager jobs.
Defined Benefit Plans
Guarantee retirement benefits specified in the plan document (also referred to as pension plans) Usually expressed in terms of a monthly sum equal to a percentage of a participant's preretirement pay multiplied by the number of years he or she has worked for the employer Benefit is fixed by a formula Level of required employer contributions fluctuates from year to year Level depends on the amount necessary to make certain that benefits promised will be available when participants and beneficiaries are eligible to receive them
Using O*NET
HR professionals consult the O*NET user's guide and most current O*NET database U.S. Department of Labor Employment and Training Administration at: http://online.onetcenter.org
Managed Care Plans
Health maintenance organizations (HMOs) Preferred provider organizations (PPOs) Point-of-service plans (POSs)
Family Assistance Programs
Help employees provide elder care and child care Making referrals to on-site child or elder care centers Company-sponsored day care programs
Origins of Employee Benefits
Historically, legally-required benefits provided a form of social insurance Industrialization during late 19th and early 20th centuries and Great Depression led to design of initial social insurance (welfare) programs, aimed at: - Preventing destitution of unemployed or injured - Stabilizing well-being of dependents - Enabling retirees to maintain subsistence income As a result, employer sponsored health insurance became common. Further "legitimization" occurred with the National Labor Relations Act of 1935, allowing for employee bargaining for benefits Employees have historically viewed benefits as entitlements, however with rising benefits costs, increased foreign competition, and a deep economic recession, the cost may be shared or shifted to the employee
Paid Time Off
Holidays Vacation Sick leave - in some organizations you can accumulate these Personal leave Jury duty Funeral leave - look at this closely: some companies allow this with restrictions such as only granted for a funeral for a parent, child or spouse Military leave - depends on duration - may have restrictions ------------------------------------------------------- Issues: Do you get paid for the following things? (you are more likely to be paid for these in unionized companies) Clean-up, preparation, or travel time Rest period "break" Lunch period Integrated time off policies Sabbatical leave Volunteerism In unionized settings, the particulars about paid time off are in the collective bargaining agreement. The paid time off practices that are most typically found in unionized settings are jury duty, funeral leave, military leave, clean-up, preparation, travel time, rest period, and lunch period.
Step 3: Define Pay Grades
Human resource (HR) professionals typically group jobs into pay grades based on similar compensable factors and value. Based on compensable factors, values, management philosophy Widths - Narrow or wide - Affects hierarchy and social distance - Absolute or percentage-based job evaluation points Wider pay grades (i.e., grades that include a relatively larger number of jobs) minimize hierarchy and social distance between employees. Narrower pay grades tend to promote hierarchy and social distance. Companies may choose to vary the "absolute" point spread by increasing the point spread as they move up the pay structure, in recognition of the broader range of skills that higher pay grades represent. For example, certified public accounting jobs require a broader range of skills (e.g., knowledge of financial accounting principles and both state and federal tax codes) than do mailroom clerk jobs.
HR professionals can take steps to maximize the benefits of these costly benefits:
Implement workplace safety programs Implement health promotion programs that include inspections of the workplace to identify health risks
Volunteerism Causes
Improving literacy Providing comfort to terminally ill patients Serving food at shelters for individuals who cannot afford to feed themselves Serving as a mentor to children who do not have one or more parents Spending time with elderly or disabled residents of nursing homes who may no longer have living friends or family ------ some companies allow this to improve work life balance some have found that allowing employees to volunteer for things improves employee retention volunteerism also promotes the companies' image
*CH 10* Employee Benefits: Historical Context
In 2014: $5,200 per employee, on average 7.9% of total payroll costs, on average
Wage data are shown by:
Industry Occupational group Full-time and part-time status Union status Establishment size Time and incentive status Job level
Note:
It is important to keep in mind that statistics of a given type (e.g., central tendency) provide consistent information *for a given set of data.* As we discussed, the mean and median are measures of central tendency. The mean and median are often different for a given set of data points. When the distribution of data is skewed to the left (i.e., there is a higher frequency of larger values than smaller values), the mean will be less than the median. On the other hand, when the distribution of data is skewed to the right (i.e., there is a lower frequency of larger values than smaller values), the mean will be greater than the median.
Fixed Pay and Compensation Mix
Managers must balance fixed and incentive pay elements to directly affect employee motivation. The mix depends mainly on three factors: *1. Salesperson's influence on decision* For the most part, the more influence sales professionals have on "buying" decisions, the more the compensation mix will emphasize incentive pay. *2. Competitive pay standards within industry* A company's compensation mix must be as enticing as that offered by competitors if the company wants to recruit high-quality sales professionals. - Salary is an appropriate compensation choice for pharmaceutical companies because they face little risk of new competition. *3. Amount of non sales duties* In general, the more nonsales duties salespeople have, the more their compensation package should tend toward fixed pay.
Step 2: Determine a Market Pay Line
Market pay line is an indication of where the pay is - Market pay rates relative to company's job structure - Pay levels corresponding with pay line are market competitive - Rates promote internal consistency
How can companies minimize pay compression?
Maximum pay rates represent the most that a company is willing to pay an individual for jobs that fall in that particular range. *Maximum pay rates should be set close to the maximum paid by other companies in the labor market for similar jobs.* Setting competitive maximum rates enables a company to raise pay rates for high-quality employees who may consider employment opportunities with a competitor; however, maximum rates should not exceed maximum rates offered by competitors for comparable jobs because high maximums represent costs to the company over and above what are needed to be competitive.
Present Level of Base Pay
Needs to be within limits of pay grade Consistent with new employees at similar jobs Needs to abide by mandates of: Title VII, 1964 Civil Rights Act Equal Pay Act of 1963 ADEA of 1967
Patient Protection and Affordable Care Act of 2010 (PPACA)
PPACA provides the basis for health care reform in the U.S. PPACA mandates health care coverage and sets minimum standards for insurance
Sabbatical Leaves
Paid time off for professional activities Common in college and university settings for faculty members who meet minimum service requirements Outside academia --> Usually limited to professional and managerial employees
Merit Pay Systems
Pay for Performance Considerations - Communicate link between pay and performance - Use effective appraisal methods - Establish increase amounts and types - Settle on base pay level
Pay Mix Policies
Pay mix policies refer to the combination of core compensation and employee benefits components that make up an employee's total compensation package Pay policy mix may be expressed in dollars (or other currency as relevant) or as a percentage of total dollars allocated for an employee's total compensation
*CH 8* Pay Structure
Pay structures represent Pay rate differences for jobs of unequal worth The framework for recognizing differences in employee contributions
ADA Guidelines Essential Job Functions
Position has an essential function Requires high skills or expertise Decided case by case Nonessential jobs are marginal
Published Survey Sources
Professional associations Industry associations Consulting firms Federal government (U.S. Bureau of Labor Statistics) Note: Oftentimes, it makes sense to obtain multiple surveys because differences in survey methodology can lead to differences in results. Using multiple surveys should give compensation professionals a more accurate picture of market practices
Nondiscrimination Rules
Prohibits employers from discriminating in favor of highly compensated employees in contributions or benefits, availability of benefits, rights, or plan features Employers may not amend pension plans so that highly compensated employees are favored
Discretionary Benefits Costs and Benefits
Promotes competitive advantage Promotes employee behaviors with strategic value Attracts quality employees Meets the needs of a diverse workforce Discretionary benefits can distinguish a company from its competition
Tuition Reimbursement
Promotes employee education Full or partial coverage Not the same as pay for knowledge
Categories of Discretionary Benefits
Protection programs Paid time-off Services Disability insurance Life insurance Retirement programs
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
Workers' Compensation Objectives
Provide income and medical benefits Reduce litigation Relieve charities' financial drain Eliminate legal fees and time Encourage employer safety Promote accident study and avoidance
Retirement Programs
Provide income to employees and their beneficiaries during some or all of their retirement Three types: 1. Defined benefit plans 2. Defined contribution plans 3. Hybrid plans
HRAs
Purpose of HRAs and FSAs are similar but with three differences 1. Employees do not contribute to HRAs 2. Permit employees to carry over unused account balances from year to year 3. Employees may offer HRAs as well as FSAs and use of these accounts is not limited to participation in high deductible health care plans
Consumer-Driven Health Care Plans
Refers to the objective of helping companies maintain control over costs while also enabling employees to make greater choices about health care Enables employers to lower the cost of insurance premiums by selecting plans with higher employee deductibles The most popular consumer-driven approaches are flexible spending accounts and health reimbursement accounts Provide employees with resources to pay for medical and related expenses not covered by higher deductible insurance plans - Flexible-spending accounts (FSAs) - Health reimbursement accounts (HRS) - Health savings accounts (HSA)
Merit Increase Amounts
Reflects prior job performance levels Needs to motivate Needs to be meaningful Influenced by the cost of living Indexed as a percentage of budget
Employee Retirement Income Security Act of 1974 (ERISA)
Regulates the implementation of various employee benefits programs, including: - Medical - Life - Disability - Pension
Internal Revenue Code (IRC)
Regulations pertaining to all forms of taxation in the United States such as income tax, but it may grant tax breaks by encouraging particular activities (e.g., retirement plan contributions) The IRC reduces a company's taxable income by the amount it contributes to qualified retirement plans The IRC also reduces an employee's taxable income by the amount s/he contributes to a qualified retirement plan
salary-only plans may be appropriate for such particular kinds of selling situations as:
Sales of high-priced products and services or technical products with long lead times for sales Situations in which sales representatives are primarily responsible for generating demand, but other employees actually close the sales Situations in which it is impossible to follow sales results for each salesperson (i.e., where sales are accomplished through team efforts) Training and other periods when sales representatives are unlikely to make sales on their own
Sales plans with salary components vs commission-oriented sales plans
Sales plans with salary components are most appropriate for differentiation strategies. Commission-oriented sales compensation plans are best suited for lowest-cost strategies because compensation expenditures vary with sales revenue.
Defined Contribution Plan Types
Section 401(k) plans (pre-tax contributions and taxable withdrawals) - enable employees and employers to defer part of employee compensation to an employee's account. Only private sector employers are eligible to sponsor 401(k) plans. Roth 401(k) plans (post-tax contributions and non taxable withdrawals) - similar to 401(k) plans except: 1. employee contributions are taxed at the individual's income tax rate. 2. upon retirement, employee withdrawals are not taxed. Section 403(b) and 457 plans (similar to 401(k) plans, but for non profit and government employment, respectively) - may be offered to employees of government and tax-exempt groups, such as schools, hospitals and churches. Deferred profit sharing plans - apply to state government employees.
PPOs
Select group of health care providers - Employees choose from a list - Financial incentives to use list Physicians must - Meet quality standards - Abide by PPO cost containment - Accept PPO fee structure Does not provide prepaid benefits
Salary-Plus-Bonus Plans
Set salary coupled with a bonus Bonuses usually are single payment for an exceptional achievement (i.e. a real estate agent generating in excess of $2 million in residential sales for a 1-year period)
Writing Job Descriptions
Should include: - Job title - Job summary - Job duties - Worker specifications
Job Evaluation Qualitative Approaches
Simple ranking plan Paired comparisons Alternation ranking Classification plans Qualitative methods evaluate entire jobs and typically compare jobs with each other or some general criteria. - These criteria are usually vague
Long-Term Disability
Six months to life Unable to perform any job qualified for Benefit: 50% to 70% of pretax pay 6 to 12 month waiting period Other benefits used first
Universal Compensable Factors
Skill Effort Responsibility Working conditions These four dimensions derived from the Equal Pay Act help managers determine whether dissimilar jobs are "equal." Many companies break these general factors into more specific factors. For example, responsibility required could be further classified as responsibility for financial matters and responsibility for personnel matters.
Working Conditions
Social context or physical environment where work will be performed. Physical environment - Vary along dimensions - Based on level of noise and possible exposure to hazardous factors ~~~ examples: *social context* is a key factor for jobs in the hospitality industry. Hospitality industry managers emphasize the importance of employees' interactions with guests. Hotel registration desk clerks should convey an air of enthusiasm toward guests and be willing to accommodate each guest's specific requests for a nonsmoking room or an early check-in time. *Physical environments* vary along several dimensions, based on the level of noise and possible exposure to hazardous factors, including hazardous chemicals. Work equipment also defines the character of the physical environment. Nuclear power plant employees work in rather hazardous physical environments because of possible exposure to dangerous radiation levels. Accountants perform their jobs in relatively safe working environments because office buildings must meet local building safety standards.
Regression Analysis
Statistical procedure designed to find the best-fitting line between two variables Formula: ^ Y = a + bX ^ Y = predicted salary X = job evaluation points a = Y intercept (X = 0) b = the slope for compensation, regression analysis is used to indicate whether we are paying well below or well above the typical market rate for jobs and to establish pay rates for a set of jobs that are consistent with typical pay rates for jobs in the external market.
Job Evaluation
Systematically recognizes differences in the relative worth among a set of jobs Helps to establish pay differentials accordingly Job evaluation partly reflects the values and priorities that management places on various positions Compensation professionals generally base job evaluations on *compensable factors* Note: Job analysis, in contrast, is almost purely descriptive Job evaluation procedures are not scientifically accurate because these evaluation decisions are based on ordinary human judgment. Therefore, a consensus of several employees helps to minimize the biases of individual job evaluators.
Unemployment Insurance
Temporary income for spells of unemployment that result through no fault of the employee An employee who is terminated for cause (ex. poor performance) does not qualify An employee who is terminated as part of a company layoff is eligible
Skill and Knowledge Blocks
The development of skill blocks should occur with three considerations in mind: 1. Company must develop job descriptions - Skills and knowledge needed - Training required - Accurate evaluation process 2. Organize jobs into family/groups of similar jobs - List similar skills and tasks per job - i.e. clerical, technical, and accounting. 3. Group skills and knowledge into blocks - A general guideline is that the blocked knowledge should relate to specific job tasks and duties
Integrating The Internal Job Structure With External Market Pay Rates
The goal is to set pay rates based on the matches between a company's jobs (job structure) and corresponding benchmark jobs.
Commission-only plans are well suited for situations in which:
The salesperson has substantial influence over the sales. Low-to-moderate training or expertise is required. The sales cycle—the time between identifying the prospect and closing the sale—is short.
Step 5: Evaluate the Results
The use of compa-ratios evaluates pay structures. Compensation professionals must also consider each employee's pay level relative to the midpoint of the pay grade. (the midpoint represents a company's competitive stance relative to the market.) Compa-ratios index competitiveness of internal pay rates based on midpoints. Divide pay rates by midpoint: employee pay rate / midpoint Compa-ratio meanings 1 = market match rate < 1 = market lag rate > 1 = market lead rate
FMLA Revisions in 2009
These changes create leave opportunities for the military and require employees to adhere to stricter guidelines for taking leave Relatives of seriously injured members of the military may take up to 26 weeks off to care for their injured military family members Relatives of members of the National Guard or reserves who are called to active duty may receive up to 12 weeks of leave to attend military programs (official send off of the family member's troop), arrange child care, or make financial arrangements
Survey Data Characteristics
They contain a lot of data Outdated data due to lag time Statistical analysis needed to integrate internal job structures with external market
Wellness Programs
To help keep health costs low: - Weight loss and nutrition - Stress management - Smoking cessation - Cardiovascular fitness
Updating Survey Data: Consumer Price Index (CPI)
To remain competitive, companies update salary survey data with the consumer price index (CPI) - Indexes monthly price changes in consumer goods and services - Most commonly used method for tracking cost changes in United States - CPI published monthly by the U.S. Bureau of Labor Statistics (http://www.bls.gov)
causes of pay compression as explained by book
Two situations result in pay compression. The first is a company's failure to raise pay range minimums and maximums. Companies that retain set range maximums over time limit increase amounts. For example, let's assume that the entry-level starting salaries for newly minted certified public accountants have increased 7 percent annually for the past 5 years. Tax-It, a small accounting firm, did not increase its pay range minimums and maximums for entry-level accountants during the same period because of lackluster profits. Nevertheless, Tax-It hired several new accountants at the midpoint pay rate. Failure to pay competitive pay rates would hinder Tax-It's ability to recruit talented accountants. As a result, many of the Tax-It accountants with 5 or fewer years' experience have lower salaries (or slightly higher salaries at best) than newly hired accountants without work experience. The second situation that results in pay compression is a scarcity of qualified candidates for particular jobs. When the supply of such candidates falls behind companies' demand, wages for newly hired employees rise, reflecting a bidding process among companies for qualified candidates.
Job Leveling
Typically, there are differences between a company's jobs and benchmark jobs --> Corrections for these differences are based on *subjective* judgment *The process for making these corrections* is referred to as job leveling many ways to do this... i.e. Point level factor = one job leveling process
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)
Benchmark Jobs
Used for: - Job evaluations - Compensation surveys 4 characteristics of benchmark jobs: 1. Established, well-known, stable 2. Common across employers 3. Entire range of jobs 4. Accepted for setting pay rates
Vesting Rules
Vesting is an employee's non forfeitable rights to pension benefits Companies must grant full vesting rights to employer contributions on one of two schedules: 1. Cliff vesting 2. Six-year graduated schedule
National Compensation Survey
Weekly and annual earnings and hours for full-time workers Data at three levels: localities, broad regions, and the nation Private, local, and state employees
Pay Compression
When the pay spread between newly hired or less qualified individuals, and more qualified job incumbents is small Threatens competitive advantage Caused by: - Failure to raise pay range minimum and maximum rates - Scarcity of qualified applicants Market forces dictate that you need to pay new people more to attract them --> If you do this an entry level person may be making the same or more than someone who had been there for years --> you should do something for the existing employees also
Design and Planning Issues
Who receives coverage Whether to include retirees in the plan Whether to deny benefits to employees during their probationary period Financing benefits Degree of employee choice in determining benefits Cost containment Communication
Disability Benefits
Worker was fully insured (40 quarters of coverage) Eligibility varies according to age and disability. Younger workers need fewer quarters of coverage because they have fewer years to accumulate quarters. Disability must last one year or be terminal Average monthly disability benefit was $1,146 in 2015
Workers' Compensation
Workers' compensation programs, run by states individually, are designed to cover expenses incurred in employees' work-related accidents.
Labor market characteristics (O*NET)
Workforce Characteristics - Labor market information - Occupational outlook
Flexible Scheduling
allows employees the leeway to take time off during work hours to care for relatives or react to emergencies. Compressed work weeks (e.g., 9-hour days or 19-hour days) Flextime Job sharing
Cliff Vesting
employers must grant employees 100% vesting after no more than three years of service
Employer contributions (company match):
expressed as a percentage of an employee's contributions up to a specified limit
Integrated Paid Time Off Policies
we are talking about *combining* some of these issues into a single paid time off policy -------------------------------------------------------- - Combine holiday, vacation, sick leave, and personal leave policies into a single paid time off policy - Provide individuals the freedom to schedule time off without justifying the reasons -------------------------------------------------------- EXCEPTION (in many plans): funeral leave - if you have used up all of your days, but a family member passes away, that is something that you can't predict or control for and is generally an exception
